EPISODE 15

Matt Sonnen [00:00:00] Welcome, everyone to Episode 15 of The COO Roundtable. We have two giant guests today that I’m really excited about. Episode 14 was, I call it a “rant” episode, I think officially we called it an “Industry Spotlight”, but just between us, I consider it a rant. I was by myself for that episode and I simply did a monologue about the M&A landscape right now in the RIA industry. And I referenced an article by Christina Townsend from Pershing, where in her article she says, “You must have your capacity, your people and your technology in place” before you can even think about jumping into the M&A game because, number one, you won’t survive the implementation or the onboarding phase as you look to swallow a smaller RIA into your organization, and two, and more importantly, you’re never going to appeal to a seller in this ultra competitive M&A environment where there are literally 40 or 50 other buyers competing for each seller. She also says in her article that once you go through the process of cleaning up your capacity, people and technology and truly building a scalable and profitable organization, you may just wake up and realize you don’t even need the acquisition any longer. Your business is growing smoothly and efficiently. And so our two guests today are both highly regarded COOs in our industry, who both worked very hard for many years to establish the proper processes, workflows, people, technology, etc. before their firms got into the acquisition game. So I’m very excited to talk to both of them in detail about that. PFI Advisors actually highlighted both of these firms in a white paper we did two years ago it was called “Becoming a Professional Buyer” and now we have both of them here on the podcast. So we’re very lucky. But without further ado, we have today Loren Pierson COO of Mercer Advisors, who pretty much everyone has heard of. I’ll let him give a brief overview of the firm in a second. And then we also have Michael Kossman who is COO/CCO and Partner at Aspiriant. So Loren and Michael, thank you both for being here.

Loren Pierson [00:02:08] Thank you Matt, it’s awesome to join you on this.

Matt Sonnen [00:02:13] Awesome. Michael, I’m going to go to you first. Why don’t you give us a just a brief overview of Aspiriant?

Michael Kossman [00:02:20] Aspiriant was formed originally as the merger of a wealth management firm and a family office firm, one being in San Francisco and one being in Los Angeles. We were formed 1/1/2008, a difficult year in which to put two firms together, as we all know what happened in the following 15 months. We’ve been around since 2008. We are currently managing about $12.5B in AUM. We have a couple hundred employees scattered across eleven offices across the country. Our client base is broad. We really serve clients in two different service offerings or business units “business lines” as you might call them. One we call “Total Wealth Management” and that involves portfolio management as well as comprehensive planning. And then we have a full family office capability that we call “Exclusive Family Office” which encompasses estate planners, bill pay, tax planning, and compliance. Historically, we’ve grown at a measured pace. Part of our strategy is not to be the hare, but to be the tortoise in this race, if you want to have an analogy to that. We’ve grown a little bit here and there over the years, when we were first formed at the beginning of 2008, we were about 70 people and managing about $5B. We rode out the great financial crisis and then we’ve added one planner at a time and a firm here or there and an adviser here or there and have got to the point where we are today.

Matt Sonnen [00:04:10] That’s fantastic. $12.5B is great. Loren, why don’t you tell us a little bit about Mercer for the probably one listener (maybe) that doesn’t know about Mercer?

Loren Pierson [00:04:22] Sure. I’ve got to say, too, it’s really enjoyable to be doing this with Michael. Michael and I have been friends and peers for years and it’s interesting the similarities between Aspiriant and Mercer and then also the distinction. Michael and I have great conversations about this, it’s fun to be doing this today. Mercer was started in 1985 by Kendrick Mercer. Originally his focus was to create a different sort of wealth advising experience that was less about accumulating wealth and more about really helping clients reorient how they think about their resources, both time and money. He really pushed clients to think about things in a thoughtful and conscious way. At the time that was unique in the industry, and the company grew. Over the years we’ve added many new clients. For a period of time we had a specialty in medical and dental and grew the company in our second era post, Kendrick Mercer by going deep into those niches. Eventually we created a separate sales team and client service team so we could take the individuals that were awesome at developing new channels and new niches for the organization, and put them full time on selling, and take our advisors and dedicate them to just serving our client needs. We’ve grown over the years, we’re $18.5B right now and we just passed 400 employees. I think it was four hundred and five as of yesterday. And Dave Welling has coined a phrase that I think encompasses our ideal client, “A family office for real families”. I think the intention there is beyond investment management, financial planning, we also do tax planning and preparation, draft estate planning documents, and a host of other services, but targeted at a client that obviously wouldn’t qualify for a private family office. That’s done really well for us, we’re finding that there’s a lot of interest out there in that type of offering. And recently, how could we not end that with our foray into M&A. 30 deals we’ve done now and our first one was in 2016. That is our new era of growth.

