Succession Starts Before You Retire

SPEAKER_03 0:00

I mean, half the advisors are precariously close to an exit event. And I tell you statistically, most of them don't have a plan. You're running a business, you're ready to retire, or you're thinking about that in a couple of years. We'll start years prior to that, because everything that every advisor business owner does, directly or indirectly impacting the value of their business. And the annual evaluation ties those activities back to sort of the best way to really benchmark a firm, right? If you want to build a business that can someday exist without you, then sure. Hire, mentor, train, but know what you're signing up for and know why you're doing it. Thought of being a CEO as uncomfortable as it might be, just start by setting a target, okay? By 2028, I want to be halftime CEO, halftime advisor. And maybe you never get past that point and you're happy with it. The problem is if you do that, the scale's gonna eventually tip and you're gonna get to a point where you're seeing how impactful your 20 hours of CEO is, and your team's gonna come back and say, Paul, give us the rest of that client service work. You can do things only you can do. We can do this stuff. Like trust us, give it to us. So it happens faster than most people are even comfortable with.

SPEAKER_00 1:07

Welcome

Meet David Grau Jr.

SPEAKER_00 1:08

back to the top 50 most innovative voices in advisor growth. I'm your host, Paul G. McManus. In this episode, I'm joined by David Grau Jr., founder of Succession Resource Group, and one of the industry's leading experts on advisory firm valuation, succession planning, and MA. David has spent more than two decades helping advisors build, value, buy, and sell their businesses. In fact, John Cutten, one of the most successful advisors in the industry, once told me he's the best at what he does. In our conversation, we discuss why succession planning needs to begin long before you're ready to retire, and how capturing a founder's ideas and philosophy, including through a book, can help preserve intellectual capital as relationships and responsibilities are handed to the next generation. We also explore how firms grow through organic growth and acquisitions, and why that growth eventually forces founders to decide whether they want to remain primarily an advisor or step fully into the role of CEO. We look at AI, how it can increase capacity, profitability, and scale while also creating risk for firms that either rely on it without enough human judgment or wait too long to adopt it. Before we jump in, be sure to subscribe to our YouTube channel or wherever you're listening so you don't miss a new episode of the top 50 most innovative voices in advisor growth. And now, here's my conversation with David Grau Jr. David Grau Jr., how are you doing?

SPEAKER_03 2:40

I am fantastic.

SPEAKER_00 2:42

It feels like a Friday, but it is in fact only Wednesday. For someone who hasn't met you before, hasn't heard about your company, give us the relatively short cliff notes version.

Building A Valuation Marketplace

SPEAKER_00 2:53

Who is David Grau Jr.? What is Succession Resource Group? What should people know about you?

SPEAKER_03 2:59

We focus on helping independent advisors value, buy and sell their businesses, right? I mean, that's sort of the core of what we do. But like we talked about when we, you know, met previously in Denver, there's a lot of room between those field goalposts. In short, where there's coaches that are really good at helping advisors work in their business, be better advisors, be better professionals, and they need that. That is not our area of expertise. Instead, we are experts at working on the business. How can we make sure that you build a valuable business that you can eventually exit on your terms? Right. Maybe that's giving it away to your son or daughter. Maybe it's selling to private equity. Sky's the limit at this point in our industry, right? But it but it is helping our clients make more informed decisions so that when they get to that endpoint in their career, that they can enjoy that process and that exit. Because, right, you, me, all of our advisor clients, the one thing we at least have in common is we're all leaving this industry, horizontally or vertically. And so our job is to try to help make sure we can inform that exit for them or their estate, make sure that their stakeholders are taken care of.

SPEAKER_00 4:00

Now, I heard about you, I want to say, two years ago by someone that we both know, John Cutten. He was our most recent guest on this show. So, John Cutten, leader, number one American, does something like 18 billion AUM. And when he mentioned you to me two years ago, he said David Groud Jr., he's the best at what he does. And so tell us a little bit more about how did you get started in this specific area that you're now the best in the world at what you do?

SPEAKER_03 4:31

You know, we tell folks we know a lot about a little. Like there's lots of folks who are a lot smarter at different parts of this business and helping the advisors. And to be fair, it does take a village, which is how I've come to know John through our various mutual connections, being around lots of other smart folks. But really, at its core, like where I got my start, what was it now, over two decades ago, when I first started doing this, FP Transitions was really kind of the only game in town, right? Like it was pretty that's not even cutting edge at the time. That was like bleeding edge when it was my father, David Sr., who's now retired, and four other partners, and he was the last one in. So there's four partners that had this idea. He was the securities attorney regulator, setting up and shutting down RAAs, so it made sense to include him. He joined, and so then he's an attorney, and so he had bought out, forced out, however you want to describe it. Attorneys don't play nice with others. Bought out all of his partners, and I think he saw where this thing likely was heading, and I don't know that they did, but he was taking a pretty big gamble on establishing a marketplace for an industry that did not yet even regularly buy and sell these businesses, right? Like that was not a thing. I spent the first 10 years of my career talking to advisors and trying to convince them that they had something that was saleable. If you can believe that by today's standards, that's a hard one to swallow. But so that was the first 10 years of my career was there, building that firm up alongside him, leading their consulting programs. But I also learned a lot about what I like doing in this space. And that is working closely with advisors to develop sort of future-proofed solutions and helping make sure that they get the value that they deserve for the time and effort, blood, sweat, and tears that they put in building this business. So it was probably 2011, 2012 that the prior firm was shifting a little bit more to selling memberships, trying to emulate more of that recurring revenue that our clients have. But to sell memberships is it's a totally different business model than being a consultant and delivering value to your clients. I get it. Consulting is not scalable. It takes humans to do it, right? I pivoted and started Succession Resource Group in 2012 and have been doing it ever since. And to your point with John, I've just had a good chance to work alongside him. And I he has certainly outpaced me in growth, right? His firm is crushing it, doing great work. But we've sort of been able to collectively grow up in the complexity of the business, right? So, anyway, long and short of it is you didn't ask why I do or why our team does what they do, but it's because we love working with these businesses, and they are legitimately businesses now, as opposed to books of business like they were when we started.

SPEAKER_00 7:06

We're in a business owner's journey, and you can define it, you know this obviously better than I do, is the point where it makes sense for them to reach out to a firm like you whether that's their future exit, whether it's their, I want to now focus on enterprise growth, is it something else? And who qualifies, right? I mean, at what stage are do they become a good fit for someone like you and your firm? Help us

Who Needs Valuations And When

SPEAKER_00 7:33

paint the picture in terms of who that person is that should really be leaning in and paying attention to this conversation.

SPEAKER_03 7:39

You bet. It's a good question and it's a hard one to answer, right? If we did one thing, and I won't belittle the advisor clients we have, because I know they provide more than one service, right? But that they focus on wealth management. There's a particular type of client and level of sophistication that our firm is really good at catering to. If I answered your question from the perspective of succession planning, very different answer, right? Because to do internal succession planning, I need bodies to have bodies and successors on my team and payroll. I need some size. So you just don't generally see folks engaging us to do internal succession planning work that have less than a couple of million in annual revenue.

SPEAKER_01 8:15

Yeah.