Matt Sonnen [00:07:01] That’s what my lead-in was all about, firm was founded in ’85, didn’t do a deal until 2016, and then because you had your people and technology and capacity in place over all those years, you were able to really ramp up. 30 deals in three and a half years is incredible.

Michael Kossman [00:07:26] I’m sorry I missed your rant in Episode 14. We sound like we have a lot of alignment there. I’m going to have to go back and listen to it after this.

Matt Sonnen [00:07:32] Yes.

Michael Kossman [00:07:33] Loren, what was the catalyst that started the M&A strategy in ’16?

Loren Pierson [00:07:41] I give a lot of credit to our former CEO who is now our chairman and heads our M&A strategy, Dave Barton. I think Dave was really thoughtful and understanding that the dynamics of the industry, such as it were, was going to go through a period of consolidation. We spent a lot of time thinking about doing M&A, contemplating doing it, it took a long time to get our first deal done. And that is right, we spent a lot time on our systems and our people and our capacity to make sure that we could do it successfully. But Dave Barton really championed that leg of our business growth. For us, it was about an opportunity in the industry and it was about being able to leverage the back and middle office across a broader number of advisors. It just seemed like it made good business sense.

Matt Sonnen [00:08:37] Perfect. So at the time of recording this, we just had the Super Bowl. I’m sure a lot of kids went to bed this past week dreaming of being in the NFL one day; I’m guessing there aren’t too many kids that went to sleep this week dreaming “I hope to be a COO of a registered investment advisor when I grow up”. So I always love to hear on this podcast, when we interview COOs, the back story of how you wound up in your position today. Michael, going to your website, reading your bio, there’s two things that jumped out at me. One is you graduated from UC Santa Barbara. I was a gaucho from ’93 to ’95 and then wound up transferring to UCLA where I graduated. But you always feel a better connection to wherever you were for your freshman year. So I always have a close connection to UC Santa Barbara. (Go gauchos). The other thing, I don’t know if a lot of our listeners realize this, but San Francisco is sort of a large city. It’s not a town in the middle of the desert. Somehow, according to your bio, there was a Michael Kossman Day in the city of San Francisco and I have no idea how you pulled that off. I want to hear that story in addition to how you turned down your NFL contract and became a COO of an RIA.

Michael Kossman [00:09:58] Yes, with much chagrin, I walked away from the $28 million contract at the time in the mid 80’s when they really wanted me to come carry the football down the field. I chose to become an accountant instead, it seemed like a much more exciting and lucrative career. But seriously, thanks for the intro and reference to being a gaucho in Santa Barbara. It was a great place to go to school. From there I did go to work at Pricewaterhouse. I am a tax CPA by background and ultimately followed a rather traditional career path that really landed me in a place of being a small business guy. Now, I really learned about that in two different ways. One was at Pricewaterhouse, I focused on small businesses and specifically the winery and vineyard industry, a really fantastic industry to work with. It’s essentially a bunch of small businesses and complicated. Working in the tax environment, being in a very strategic but regulated framework, actually has a lot of parallels to what we do today as RIAs. After I had done that sort of traditional career path, I ultimately decided that I wanted a bit of a left turn and went to work at a large nonprofit in San Francisco that I helped grow and bring  professionalism to an incredible organization, help expand it. Ultimately, by the time I left, a somewhat bootstrapped nonprofit organization became a really professional, well-run service organization providing hot delivered meals and frozen meals and groceries with about a $12M budget. While it was a nonprofit, really, the only difference is that the person consuming what you produce is not the person paying for what you produce. But you have all the same issues of sourcing and logistics and people and technology and operations and management. All that is still there. And so that was really where I learned to be kind of the broad based business guy. And as I was looking to leave from there, I ultimately did a little bit of going back to my roots, which were at Pricewaterhouse working with small businesses and high net worth individual time and was hired on as the first business manager at Kochis Fitz, which is a predecessor to Aspiriant. Even at the time, this was in August of 2000, an RIA managing $420 million, which in 2000 was a lot of money, was somewhat large at the time. Now that seems small. And then hiring somebody who is going to be a professional manager of the business was unusual. It was a bit of a pioneer move on the part of Tim Kochis and Linda Fitz to do that. But you specifically asked about Michael Kossman Day and bringing a professional approach to Project Open Hand, which was the nonprofit that I worked at, I’d spent about six years doing that. My last day at Project Open Hand was recognized by the mayor of San Francisco, Mayor Willie Brown at the time. He recognized my last day at Project Open Hand as Michael Kossman Day in San Francisco in acknowledgment of my contribution to the city and county and the people who live there and everything that I had done for them. So March 31st is Michael Kossman Day, and of course I get notes from friends and family every March 31st. So it’s great. It was really wonderful to be acknowledged for the hard work. That was indeed hard work and at the same time incredibly gratifying. We fed two thousand people a day, every day. And even though there were days that were really hard, you went home knowing you did an incredible thing. And it was great. I loved it. It taught me a lot of things that I know today and I still, almost 20 years later now sitting in this chair, employ.