SPEAKER_03 8:16

It's not that we couldn't do it, but at some point I need at least two people on the proverbial dance floor, or I can't, in fact, do it. It becomes very academic and they wouldn't pay for that. But you think about the business brokerage work that we do, right? If you're running a business, you're ready to retire, or you're thinking about that in a couple of years, we'll we'll start years prior to that, doing annual evaluations. And not that you need to know the number every year, although that does not hurt to know, but it's more the things that are impacting that value, driving it up, driving it down, because everything that every advisor business owner does throughout the year, it's directly or indirectly impacting the value of their business. And the annual valuation ties those activities back to sort of the best way to really benchmark a firm, right? If you've been growing by 7, 8% in revenue every year, you think, well, that's that's pretty good, right? Like I'd like to grow by more, but seven, eight percent is not bad. But your value is growing up by 14, 15 over the prior year, like you're doing something right. And it's nice to know what that something is, obviously, and do it again next year. Inversely, if you come back to us and say, like, hey, I grew by 14% last year and your value went up by five, you should also know that. You're not gonna be as happy with us as the alternative answer, right? But you should know that. So the short answer is start with the end in mind, right? I I get the financial considerations, right? You're not gonna pay us, you know, thousands of dollars to put together your LLC and your operating agreement, your employment contracts until you have enough people that it makes sense for. But those are all things that every business needs. And if you don't do it right at the beginning, you're gonna have to redo it later, which we do a lot of. So I'd say, in general, sort of our our typical client that can use and benefit from all of the services and would want to afford it, they're probably doing getting close to a million a year in revenue. But we have plenty of clients who do 500,000 in revenue. They built a great lifestyle practice, and they're they're on the back nine, they're ready to retire, and they want to sell to somebody like you talked about, John Cutton, for example. We'll help them, we'll get it done. It's very transactional, right? We'll make sure they have a great experience on their exit, but it's probably not going to be an ongoing relationship. So I hate to give the typical attorney answer that it depends, but it kind of depends, right? If it's annual valuations, we have clients that do 300, 300 or 400,000 in annual revenue. If it's succession mergers, we were talking about clients that do 30 or 40 million a year in revenue and up.

Organic Growth Versus M&A

SPEAKER_00 10:32

What's interesting about this is that I don't know the exact number, but you've been doing this for 20 years and you see under the hood for all these successful firms and what they're actually doing to grow. And so I was just listening to a podcast. Actually, Michael Kitts' podcast, and I was looking into Peter Malouk, by example, who has an RIA and he was talking about his growth. And from what I understood, from what I listened to, it's been a lot more organic growth. Where do you see people having the most success when it comes to scaling the firm?

SPEAKER_03 11:04

Scaling rapidly, it's MA, right? I mean, especially when you look around the industry. And I think you and I were sort of joking at the conference. You can walk into any of those main sessions for the conference we were at, stand in the back of the room and look around. And I don't care what conference it is or what time of year you go, half the room has white hair or no hair. Right? Like that's just the industry we're in. The average advisor's age is, depending on the source you cite, anywhere between like 55 and 57. Our typical advisor who's starting that succession or exit process is in their early 60s. So half of the advisors, right? And you know how averages work, I mean, half the advisors are precariously close to an exit event. And I tell you statistically, most of them don't have a plan. So to actually answer your core question on the growth side, I definitely wouldn't want to, as an advisor firm trying to build a valuable enterprise, rely on inorganic growth as my growth engine. But boy, can it turbocharge it. Uh John Cutton and some of his peers, uh, Peter Malouk, case in point, right? They've done fantastic on their organic growth, I'm sure. But we've done a few deals with them. And picking up somebody else's life's work and onboarding that in 90 days to six months, that's pretty good too.

SPEAKER_00 12:17

Yeah, no, I I I totally agree. So on the one hand, it's it's very appealing for the reasons that you stated. So give us a primer. So for someone who's thinking, okay, I haven't done an acquisition yet, I'm looking to scale. What are some of the things that they should be thinking about? If they're thinking, how do I best scale? Whether it's organic, whether it's acquisitions, on the acquisition side, what are some of the key things for them to think about?

SPEAKER_03 12:39

Capacity

Capacity And Profitability For Deals

SPEAKER_03 12:40

and profitability are probably your two big ones. And that could answer 10 other questions that you ask, right? But I say the capacity perspective because most advisory businesses, if you look at their profitability, and this ties back to capacity, which is then fundamental to being successful with inorganic growth activity and organic activity, the target like profit margin for most firms is gonna hover between like 30 and 40 percent, is sort of that healthy range that we've seen for firms.

SPEAKER_02 13:06

Right?

SPEAKER_03 13:06

And you think, well, okay, well, if we're at 50% profitability, that means we're we're better. Like I would throw a flag on that play and say, no, if you're at 50% profitability, either you're a unicorn and high-five, they're out there. You know, we've got one that we're listing here shortly, but those are the anomalies. Generally speaking, in a professional service firm to deliver a client experience that you could stand behind, you're gonna have to be between 30 and 40% profitability because when you hit 45, 50 profitability, your team is gonna be ground to a nub. They'll have no capacity, they're working 50, 60 hours per week, and you're gonna have to go higher. And you're gonna need to get that person a computer and a software and a place to sit. And guess what happens? When you hire that next batch of people, your profitability is gonna go from 50 down to like 40 or 35, and they're gonna get experience and you're gonna fill up their bucket of time taking great care of clients, and your profitability is gonna creep up and then everyone's gonna be burnt out, and you're gonna hire more people, right? You're gonna vacillate between 30 and 40. If you can hit 45 because of AI and maybe pruning your book of business, more power to you. But as you think about then inorganic growth and being able to go out and buy practices, I can't be running at 50% profitability, which means I could afford to buy better practices, but we're not gonna have any bandwidth, right? We're gonna onboard somebody else's job effectively, taking care of I don't know, 200 households. We've got to have some internal capacity. Number one for the team to service, but also for the owner to go have these conversations, right? It's time consuming. Even if you and I hit it off, we feel like we got a really good fit, good match. I'm trying to convince you to give up your life's work and sell it to me and that your clients are gonna land and they're all gonna stay. It's just gonna take time. And the problem is if we don't have the capacity, I don't have the time. And I start getting back to you, you know, every other week. Well, this is sort of your proxy for how your clients are gonna be served in our model. And if I'm slow to get back to you, and you're in theory my top priority, so capacity is number one, but you gotta then balance that with profitability. If you can operate a more profitable business than your peers, you're gonna have more valuable business, you're gonna have a multiple arbitrage, right? Where you're out there paying three times for businesses on revenue, or I don't know, eight and a half times earnings, and you're worth three and a half, four times revenue, or nine or ten times earnings. So their business put into your business is automatically accretive, right? Because we're more profitable, because we have the capacity and we're more efficient. I can then in theory, if I want to win with my checkbook, I kind of can because it's a short-term win for you with me paying what appears to be a higher price. But in my business, I know how much revenue we can produce per household on average. I know the profit we can produce, I know our capacity constraints. So a buyer, again, not to keep going back to John, but he is a really good, sort of polished example because he's been able to do this over and over again. He's able to effectively balance those two things. And I'm sure size doesn't hurt, but size doesn't do it alone. Size alone does not make you more valuable. I've seen some very poorly run, very large businesses.

SPEAKER_00 16:00

Yeah, because I have this conversation with advisors a lot,

Advisor Identity Versus CEO Identity

SPEAKER_00 16:03

right? So I primarily work with the founder CEO and they're at different stages. And the pattern that I see is that they started the business as an advisor, like I think is normal for most people. Over time, they have success. And then what tends to happen is that they start to, you know, first they get a team to take on new clients, gradually they decide, okay, I shouldn't be personally working with so many clients. It's not a good use of my time. They start to reduce the number of clients they have, and at some point they have to make a decision of sorts, which is am I an advisor, am I a business owner? And I and I'd love to get your thoughts on this because I find that with a lot of them that I talk to is that they have a strong emotional attachment to the clients that they work with and that help them build their practice. But if you step back and look at it strictly from a numbers perspective, them doing that work is probably not the best use of their time.