Matt Sonnen [00:13:53] That’s a fantastic story, thank you. Loren, you’ve got a Santa Barbara connection. You lived there before Mercer moved headquarters to Denver and looking through your bio, I think you were an adviser prior to being on the operation side. So talk to us how you’ve zig and zagged your way to the role of COO today.

Loren Pierson [00:14:15] Yeah, you bet. And since the three of us have a Santa Barbara connection, at the end of the day, I don’t think any city anywhere has ever celebrated a “Loren Pierson Day”. I don’t know about you Matt, but I think kudos to Michael on that. That’s an awesome story and I did not know that. Prior to Mercer, I was an advisor at Morgan Stanley. That was fifteen years ago. Then Mercer recruited me. I started as a certified financial planner in the Bellevue, Washington office. It’s interesting, when I kind of chart through my path at Mercer and I was reflecting as Michael was talking about his, Michael and I are part of a COO study group. I don’t think there are two identical pathways that any of the COOs have taken. It’s an interesting position in that so much of what you’ve done in your background, contributes to your success. But it’s such a varied role that there is a lot of life learning that is broadly represented in the various COOs of RIAs and larger than that. But yeah, my background as an advisor, I worked in Bellevue for a number of years for the company and then as the company really started to take off I think my career trajectory obviously benefited tremendously from that. I moved to Scottsdale, Arizona to take over running a branch for Mercer and I was able to build a great team there and client base. And as opportunity continued to present itself, we strategically decided as a firm to open up a new territory in Southern California. So I moved out to Newport Beach to open a branch from scratch there. So I sort of built our Southern California presence, did that for a number of years, and then up to Santa Barbara, to run client service. While I was in Santa Barbara our former COO took an opportunity elsewhere. And in the interim, I took over the operations responsibilities. So I was essentially running client service and operations. When Dave Welling joined the firm, he and I got along immediately. And we had just a series of really great conversations about what the company needed in terms of our human capital and where I could best contribute to the firm. He gave me the choice to stay on as head of client service or pivot into the COO role. And for me, I didn’t even think twice about it. I was so enamored at that point of being able to solve organizational problems through the lens of operations. And I love working with clients, I miss working with clients, but I just find it really gratifying to be able to get my hands dirty every day and dig into the things that frustrated me when I was an advisor, that I know by proxy frustrated clients, and run operations. So no, I didn’t grow up dreaming of being a COO one day. But I think I found my calling in life and I love it. And I can’t imagine doing anything else.

Matt Sonnen [00:17:35] That’s great, and I love how you said “get your hands dirty” because I think that’s exactly what every COO, I think feels that way about their job, you’re really in the weeds of the organization and making decisions that affect the long-term trajectory of the firms. That’s a great phrase there. So we talked about it a little bit at the beginning, both of your firms are very well known as large RIAs that attract and/or acquire advisors. But you both approach M&A a little bit differently. So let’s go to Loren first. Loren, can you just talk to Mercers’ acquisition philosophy?