SPEAKER_03 16:52

We might need another podcast episode for that one. Boy, that's a big one, Paul. I've been there. So as a fellow business owner and practitioner who love what I do and love the clients that I serve, don't get me wrong, I'm you as advisors listening are our clients. So if you saw the air quotes on YouTube, right? Like I really did love, I do love working with the clients, but I would tell you, most business owners, advisors who are listening, me included, probably you someday, right? It's it's not that we won't give that role up as practitioner because we love our clients and the work that we do in the community we serve. Like, that's part of it. But it's also just the safety, right? You're an expert in that area. You're really good at it. You got your series 7, your 63, your 65, your list your designation, CFP, CEPA, like run down the list. You have been properly trained, mentored to be an amazing advisor to your clients. And you can train and replicate that. Uh, before you started your business, Paul, how much CEO training coaching did you get to figure out exactly how to run a business? Like I sit in the seat of CEO and I still look around sometimes and so where's the manual? What am I supposed to be doing? Right? And I have seen some advisors thrive with that. I have seen others, their business thrives, but they, I think emotionally struggle with it, right? Like that's not their comfort zone, it's not what they love doing. They might grow into it and love it later, but for now, they they didn't grow up in a family business. They don't know what it means to be a CEO. I'm not taking anything away from any of us. Because you spent 10, 20 years building your book of business, but then it gets to a point where you end up having to spend five hours per week to start with, right? As a CEO. Because now we've we've had enough success and got enough clients where I can't do it all. So I gotta hire somebody to answer the phones, and then I gotta hire somebody to help take care of at least some of the smaller accounts because I don't have time to be prospecting, servicing the entire book, getting RMD requests. Like I can't do it. So I need somebody. And I got two people, and guess what? They want benefits. Oh, okay. So I gotta go figure out a benefits provider or find a PEO. Before you know it, you're spending five, 10 hours per week being a CEO, but you're doing all the parts of the job that you don't like doing, right? You think, well, if this is being a CEO, then hard pass. I'll go back to being an advisor. But you and I both know if you can get to a point where, and I'm not gonna ask that the advisors listening aspire to get to a 100% CEO, 0% advisor, but I'd say let's kind of shoot for that, right? Because I can tell you, if you're sitting in front of clients, even if it's your most complicated cases, your best clients, and you you say you love what you do, I get it. But that work for your A clients, however you define that, that's probably if you had to outsource that, right? You said, you know what, like I lost my voice, I'm never getting it back. So I've got to hire this function out and get somebody in here to do it. And I got 12 months to get them trained, you're probably gonna spend like $300,000 a year to get that person in, which that's gonna sound like a lot of money. But if you boil that down to an hourly rate, you're talking about like $150 an hour is what it would cost you to get that job done. To get somebody in that after 12 months of shadowing you could deliver the same level of client experience. Like it won't be cheap, but on an hourly basis, Paul, it is cheap. Because then I think about, you know, you in my example here as the advisor listening. If I could free you up even 20 hours per week, right? So you're gonna go down to part-time instead of 200 households, you're gonna see 100. If I could get you 20 hours free per week, what could you do with that extra 20 hours? Could you deliver more value than $150 an hour? And you get some folks who were on the back line of their career, and the short answer is no, but I would like to not work 20 extra hours per week. I'd like to work 15 or 20 total. Okay. Well, then bringing somebody in and hiring them can elongate your career because you can, in fact, work 15 or 20 hours per week without the client experience suffering.

SPEAKER_01 20:26

Yeah.

SPEAKER_03 20:26

Or you can double down and then go be the CEO leader that your team needs, because who in your organization can mentor and train and create little mini-mees, right? Like, how can I create a Paul Jr. and a Paul the third? Only you, right? So you can replicate you, they can't replicate you because they just learned from you. But I gotta, I gotta have more free time. I gotta enable Paul to be able to train and replicate himself. One, who's the best at prospecting? You know, the elephant hunting? Yep. The guy with the gray hair that's been doing it the longest. Well, we can't get him or her out of client meetings. Like you have to, right? So I think when you get back to the thought of being a CEO, as uncomfortable as it might be, just start by setting a target, okay, by 2028. I want to be halftime CEO, halftime advisor. And maybe you never get past that point and you're happy with it. The problem is if you do that, you're gonna the scale's gonna eventually tip and you're gonna get to a point where you're seeing how impactful your 20 hours as CEO is, and your team's gonna come back and say, Paul, give us the rest of that client service work. You can do things only you can do. We can do this stuff, like trust us, give it to us. Yeah, so it it happens faster than most people are even comfortable with.

SPEAKER_00 21:34

Yeah, I I totally agree with that because I think part of it's just getting used to it. And when you see that your team, when you build the team and you can see that they can do it, and this has been my experience, you know, it's always as especially as the expert, it's like for me, one of the breakthroughs for me was that I hired my older brother to come in and it was just a really good fit. And so now I'm speeding up the process of stepping back and being the CEO because, you know, just like you're Your father, because you're David Grow Jr., in some ways cloned himself. And, you know, I'm I'm in some ways cloning myself. You know, it's like I joke, it's like, hey, you know, we're kind of interchangeable at this point. And I think the safety valve for me is that because he's my brother, I'm willing to go faster and to give him more ability to take over things that maybe before I would have held to the chest because there's always the concern, you know, if you hire someone and you train them up, and then a year or two later they leave, right?

SPEAKER_03 22:29

You just trained a really competent, capable competitor, not a successor.

SPEAKER_00 22:32

I mean, you would know this better than I do, but I think I would imagine that's a big fear. And so to be very specific, like I can think of a client of mine, I'm gonna call him John. You know, he's very successful, he's built up the firm, he doesn't have family in the business, but he's at the point where he's, you know, he doesn't want to give up the practice, but he's also at the point where he needs to transition beyond being the advisor. And, you know, I ask him questions, see how it's going. But I think the missing link for him, in at least in terms of speed of that transition, is that if you don't have that person in place that you can fully trust, then it becomes challenging. Yeah, I'd love to see from your perspective, especially as this translates into, you know, founder dependency and enterprise value and things of this nature. Let's just say absent the family member being able to step in, what are you seeing that people are doing that makes us more successful?

Trust, Equity, And Phantom Ownership

SPEAKER_00 23:22

It is scary to your point, right?

SPEAKER_03 23:23

Because we're going to take you talk about equity in these businesses. Like, well, what is equity? Oh, it's our shares, it's our units in the LLC. Equity in this business, and by this, I mostly mean like professional service businesses. Yours, mine, the advisors, CPAs, attorneys. The equity is the relationship that you have with your clients. And if I just told you that you need to stop having relationships with your clients, mentor and train little mini use, and then delegate, after five or six years of the advisor on your team, you know, using your recipe right, but they're the face to the client, the equity kind of transfers, right? They they they could, in theory, walk out that door and without soliciting the clients, clients would just follow them. And you think, well, shoot, now what? That doesn't sound like a very good prospect. I'm gonna bring stuff in, delegate it, try to grow, and then be losing stuff out the back door. I mean, you can solve some of that with culture, you can solve some of it, or at least mitigate some of it with the right contracts. But I mean, it's about designing compensation to support a team. That's been a major change in the industry. That I mean, we all as business owners struggle to nail down compensation for our team and not just how much, but how to pay them. So that's part of making sure that we can hand these relationships off and be able to feel confident about that person not walking out the door with our clients. Uh, so there's the compensation that's a part of it, and then it's it's about the career track, right? I mean, I've heard a lot of advisors talk about the next generation and they're very sort of achievement-oriented, and I don't know they always mean it in a good way, but right that they're very achievement-oriented, they they're very entitled, they just want stuff given to them. I mean, yeah, maybe there's some stereotypes that you know hold true, but in general, we need to get our teams to think and act like owners, right? Like, wouldn't we all want our employees to think and act like owners? Turns out there's a really easy way to do that, make them an owner. But it's not like it used to be. And I think this is one of the major issues why we haven't seen succession planning as much in an industry full of professional planners. It's not because it's a bunch of, you know, ostrich with the head in the sand. Like, advisors know they should be doing this. But historically, I look at these businesses, and when you think about sharing equity, there's one type of equity I can share, and it's the equity that I have. It has voting rights, profit rights, a stake in the value. And I'm not willing to give that up to a you know 32-year-old who just got their CFP and started shaving a couple years ago. Like that chance.

SPEAKER_00 25:37

However, you have my intention. How do we solve it?

SPEAKER_03 25:40

How do we solve this? If by today's standards, I could look at my toolbox as an owner and say, okay, well, yeah, I got my 100 shares and they have voting and profits and value rights, but I also have non-voting units or shares, and I also have liquidation rights, and I also have a phantom equity plan. All of a sudden, I've got this really cool kind of career track within an accompanying path to being a partner that's not analog. It's not like not a partner, not your partner. It's a much more graduated, right? We start with giving you a fair compensation. You prove that you actually should have a seat at the big kids table. And then we set you up, I say phantom equity, like just amongst us girls. In reality, it's a stock appreciation rights plan or a liquidation rights plan. But at its core, it's phantom equity, but it's a way to have them start to earn some sweat equity. And you know what? If they prove themselves and they're earning this account balance and they don't get fired and they don't quit, then some of that select group can roll their phantom equity balance into real equity. So it becomes this really cool thing where it's less about worrying about them leaving and more worrying about them trying to force you out the door before you're ready. And that's a good problem to have.

SPEAKER_00 26:42

That's an excellent problem. And I would imagine that this is something that your firm helps people structure with.

SPEAKER_03 26:48

Yeah, I mean, it's a combination of the work that we do on the technical side, right? Putting the contracts together, figuring out the right types of plans to put together, creating the career track and comp plan design. And then it's also partly, I mean, this is where a lot of the coaches do a great job, right? Is how do I get in and really operationalize this and help it land with my team and get it sort of integrated into the culture that we're building? So it really does take a village. I mean, again, yes, to your point, we can take care of the valuation, we'll take care of the strategy, like which type of plan makes the most sense. We'll do all the contract work because we got the tax and legal all under one roof. But there is this human element too, right? And the owner is sometimes really in touch with that, of making sure that this is gonna resonate with their team, it's gonna land. And other times the coaches help fill in some of those blind spots.

SPEAKER_00 27:34

Yeah. To me, as I hear this, what I'm thinking is that sometimes when you think about exit, you know, there's always like this procrastination, right? I think we joked about this when we were at the conference. It's like, you know, every time I meet my advisor, they say, Hey, you should go get your will done. I'm like, that is excellent advice. I totally agree with you. And then we meet again the next time and he's like, Hey, have you done your will done? I'm like, oh no, I haven't done it yet. Just because it seems like it's in the future, one day I'll do it. But just this conversation about, okay, I want to grow, I want to make it less dependent on me. I want to build the team. I don't want to run the risk of training my competition. What you just described sounds like something very powerful that someone should be doing sooner than later in terms of actually building that structure so that they can grow, get their time back, build their valuation, et cetera. That wasn't really a question. That was more of a comment, I guess.

SPEAKER_03 28:22

Well, and and I would say, in response to your comment, um for me and the seat we sit in, especially looking at it from the valuation lens, but also helping people on the back end exit, there are great, very efficient lifestyle businesses, right? Where they don't want all that complexity I just described. They don't want to train mini-mees, they don't want to worry about people taking clients out the back door as fast as I'm bringing them in the front door. I want simple, I want efficient, I don't want the headaches, and I certainly don't want any partners. There are very efficient, great lifestyle businesses that, frankly, on a profitability perspective, will outshine firms that are two, three times their size, right? Because they're very intentional about what it is they're trying to build. And then you go the other way with it. And you say, okay, well, then there's enterprises, right? Where it is full-time CEO, sometimes a COO behind the scenes with them. I mean, all of a sudden you're really starting to talk about a legitimate business that you could take the founder out. And maybe the business doesn't grow as fast, but it still operates, it still grows. The problem is there's a lot of room in that no man's land between the lifestyle business and the large enterprise, those are the businesses that people feel like sometimes they get stuck, right? Because we haven't hit the size and scale and efficiency of the enterprise you're describing. But I can remember the days of how simple things used to be, right? Where I was very profitable. I worked on my terms, I could take vacation. Yeah, you know, my clients knew I was gonna be out for two weeks, and but they were pretty well trained. It's when you get stuck in that middle area, right? Where you're we clearly left the lifestyle business behind. Like now I've got staff, I'm mentoring and training, but it's gonna take a couple of years of very intentional building to sort of get out of this solo into this super ensemble. Like there's a lot of room between those two things, and there's a lot of firms that they never wanted to be an enterprise, but they were too good at their job of being a solo practitioner in lifestyle business. And they they couldn't say no to clients, and all of a sudden they're sort of forced into being a CEO and they never really wanted it. And that sucks to see, right? Because those are the advisors that you can tell when they finally sell and they retire, a lot of fans they'll stay on for years after they retired because they're finally back to doing the one and true things that they actually really like doing their entire career.

SPEAKER_00 30:36

Yeah.

Lifestyle Firms, Enterprises, No Man’s Land

SPEAKER_00 30:37

Is is there a technical term for no man's land? I mean, because I know enterprise, I know lifestyle. I don't know the technical term. Is it no man's land? I mean, it seems like a good term.

SPEAKER_03 30:46

I mean, when you look at the talking heads like us that talk about this stuff, right? You got the solo, silo, right, where a handful of solos come together and we're sort of a team in name only. So you got solo, silo, ensemble, superensemble, but there's so much room between these labels, right? That in reality, you're either operating your practice by yourself and you're hopefully efficient and enjoying it, or you're on the path towards building a large enterprise. And if your sights are set on being an enterprise, I'm not gonna say you're all gonna get there, but you definitely increase your odds. It is that no man's land, and I do lack a better term for it, but I call it no man's land because you feel like you sort of wandered into it unwittingly. Like I didn't intentionally set out to be an enterprise and I failed. Yeah. I just set out to take great care of my clients and serve my community, and here I am at two and a half million in revenue with 10 employees, and I'm figuring out payroll, and I'm up late at night, and I'm stressed, and trying to figure out how we grow this thing. Like it wasn't on purpose for a lot of folks. I think it's folks that have entered no man's land and they are uncomfortable, but they look back and they can't see how to get back to being a solo.

SPEAKER_00 31:50

Yeah. I mean, I'm I just turned 51, and currently, you know, these things can change, but currently I enjoy what I do so much that the idea of, you know, retire is like retire from what? I mean, right, you know, I'm like a kid in a candy store. I get to do what I loved doing. You know, it's like if I were to retire, I'd be like, I'd be like, please do not make me retire. I want to continue doing what I'm doing until I can no longer do it. Well, for someone that's maybe more on that side of lifestyle business, you know, my my take on this is that they may have made a conscious choice at some point for many of the reasons that you described. I think underlying that is this fear or experience of entering no man's land and getting into what you were describing in terms of I'm not good at this now, I'm doing things I don't like, and now I have all this complexity that didn't exist before. And at the same time, though, if they're like really good at what they do, you know, there is a point in your calendar where it's like, I can continue to bring on new clients, and now if I'm turning them down, it's like, well, that's just not a good decision. Because to me, the ultimate variable is how much can you make your time worth, right? And let's just take an easy metric, you know, this isn't perfect math, but if you know, if I if I generate a million dollars, I want to say, you know, I could calculate it at $500 an hour, assuming a 40-hour week, right? And so if you're already doing that and you don't want to spend more hours, but you want to, hey, if I can make it worth a thousand dollars an hour, then that seems like a good trade. So, as well as if you're thinking about making your time more valuable in whatever capacity it is, but as well as enterprise value, which is now, you know, I want to lean on you from one of your specialties. How as that lifestyle business that's very successful, doesn't want to enter no man's land, but is interested in making my time more valuable and creating a bigger valuation. So at some point when I do sell, I get maximum value. How would you advise or coach that person?