Loren Pierson [00:18:13] Yeah, absolutely. You know, as I alluded to in the question a little while ago, and as you stated Matt, we were operating as a business for decades before we did our foray into mergers and acquisitions. There is definitely an element of the article that you referenced that we would not have been successful had we not had our house in order. When we do acquisitions, we talk about being a an integrator. That’s sort of the word that we use to differentiate ourselves from some of the other strategies of mergers and acquisitions in our space. In order to integrate in the way that we do, we have to have certain criteria for a potential partnership with an RIA. First of all, there absolutely has to be philosophical alignment. What we mean by that is we have to have a mutual understanding that we are and will always be a client-centric, client-focused organization. If we’re talking to a potential candidate and we just don’t get the strong feeling that they’re as committed as we are to that, then we’ll take a pass on it. Second, ideally the potential acquired firm adds value through financial planning, through advising on wealth, not singularly in an investment strategy or something like that. There has to be some narrative arc that matches ours in terms of value add and the firm has to want to be part of the larger Mercer ecosystem. We do convert to our shared instance of Salesforce, our shared back-office, our shared middle office, and that frees up the advisors, the associates, the financial planners that we’re acquiring to really specialize in what they love, which often is the client relationship. Some are great at selling, some are great at advising. We have picked up some great talent in operations, but there has to be a desire on that potential candidate firm to integrate into our ecosystem. I think that makes us a little unique in the space and it’s definitely harder work. It’s data conversions and, Matt of course I know you remember, we worked with you years ago on helping to frame out the many hundreds of steps that are required to do an integration successfully. That was great work that we did together and we’ve been using versions of that template since. That’s sort of our strategy in a nutshell. And Dave Barton who heads up our M&A strategy, he really, really built the modern version of Mercer Advisors. I can’t think of any better person to sort of represent our brand than him. And he does really well at communicating exactly who we are and and doesn’t pull any punches. And we’ve done really well.

Matt Sonnen [00:21:27] That’s great. We’ve talked about that on other episodes, too. I think it’s so important that in an acquisition, one of the main goals for the advisors should be “I want to go back to being an adviser and stop thinking about the day to day and just think about the growth of my firm. And the reason I’m thinking of joining a larger organization is so I can get rid of a lot of that.” So kudos. That’s fantastic. So, Michael, I know you guys view things a little bit differently, why don’t you talk about how you approach acquisitions?

Michael Kossman [00:22:02] So our approach, is not actually terribly different, I think all of these approaches among the various firms that do this are of a similar flavor. But I think there are core components of it that are slightly different. We characterize ours as values-based. The first lens that we look through with potential merger partners is “Do we share the same values?” And Loren touched on this, the client/service ethos is a really important core value for us. Perhaps it seems a bit expected for that to be part of the ethos, but it’s a really important one, so we’re similar to what Loren is describing in that sense. But in terms of the values component of it, the good merger partners for us need to share a belief in some of our core values. For example, one of which is clients are clients of the firm, people do not own a book of a business. That can actually be a turnoff to some potential merger partners that want to come in and say, “Wait a minute. So when I come in, I no longer own my client?” And we say, “No. Actually, that phrase ‘my client’ is verboten at Aspiriant. They are ‘clients that you work with’ or ‘clients that you serve’ but they are not ‘your client’. The clients are clients of the firm and we all work together to serve them.” So that’s a really core values based perspective that we bring to the table and talk about with our merger partners and potential merger partners right out of the gate. Another approach that we have (that perhaps somewhat narrows the perspective or the potential merger partners that we have) is a key part of our strategy is being the aggregation of assets and talent on behalf of our client. When we’re looking at a merger partner, we will look through those two lenses and say, “Is this group of people bringing to us assets that we’re going to be able to aggregate with our other clients for their benefit?” I could talk a lot about how we do that, but I’m positive that that’s part of what we look at. And where someone bringing talent to the organization that we can leverage for the rest of the clients and bring to the table in that sense. What you will hear inside of that is it’s not just about getting bigger, it’s also about, and more so about, getting better. And those really are the core pieces of our philosophy.

Matt Sonnen [00:24:46] I love it. Not about necessarily getting bigger, but getting better and figuring out where they’re going to fit into the broader organization beyond just the AUM that they’re bringing with them. That’s great.