SPEAKER_03 33:39

Yeah, so a lot to bite off there. I'd start with size doesn't necessarily matter, but I will say that larger enterprises do get more value per dollar than lifestyle business. However, the lifestyle business in the 20 or 30 years leading up to that sale will be a cash cow. And I've run the numbers. And if you are intentional about running an efficient, well-run lifestyle book a business, you can make a lot more than if you decided to double down or go the enterprise route. A, because a lot of people don't make it to the enterprise side of the equation, they just end up less profitable with more headaches.

SPEAKER_00 34:14

They get stuck in no man's land. It's like it's stuck in no man's land. It's like going through the Sahara or Death Valley. It's like you see it over there, but I'm not gonna make it.

SPEAKER_03 34:23

Correct. Right? So the enterprise, when when you get there, they do get a high value, but you're also getting a lot higher multiple on a lot smaller number because be an enterprise, right, where it's not owner operator, you don't do that and run at 40, 50% profitability, right? Like firms the size of you know, like Cuttons or Peter Maluke's or Stratos, right? There's a lot of these big enterprises out there. Their profit margin sucks. Like it's it's run that way on purpose, right? Because it's efficient, it's scalable, it's repeatable, it's not tied to the founder anymore, but that comes at a cost. Yeah. So they get a high multiple and a small number, they're still doing just fine, mind you. Yeah. But the lifestyle business can do just fine. The core of your question, though, you know, how does that lifestyle business maintain that? Well, I think it's you know, it's partly doing that annual evaluation. It's also, I've seen some folks who run a lifestyle business, but they have a good coach, they do their annual valuations, and they're good at pruning the book, right? As we bring on that next new client, I'm not just adding where I have a hundred households, then 120, then 150. No, no. I know for my sanity, I don't want more than like 80 to 100 relationships. And also I don't want to manage anybody else. So 80 to 100 is the number. And in fact, as I move up market, it might be less than that because it's gonna be more complex, it's gonna take more work. But they gradually work to prune the book, right? They do a partial book sale and they sell the bottom 20 or 30 households. And that way I have room to take on these new clients that continue to find me because my reputation and because I'm good at what I do. And we hear back from a lot of folks who say, Well, who would want my bottom 20 or 30 households? There's plenty of folks. You think the advisor or founder who we're talking to, it's just them 20 years ago. Is there not, you know, somebody recently who came out of a warehouse, they went independent, they've got you know 25 million in AUM. They're trying, right? If they could take your C and D clients, it's a win for everybody. Your C and D clients now get treated like A clients, win, and they'll probably find some additional wallet share to be had there. You have some additional free time and can refocus your business. Yes, your revenue goes down slightly, but your value goes up because all your other key performance indicators just got better. And for the next generation advisor, it's a win for them because they just picked up additional clients that they've been looking for, but can't get on their own. Yeah. And they're auditioning maybe to take on more of your C and D clients in the future, which your C and D clients, if you keep pruning, keep getting better and better. So I'll be happy to take them, right? Like it is definitely possible, but you do have to be intentional with it.

SPEAKER_00 36:46

Okay, so just to gather my take on what you just said is that for that lifestyle practice, you know, especially if it's successful, because it can be so profitable, that optimizing for enterprise value might just be the wrong thing to go for. Yeah. Because if you enjoy what you're doing and you're not looking to retire per se, and again, you enjoy what you're doing and you're constantly making your time more valuable, then optimize for the profit that you're making year over year. Yeah. Versus enterprise value. So enterprise value is it sounds like the wrong metric.

SPEAKER_03 37:12

I mean, enterprise value. If you want to build a business that can someday exist without you, then sure. Hire, mentor, train, but know what you're signing up for and know why you're doing it. Again, it's the folks who they that was not their goal, right? If you ask them when they started, you ask them now. Their goal is never to be a CEO or a boss or a manager, definitely not a leader. They're really not entirely sure what that even means. Yet here they are sitting around around on a business doing a couple million dollars a year with a staff. So again, I don't say it sucks, right? Because to your point, they've had a ton of success, they got a lot of business coming in, but they're in a position where they don't enjoy doing what they do. What they do now is spend half their time leading and mentoring and training. And if that's not what you're good at or what you enjoy doing, that can be really draining, right? Like that can be exhausting. But then there's some folks, it sounds like you, that maybe thrive on that, where if I could just get out of taking care of the clients, all the things I could do. And we love when we see that. But one is not better than the other, I guess is my main thesis here, right? Like it's it's being stuck in the middle, which I think you get pretty in any business course, not even your MBA. Don't get stuck in the middle, right? You want to compete on price, pick a lane high-end or go cheap. Don't go in the middle. And I think that applies here as well as anywhere else.

SPEAKER_00 38:25

It sounds it sounds like it. And and so for that lifestyle that's like, hey, this is my lane, you know, I'm maximizing profit, you know, at some point I'm gonna leave, whether it's, you know, by choice or by you know life, what is the path for them to sell? It's it sounds like what we're agreeing on is the goal is not enterprise value because they're making a lot of money, enjoying what they're doing. But what in terms of at one point in the future when they do can no longer be the advisor for whatever reason, what is the reality then in turn taking that asset and selling it? Is it just like you're getting a discounted rate because the reality of what you're giving, or how does that work?

SPEAKER_03 38:59

Yeah, I mean, at the end of the day, when it comes time to sell, you are selling a job, not a business, right? So, you know, I've listened to you know, Michael Kitsis for years talk about it and advocate for the small business, right? He's a big part of XYPN. Those are all great, true, rosy ideas. But when it comes time to sell, if you have a lifestyle business, you are selling your job, right? Like you're not selling a turnkey enterprise that I can buy, take over, that runs and generates profits. You are selling work. Now, the upside is people will still pay you for that work because there's plenty of people who don't have enough work that would love to have your work. So you still get value. You just don't get the same kind of value that let's say an enterprise would get. But again, just go look in your bank account, look at your retirement account, and all the profits you've been sucking away year over year, look at all the hair you still have on your head, right? Like from not having all the stressors from the business. So just don't forget what the last 20 or 30 years afforded you about you being intentional about building a lifestyle business. But when it comes time to sell, either one, you're gonna be able to sell and you're going to sell to one of these enterprises, right? Where they can afford to pay you a pretty penny for your business, because for them, it's still a good multiple arbitrage. It still makes sense for them to do it because what they will trade at. So it can still be a win-win, but you're gonna sell, you're gonna pull the ripcord, you're gonna make introductions to your clients over 12 to 18 months, and you're gonna fade into the background. And your clients are gonna be, in theory, better served if you find you know, from that's a good fit for you. Yeah, because the buyer does they do taxes, they do estate planning, they do wealth management like you do, which is why you have a good fit. Yeah, but they do all this other stuff for your clients where your clients are gonna think, like, oh my gosh, Paul, like, thank you so much. Like, I hate to see you go and retire.

SPEAKER_00 40:36

Yeah, yeah, yeah. And then like three months later, they'll have forgotten your name.

SPEAKER_03 40:39

I know, right? The other side of that same coin, though, is kind of like you described with you and your business, right? You love what you do, retire from what? Problem is I hear that a lot from advisors who are 75 years old, they got a great book of business, good recurring income, and they're saying retire from what? And I'll tell you, retire from what? Retire from the business because you're not taking care of your clients. You're not saying current on CE, you're not saying current on technology, and frankly, you're not serving your clients anymore.

SPEAKER_01 41:05

Yeah.

SPEAKER_03 41:06

You're being purely responsive, right? And I know shots fired, but I can tell you, you ask our marketing team, they send out a lot of emails throughout any given month to our members and our subscribers. And it is, it doesn't matter what month it is, what time of the month it is. There is at least, and I'll be conservative here, one quarter of every set of emails we send out that come back with out of office responders. At least a quarter, it's probably a third. So I mean, there's probably conservatively three-quarters of the advisors at their desk at any given time. More realistically, probably two-thirds, which means there's a third that are kind of retired in place.

SPEAKER_00 41:41

There could be a good segmenting strategy there for us, right? It's like, okay, if you get this reply, put them in this funnel. So I want to change gears a little bit. I'd

Documenting Philosophy With A Book

SPEAKER_00 41:51

love to get your feedback on this. And so just to set it up a little bit, we work with founders, successful. I think many of them are in no man's land. You know, it's like if I think about it, you know, they're they're in no man's land where they're whether they're growing organically through referrals, whether they're scaling through acquisitions or some combination, they get to that point where they started as an advisor, they're successful, they've hired the team members, you know, they have the junior advisor or advisors, they have the office manager, they have all the things that they were told that they needed and they're growing. But to me, the thing that I still look at is their calendar, right? So what is your calendar and how much of the business still runs through you, whether it's the clients, whether it's not not all the clients, you know, some of the clients, whether it's the judgment and the key decisions, you know, having to go through you. And so the solution that I help them with is what I call document to scale, which is, you know, it's get the ideas, the judgment, the stories out of your head onto paper. And there's a version of this that probably many people do SOPs and you know, operations manuals, etc. But to me, what I talk to people about is a book, right? And the reason for the book is that it does a couple things simultaneously. It creates the external facing messaging and marketing, you know, assuming that you're the founder, you're the one that has the ideas, stories, et cetera, all that experience and judgment and knowledge, right? We're capturing it so that for the client-facing world, you're the rainmaker, you're the person whose judgment they're coming for. You have the stories, you have the battle scars, et cetera. And then internally, we're also saying, hey, this is the messaging that we've captured, you know, that we're now promising, you know, essentially, that we want to make sure our team lives up to, right? And whatever the gap is, we're gonna fix it and make sure that the external and internal come together. And so just personally, what I love about this, and you know, this is what I essentially the value proposition I talk to founders about, is that when you're able to do that, the first thing is well, I don't have time. You know, that's like sign number one, you need this, right? Is that the less time you have, the more you need this. But when you do it and you operationalize it the way that we do, suddenly what happens is that. You can step back. Like I was able to stop working with clients directly because they're not really coming for my personality. You know, I like to think of a nice guy, but they're really coming for the ideas. And essentially it's like, hey, they come for ideas, and now you're gonna be working with, you know, my brother or a different team member. And I get zero pushback. I think I had one person who said, I want to work with you, and just because I was bored, I said, sure, why not? So I'd love to get your feedback from a founder, you know, from your perspective specifically, how you see this in terms of just the idea of documenting your thinking, you know, whether it's a book, whether it's something else, but how from your years of experience, how that could potentially impact a firm, you know, take it whatever direction you want, enterprise, founder dependency, et cetera.

SPEAKER_03 44:41

So I'd say, yeah, two parts we can bite off there. Number one is just eliminating the brain drain from your firm, eliminating it from the industry, because that's the part that I think as an industry scares me as a client. I have an advisor. You think about if the average advisor is in their mid-50s and our average sellers in their early 60s, there's gonna be a lot of intellectual capital leaving this industry if folks don't do a better job of that internal succession planning and writing it down to your point. And yeah, maybe it's SOPs, maybe it's creating your client experience and building that into the CRM system. But even when you've done all that, there's still a lot of intellectual capital up here, right? And the problem is you know, because you you've done this, you help clients with it, you can sit down, you can do that brain dump to your you know key team member, right? And he or she gets it. Great. And then you have a little more success and you do that same thing to the next one. Is it as good as the first time? No, it was better. Well, that means you didn't do it as good with the first one. So you get better at it as you go, or maybe you have an off day. If you just create the book and you write that stuff down, it's the best version and it's every single time. So I do think from a marketing perspective, obviously, yes, definitely a case to be made for what you're talking about. And given that marketing drives growth, and growth is the fundamental thing that drives value, really, if and when they engage you, and you're going to help them write that book and write it down. What you're doing, frankly, you're I I know they'll pay you, right? But the return that they're gonna get on it means what you're doing is basically free. Like, not only are you gonna help them drive the value of their firm, increase, you know, operationally probably, because they can use that internally as a little handout manual, but also it's gonna help you grow. And that's gonna, you know, you think about multiples today at eight, nine, 10x. If this can generate an extra million dollars of profits, an extra thousand dollars of profits, times 10, anything gets really big really fast, right? So I think that's one really. I I love the idea of the book from the brain drain perspective and helping make sure we don't lose all this intellectual capital. You spent two decades grinding out to learn. Pass it on to the next generation.

SPEAKER_00 46:42

And let me add one thing, and this is you know, from my own personal experience, I'm gonna use I'm gonna bring John Cunn back in, who we both know we've talked about, is uh I just had him on the podcast and he hasn't seen a client. He should write a book. He should write a book, and he did. And I I talked to him about this, and he he hasn't seen a client personally for 14 years, so he's clearly chosen the CEO of Path, right? And in in the video that we just did, episode four, um, you know, in the past couple years since he's written it, this is where he's giving out tens of thousands, because he has a big enterprise. So he's giving out tens of thousands of these. But what he said specifically is like he gets to meet the clients without ever meeting them, right? Because the book is in the seminar, the book is in this, and it's his smiling face, it's his wisdom. It's when you're hiring the firm, it's not just I'm hiring, you know, associate. It's like, oh, this is you know, this is John Cudd, and now I get to understand who he is. And so for someone like that, he doesn't have to be in the meetings. He's in the meeting without being in the meeting. And this is and this is me because you know, this is where the founder trap of giving, you know, letting go, and you know, what's my purpose beyond it's like I'm like a kid in a candy shop, and you can see I'm a big guy, so you know that means something. And it's because I'm constantly the visionary, I'm constantly coming up with my next book and my next ideas. And I say to my team, here's the book, run the play.

SPEAKER_03 47:55

Right? A hundred percent. So you you got that, and then when you start thinking about the owner getting that stuff written down so they can climb their next mountain, that's mission critical, right? Because in our industry, in my own most professional services, I'm guilty of this as well. You start out as kind of a generalist, right? Like you have to be. I've got to build the website, I have to prospect and get clients, I have to design the business card, I need to come up with letterhead, and the list goes on and on, right? You guys have lived this reality. All of you listening, Paul, you've been there more than once from the sounds of it. You you have to be a generalist. I can't be amazing at one thing, or I will not have any clients or a business. So I gotta be pretty good at a whole bunch of things. And if I'm not, I will be by the time I'm done. But as the business grows, then there's literally a book out here, it's on my bookshelf. What got you here won't get you there. I can't just keep hiring generalists. We have a name for those in this industry, and that's not a bad thing, but it's the shift from solo to silo, right? Oh, well, now we're bigger, we're a five million dollar team, not just a million dollar team. We go to the evaluation and you look under the hood, and really I talk to the five partners, and they all give me their client experience, how they onboard clients, and it's five great answers. They're just five different answers, which again is not a bad thing, but that's that's five generalists that have come together. And now they're a five million dollar firm, but not really. That's a team and name only to really grow your enterprise and scale it, right? Like to confidently walk into no man's land and know I'm coming out the other side. It's about becoming a specialist. I'm gonna become a specialist and become the CEO, and it's gonna suck some days, and I'm gonna have to focus on being a leader and getting mentored and trained, even though I feel like I'm the expert in the room, but not on being a leader. And my team is gonna have to become an expert, right? Not on becoming a leader. I got that one, or I'm gonna try to get that one. You're gonna be an expert in our case on succession planning, and you're gonna be an expert on valuation, and all you have to do 52 weeks a year, 40 hours a week, is become an expert on that thing, right? And that's they always say, you know, hire people smarter than you and get out of the way. That feels really good until you actually get people who are smarter than you that you're supposed to be managing. And then it gets a little unsettling because you know what? I thought, I'll use myself as an example. I thought I was really good, best in the industry at merchers, acquisitions, succession planning, valuation, death and disability planning, entity formation, compensation plan design, like run down the list. I could do it all. But now we've got some team members, and whether you take Parker on our team, Julia, Nicole Fry, Kristen, my wife, Ryan on our evaluation team, they individually would run circles around me on their relative topics. And that's both good and bad, right? But now my job isn't to teach them how to do their job during the week because they're good at that. Now it's to be the mentor and help train them to climb the next mountain. And that's how you get through the Sahara Desert and come out the other side.