Michael Kossman [00:25:01] The last component of it that Loren started to touch on but didn’t specifically is the investment platform. Similar to what Loren said, we require all of our merger partners to not only use our centralized operational pieces of our investment operations team and all of our systems, so your portfolios need to be in our portfolio accounting system, our Salesforce etc., we also, to the extent that it is not detrimental to clients, require that the portfolios get converted to our investment platform and that can be a piece that is a little bit challenging. If someone is a stock picker, we’re not the place for them because we don’t do that. And the clients that they work with who are accustomed to having individual issues in their accounts aren’t going to be happy being at a place where their portfolio is primarily made up of by institutional-class funds. So the investment platform has to be compatible. In fact, that’s often the first conversation that we have so that we don’t waste people’s time.

Matt Sonnen [00:26:11] I mean, I’m the ops guy, not the deal guy, so I’m biased. But in my experience, it actually is that investment mindset that breaks down more deals than anything else. It’s not valuation, it’s “I’m God’s gift to investment picking” and beyond that, “I have to be the one that enters the orders. I actually have to sit at my desk and type in ‘Buy six shares of Microsoft’. And the fact that I’m joining an organization that wants to centralize trading and you want me just to tell somebody in a backroom somewhere, ‘Oh, just add two hundred thousand dollars to the portfolio’”, while that’s completely scalable and what they should be doing, many, many advisors get hung up on that. That will break deals down immediately, so it’s very smart that you guys are doing that early in the conversations.

Michael Kossman [00:27:03] Absolutely. Whether it’s the value that they attach to what they’re doing, like what you just described, they will associate personal value and satisfaction with fingers on keyboards, placing trades. The overall portfolio construction component of it can really be like religion, that’s what we liken it to. If you are a believer in stock picking, I’m not going to change your mind. And I’m not going to try to. And it’s not to say the stock picking is bad. It’s a different approach. But it is a bit like religion –I can’t change your religion.

Matt Sonnen [00:27:51] So let’s go one step deeper. We’ve talked about the M&A approach of the firms, but now I want to talk about you in your roles as COO, how are you involved in the M&A process? Are you brought in during the negotiation phase—kind of that sales phase so to speak, to tout the infrastructure of the firm and tell the story of how advisors can grow more quickly as part of your organization? And/or are you brought in after the deal is closed and it’s really just up to you and your operations team to integrate the advisor into the into the organization? Loren, I’ll go to you first. How are you involved in that M&A conversation that happens so often at Mercer? 

Loren Pierson [00:28:37] Yeah, I love the question, and it is interesting. That is also a point that among Michael and my peers is a huge variation depending on what the firm is and how they’re doing it. But for Mercer, we have a really well developed deal team. They’ve got systems in place, they’ve got communication buttoned up and they’re really good at doing due diligence and moving the conversation through the various stages. Probably on maybe half of the deals that we do, I participated in the due diligence and that’s usually as a representation of Mercer operations or if there’s something unique about the particular acquisition that we really need to hammer through what the details are going to look like on the other side. But Dave and I, we’ve been working together for so long we finish each other’s sentences. He knows the right deals to set up for us. Anything that he gets across the finish with us then becomes my responsibility for integration. So my work really picks up at the pivot point meeting. We have an all hands on deck, everybody that was involved in due diligence and then everybody that’s going to be involved in integration, we debrief, we talk through the nuances of the particular case. Even after 30 acquisitions, there are definite similarities and definite processes we maintain. But each one is unique as well. So we have to make sure that we’re being sensitive and communicating across our different groups how we’re going to handle the particulars of an integration. So when I get involved pre deal, it’s really hard for me not to sell Mercer. I kind of become the Mercer cheerleader that I have at my very core. I think Dave just builds at some point. I take up too much airtime and start talking about Mercer, but I do love it. And it’s fun to be a part of the due diligence. And I would say the one exception is if we’re going to do something that’s a sort of step out for us, or outside of our wheelhouse, we as a management team have a very collaborative and open conversation on “Is this something we want to do? Does it make sense for us? Are we going to be able to be successful and support it?” And we debate it and there’s no ego in the result. And we find that obviously we make better decisions up front. The integrations go well, everybody is happier in the end. And so sometimes I’m involved before the deal closes and all of the integrations are then one of my core responsibilities.

Matt Sonnen [00:31:31] Perfect. Michael, how are you leveraged in your role as COO to attract and integrate advisors into Aspiriant?