SPEAKER_00 50:42

Yes. This is how you get through no man's land.

SPEAKER_03 50:45

Don't just stop and set up the tent and say, I'm living here.

SPEAKER_00 50:48

And don't retreat, you know. Don't retreat. Because you won't find your way back, unfortunately. All right.

AI, Judgment, And Firm Capacity

SPEAKER_00 50:54

Final topic I want to discuss with you is AI, which I think is on everyone's mind. I feel like I was an early adopter, and by that I mean not Elon level early or someone else that's been doing this for decades. But really, what I think, what I've come to is that really the value that anyone, myself, but a team member especially can bring to my company is judgment. Because the AI can run and do a lot of this stuff, but it can also get things wrong. You know, if anyone listening to this has any experience with AI, which probably is most people at this point, you say you give it a new piece of information, it's like, well, that changes everything. And so you still need judgment in order to say, no, you're off track. Tell me about this. Otherwise, it can it can mess you up. But then once I know people have judgment, they know my philosophy, my approach, they're, you know, within those guardrails, if you will, then it's like I want to get out of the way because I can't keep up with the the rate of learning and the rate of advancement and the rate of all these other things. And so from whatever angle you'd like to take this, what stands out to you? What should a firm owner know about or be thinking about when it comes to AI vis-a-vis the work that you do?

SPEAKER_03 51:57

It comes up on a lot of our evaluation debrief calls, conferences that I'm at. And the short answer is does AI or technology, right? But I mean, AI is kind of the thing we're talking about right now with technology, does it make your business more valuable? And the short answer is no, doesn't. In fact, it technically costs you money. So I could make an argument that it lowers your EVITAL and maybe it lowers your value. But it's it's not that it increases or decreases value, right? If you go sign up for a claw or ChatGPT or Perplexity and get an older version of all of them, I don't care. It's what can you do with it to your point? That's back to the judgment, the discernment. So does it make you more valuable? No. Can it facilitate you being more valuable? Hell yes. We've already started to see it with teams that for those that survey their clients, they regularly get feedback, like not Google reviews and testimonials, because that's a compliance headache, but they they talk to their clients, they formally survey them, they have those survey results, they can repeat back. We we are seeing the client satisfaction stay the same or increase while the number of households served per advisor increases, which drives higher profitability because we now have more capacity, right? If you used to be able to serve, you know, whatever type of client we have here, if you used to be able to serve 110 households, was kind of your average capacity. Now leveraging AI top to bottom through the organization, you can comfortably take care of 140. Like, all right, well, we didn't double your client headcount, but if we can increase it by 10, 20% across the entire industry or across all the advisors in the firm, that's gonna do a lot for our profits. And again, times 10, an extra dollar of profits is $10 in value at capital gains. So I don't know how you don't say current on this AI at this point. It's hard, right? Because we we've had folks internally that were early adopters, and then it outpaced their ability to keep adopting, right? They got busy, and then you come back to and you're like, oh my gosh, I thought I was the early adopter on this. And I, what are these new tools you're talking about? Like skills, right? Agentic AI, like, I don't even know what that word means.

SPEAKER_00 53:56

I I I'm on Twitter, I see what people are doing. There's a new thing called Rockbot, which I'm like interested. I started the time yet to figure out what it does for me yet. Right.

SPEAKER_03 54:03

Yeah. But boy, you think if you can commit the time and effort, I mean, even if you're again, you're not gonna necessarily be a power user, right? But if you can just use it with good judgment, good discernment about the things you're an expert in, it's not gonna replace the advisor. But boy, I tell you, I'm scared to think with the bionic advisor, right? The human element with the AI, what they're capable of doing, it's gonna be really interesting. And that'll probably be a big change in our industry over the next. I mean, assuming AI keeps doing what it's been doing and at the rate that it's scaling and being adopted by users, I can only imagine what it's gonna do for our industry to augment the expertise that these veterans already have. Man, it's gonna increase the value of their enterprises, their profitability, their ability to deliver a service at scale. Like it's it's really cool to see. And we're still in the early days, right?

SPEAKER_00 54:54

Do you see at this point any risk? Meaning in terms of valuation, like if AI can increasingly do what I do, I and I think this is a fear, right? Will AI take my job essentially? Do you see any risk or or what risk do you see?

SPEAKER_03 55:07

You're asking a guy who bought the 3D TV, that didn't pan out. Right? I was the early adopter on a whole bunch of things that in fact did not pan out. And so I keep holding my breath on AI, but I think your risk at this point is not adopting it and getting too far behind the eight ball, right? Where, like back in the day where I refused to adopt these computers, like what? Like this shared terminal everyone in the office has to go use. Yeah, but that's the early phase one. I do think the risk to the advisors is this becomes part of how they operate, right? Like they can no longer do what they do as well as they can do it without this AI support, you know, with the LLM. And then somehow the rug gets pulled out from under us and the cost of it stops being subsidized, and we have to pay full freight to get the power when you realize just how much power the GPUs that are needed here, and you get a bunch of firms that all of a sudden can't afford it anymore. That could suck.

SPEAKER_01 55:59

Yeah.

SPEAKER_03 55:59

But short of that, and I think I think it's already happening.

SPEAKER_00 56:02

I think, like just for the news, I I look at, you know, everyone's like, we're gonna do all AI, and then suddenly it's like they look at their bill, they're like, okay, let's scale back to AI.

unknown 56:10

Yeah.

SPEAKER_03 56:10

Well, I hear these horror stories, right? I was at a conference a couple weeks ago, and I won't say their name because it it would be a disparaging comment. And it's just in this particular instance, but the attorney for this very well-known law firm in our industry got up on stage and was giving sort of these horror stories about how you shouldn't rely on or kind of use AI because you get these erroneous results about made-up stuff. And then anybody who's, you know, even a borderline, you know, decent user knows, well, you need to personalize it, you need to set it up, you got to create some guidelines, and you need a smart person who knows the subject matter sitting in front of it.

SPEAKER_00 56:43

That's 100%.

SPEAKER_03 56:43

But if you do those things, then you don't have to worry about like, oh, it gave me made-up results. Well, exactly. That's not on the LLM, that's on you.

SPEAKER_00 56:49

Yeah, no, I can't underscore that last point of not, is that I think the power of it is when you have the subject matter expert, it's giving them superpowers, it's making them ironic, you know, use your metaphor, you know, still the you know, the client, especially for advisors, so much of it's behavior, right? I don't yet know how the AI is gonna, you know, help you with your behavior and the fact that you take risks or you spend too much or you make poor choices and the rest of it. I mean, that's irreplaceable for the indefinite future. Before we end today's conversation, is there anything that I haven't asked you that you think would be relevant or important for our audience to know?

SPEAKER_03 57:24

Yeah, it's a good question. I mean, we managed to cover a lot of ground from the technology side to structure of advisors, right? The solo, the silo, no man's land on your way to being.

SPEAKER_00 57:35

I'm totally taking no man's land. That's gonna be a new word I use.

SPEAKER_03 57:38

So I mean we we did cover a lot of ground, right? But I I think for advisors who are looking at the industry, they're seeing multiples go up, they're seeing AI maybe helping increase profitability, all this consolidation happening.

Sell Now Or Wait

SPEAKER_03 57:50

I I think the only question we haven't really laser beam focused on, talked about it in a roundabout sort of way, is should they sell now or should they wait, right? I mean, you're looking at multiples going up, you're seeing private equity, we have more industry lenders than we've ever had before, which is more capital greases the wheels of commerce. And and it's really interesting to think about that right now in this space where no, you probably don't love compliance and CE, and every one of us has that annoying client that when they call, you go, I get it. So there's days I'm sure I talk to my clients, uh, and I don't get to see them as much as I used to, right? Now it's sort of voluntary for the ones that I like. But there's definitely days I'm sure, right, where they're like, God, if you could get me X, I would sell today. Um, so should I sell now? Should I should I wait? Would I get a better deal, better result? And short of saying it depends, it is important to think about what are you driving towards, right? If you're still out in that Sahara Desert and you're getting close, but you're not there yet, then no, don't sell. Get to your destination. Because selling short of that is like trying to sell a home that's three quarters remodeled. Yes, it's three quarters of the way there, but it is not in fact done, and I can still see the subfloor and stuff. Like, that's not gonna help. So commit to get to where you're going. And if you think you've gotten there, you got a good lifestyle business, then you got to think about if you waited five years, for example, are your clients gonna be older or younger in five years? If you're not in growth mode anymore, then the short answer is they're gonna be five years older on average, right? And that's not gonna help your value. Will taxes be higher or lower in five years? Well, they don't ever seem to go down, right? They just go up. So now we've got clients are gonna be older, taxes are gonna be higher. Well, what about interest rates? Well, I mean, I know we've seen them, you know, move around a little bit, but the cost of capital is not bad. You've got a high level of demand in our industry right now. So I get it. If you're like you said at the very beginning here, Paul, you love what you do, you're saying retire from what? If you're still committed and you're still working full time, then double down on that. Stay, work, enjoy the profits, because I know you didn't always have them for the first 10, 15 years of building this business. And you've kind of reached the promised land now. If you are working less or you want to work less, which I'm probably speaking to about a third of the industry, there's enough optionality out there now that I would say focus on doing what's in the best interest of your clients, right? Whether you're literally or figuratively kind of a fiduciary for your clients, picture your top 10 households that are a fly on the wall in your office for the last year and you didn't know that they were there. How would you feel about what they saw, right? And I think that can sort of help inform that answer. If you're rarely there and you're enjoying being kind of quasi-retired, your clients would be appalled to know that, right? They assume you're there watching the stock market.

SPEAKER_00 1:00:32

I know, staying up on AI. I call my advisor, you know, anthropic, up or down. You tell me, you know, it's Tesla, what should I be doing? Yeah.

SPEAKER_03 1:00:39

So I think from a timing perspective, the one thing we didn't talk about, and there's no easy answer, it's different for every advisor probably listening, but it's just more thinking about and continuing to be a good steward to your team, to your family, and most importantly, your clients. And I think that can probably, if you're honest with yourself, give you the answer you're looking for. And if you can't answer that, if you can't be honest with yourself, talk to your peers around you, right? Talk to your friends, your colleagues, if you have a coach, ask him or her, talk to your spouse. Somebody will be objective with you.

SPEAKER_00 1:01:06

This has been

Where To Follow And Connect

SPEAKER_00 1:01:07

great. I've really enjoyed the conversation. I always love these conversations because I learn and I sharpen my own knowledge. And so this has been fantastic. I really appreciate your time. Final question for someone that's been listening in and either they want to follow you on social media, they want to reach out, whatever it may be. What are the best ways for them to learn more about you or to stay or to follow you?

SPEAKER_03 1:01:30

I mean, shoot, at this point I'd say probably ask Claude or Chechi back and probably give him my home address and my cell phone number. Fair. Short of doing that, please don't do that. You probably will get more on me than you want.

SPEAKER_00 1:01:40

In all transparency, that's literally what I did to prep for the session. I went to Google AI overviews. I mean, we had a great conversation already, but I said, okay, I'm doing this podcast with David Groud Jr., give me the executive brief on everything I should know. And it did a fantastic job. So yeah, right?

SPEAKER_03 1:01:55

So short of doing that, I would say you can always visit our website. Probably more importantly, just visit us on LinkedIn. We've got our marketing team that is good about not generating marketing content because that's not useful for anybody, but taking the content that our project teams develop for our clients and then sharing tidbits of that, right, on social media. So that can be a good way just to sort of whet your appetite. I mean, obviously, if you want to reach out to us, the website's there, successionresource.com. It's got all of our contact information. We're easy to find, I promise. But the stuff that we do is it's so niche that in general, you're not just going to listen to this podcast and say, oh my gosh, great timing. I'm so glad Paul interviewed him. I'm ready to sell my business. I need to call David.

SPEAKER_01 1:02:36

Yeah.

SPEAKER_03 1:02:36

Now, if you're listening to this and that did in fact just happen, yes, do call me. But that's not what happens for most folks, right? You need to start to sort of gather some information around the edges, and we can be a little bit of that catalyst, right? To get you thinking, eventually you'll take action, right? So, anyway, long answer for a short question. I'd say probably just certainly check out the website, but LinkedIn is a really good way to just start to consume some bite-sized content and see what resonates with you, right? Because it's everybody's journey is different, the size of their business is different, their appetite for what they're trying to build is different. And I think the more information you can get on pros and cons of the solo versus ensemble, current valuation multiples, those things can all start to help inform the conversation we'll eventually hopefully have.

SPEAKER_00 1:03:18

Yeah, I do have to acknowledge that I I appreciate your answer about Google AI overviews and chat scripty because you're the first person who who I totally agree with, by the way, but you're the first person who just called that out because you know, just showing what you did. It shows how outdated the question is, right? If someone were to to go to Google AI overviews and do you, what have you checked? What does it say about you, right? That you know, that's something that we've coached people on. But yeah, I I definitely appreciate the answer. I also find it interesting that, you know, as AI changes everything, increasingly, you know, in marketing, you think of like a funnel. It's like, okay, someone, you know, opts in for a lead magnet and then they get the next step. And I think that's becoming out of date. I mean, you know, now it's like this big mess where, you know, I heard your name here, and then I happen to see you over here, and then this other thing happened, and then something happened in my life where now it's like, oh, I need this person, right? And so it's it's by no means a straight line. I know. It's a jumbled mess that we all do.

SPEAKER_03 1:04:13

That's why I mean, you know, the marketing and the seven touches, right? I think about people oftentimes they download something and they read it, and then a couple months later they'll sign up for our newsletter, and then they'll read a few more articles, right? And it's just about starting to take something that you're kind of in putting off, like your will, not to shame you, right? But it's not that you don't know you need to do it right, but as far as like the priorities go for today, this is unless you plan to die tomorrow. Like exactly it's something I can deal with tomorrow. And for a lot of the work we do, I get it. You you got to be an advisor, business owner, husband, wife, like first. But eventually we do need to take time, hit pause, and focus on working on the business just periodically. So if the resources and educational content we can provide can be that catalyst, we're happy to do it.

SPEAKER_00 1:04:54

Fantastic. Um, David Groud Jr., I've enjoyed the conversation.