Michael Kossman [00:31:40] I would guess that it’s somewhat driven by us not having the same structure of a deal team that Loren has. I’m involved at the very beginning, even when it’s a glimmer of a potential interest from a firm, I’m brought into that. I’m part of the deal team that’s there and the initial conversations, the middle conversations, during the due diligence, during everything. And I think one of the great values,  and I think there’s many values that an operational person brings to the table, is that we are able to see many of the things that high level leadership folks, with all due respect to our CEO—who is brilliant and wonderful and a detailed guy—he doesn’t always see everything that can potentially impact valuation. I think it would actually be a big mistake not to have a COO involved very early on in the process, because they’re going to see things that are going to effect the deal team when you’re going back and forth on that valuation and understanding the risks of what happens on Day One, difficulty of integration, and the potential for employee or client attrition post close. The COO’s going to be able to see that the trees are there while the CEO is looking at the forest.

Matt Sonnen [00:33:07] That’s very well said, I couldn’t agree more with that one. And like I said, we’ve talked about that a lot on this podcast. So sticking with you, Michael, you had mentioned earlier the eleven office locations. I know plenty of RIAs that have one office location. And if there are multiple advisors and multiple teams servicing clients within that one location, it’s difficult to get everyone marketing the firm in the same way and offering and touting the same services to clients. Many times if you grabbed each adviser and put them in separate rooms and said “Tell me about your firm”, you would not know they were selling the same RIA. So, with the eleven, and you mentioned all of them are slightly different, how as COO do you ensure a unified client experience across those locations? And how are you managing culture across multiple locations?

Michael Kossman [00:34:02] Those are two big questions. They’re both very difficult and actually I would probably say culture is even harder. We do it with “leveraging centralized platforms and centralized shared services teams”, that’s the phrase that we use for marketing and operations and investment strategy and research, etc., and they’re utilized by all the different offices. It’s one of the great benefits that we bring. You mentioned earlier that one of the things that potential merger partners are looking for, is that it takes some of that sort of shared services central operations off their plates. Inherently when you are utilizing teams like that, the client experience is as uniform as it can be. You have individual human beings delivering something and it’s gonna be slightly different and that’s okay. We have a standard quarterly report and there’s maybe five versions of quarterly reports that advisors get to choose from, there’s a library. There’s a standard report that you get to deliver to things like topic libraries. We have a whole library of planning dialogs that all the advisors across the firm utilize. So if they’re going to be going into a client meeting and they want to talk about “When should I elect my Social Security” or “What do we think about education funding?” There is a standardized approach. It’s a standardized set of principles and foundations; it’s a standardized deck they can use in a client meeting and nobody’s having to recreate it. And that is all maintained by a centralized group in our planning strategy group, similar from an investment strategy perspective. There’s an investment deck that comes out every quarter. We have a centrally produced quarterly meeting dialog deck that is available to people and they can pull any of the pages they want out of that deck, they can’t add to it. It’s like 180 possible pages. And most people pull out the 30 or 40 that are going to be relevant to the client that they’re sitting down with. So we have all these centralized processes and resources that are available to the advisors out in the field, but they all come from one place. In that sense, it is a cohesive client experience, all sourced from one location. And of course, it’s all branded the same with logos and brand and colors and that sort of thing so that kind of experience feels similar. From a cultural perspective, which I think of as our employees, but also somewhat the client experience when they’re physically in one of our locations, that’s also something that we do a lot of central nurturing of that experience. Whether it’s from all hands calls with the CEO, to a bi-annual conference that we do where everyone comes into town, Human Resources makes their way around to various things and sends out standardized materials, we have a Day of Giving that happens every year where people go out into the community and then enjoy each other’s company after that and do some community service. So, we try and do some things that support some of our culture that are really driven and managed from a central place. It’s a great topic. It is challenging. It is probably one of the things I think about every day, about how to maintain it and how to make sure it doesn’t start to fall apart. 

Matt Sonnen [00:37:54] Yup. Talking about client experience, one of our clients said “PFI, I’m bringing you in here. I need you to standardize wherever possible and I need you to customize only when necessary”.  And I thought that’s a great slogan there, I like that. But that’s what you’re talking about. They all pull from the same place but they can put their own spin on things as they present. That’s great. 

Michael Kossman [00:38:19] Yeah, exactly, and I actually love that phrase. It is wonderful. It’s like on our Day of Giving, when we go out into the community and do community service, that is done as an organization, but each local office makes their own choice about when they want to do it. It’s basically a summertime activity. They pick the day they want to do it and they pick the charity they want to go help, whatever is meaningful to them or the clients they serve in that market.

Matt Sonnen [00:38:44] That’s great. So Loren, you have it even worse. 42 locations at last count. And what did you say earlier, 405 different employees? How are you ensuring that everyone’s on the same page, both from client experience and culture?

Loren Pierson [00:39:03] You bet, I wouldn’t characterize it as worse Matt, that’s my only caveat to your question.

Matt Sonnen [00:39:10] You have a larger opportunity. Loren, you have a bigger opporunity.

Loren Pierson [00:39:12] Yes, exactly. Right, I like that better. Before we even get into centralization and standardization, I remember when I was an advisor and we as an organization started talking about standardizing things and creating central functions or whatnot. When I was an advisor, that felt really constraining sounding to me. And I obviously see the benefit from an organization perspective, but as I matured as an advisor and then moved into operations, my lens changed on why centralization and standardization is needed. I think our conversation here at Mercer is the more things that advisors are doing manually that don’t add value or that are re-creating something that already exists in a great form, the less of that they’re doing, then the more time that is freed up for them to spend doing what the real value add is, which is nurturing the client relationship, helping the client define and achieve their goals, and coaching them on the behavioral biases that would derail a plan. So standardization really for us is about ensuring that the client has the best experience that Mercer can deliver, regardless of where the client is, who the advisor is, etc. So our process that got us to where we are now has taken years and probably the better part of a decade. I think, to really fully realize. There was sort of a period of time where we put a lot of work into the fundamentals of what we needed to do as a business to be able to grow and scalably manage people and culture over 42 offices. It started back in 2015 with a pretty big overhaul of how we organized our client service group at Mercer, defining roles, creating defined learning paths, assigning clients to specific teams, and really delineating all of the human capital into defined clear roles. Once we had the human capital organized over, however many branches we had in 2015 is about half of what we had now, then we delved into codifying the workflows that those people were gonna be doing and the way in which they were going to be interacting with our centralized resources. If we hadn’t organized the human capital in the first place, if people weren’t working in clearly defined roles, then it would have been really hard to create uniform workflows that everybody could participate in. That’s the second building block, the workflow creation. The standardization of how things got done was sort of our next step. Although we’d been using Salesforce for a number of years before that, I think that’s when we really started to realize the benefit of having a CRM that was pretty much used by everybody in the organization. That’s how you and our New York branch get an estate plan cued up and completed for a client from our centralized team that’s now here in Denver. With the same process it’s certainly easier to on board new clients when we do acquisitions. We have pretty much all of the workflows documented and we’re migrating those to our learning management system, which gets more and more robust each year. I think that the final step these days, at least of our process, was our move to Denver. We made a decision as a team two years ago, that in order to serve the advisors who work with our clients across the country and our future state, which is more than 40 offices, we needed to be in a location that was centrally located to the branch network that we have. We wanted to create a place that wasn’t a corporate headquarters, we wanted to create a hub of energy and activity and collaboration that would serve as a touchpoint for all of those 40 offices. So since moving into our new space here in Denver, we ran a series of what we call Academies this last year where we’d have twelve to fifteen folks in from the field from various different branches, and it would be essentially a workshop for three days at a time. That Denver central hub and the concept behind it is one of the most critical components of our success and a building block that’s going to help us now continue to grow over the next five years. That is basically the journey we took. And I kind of like to think about Mercer and any organization as a constant work in progress. You never achieve an ideal state, you’re always working towards the optimal state and making progress each year and you create your five year plan and then life happens and things change and you’ve got to be adaptive. That’s part of what makes it a challenge and part of it that gets you up in the morning. That’s our take on standardization, that’s definitely how we’re able to manage the opportunity.

Matt Sonnen [00:45:07] Your comments were a perfect segue way into my last question it’s a big one. One of the many goals of this podcast is we’re hoping to open the eyes of some RIA owners out there and get them to view the COO role not just as an ops person that manages the technology stack, but as an internal business consultant. We talked about your backgrounds and how incredible those are, so really turning to the COO as that business consultant who can look at the firm holistically, not only work through the technology and operations and inefficiencies, but acting as that consultant to the business and thinking about the five year business plan. It’s my hypothesis, which I try to prove with this podcast, that it’s the COO that can take that metaphorical step back and think about the investments that you’re making today in the business and how that’s going to shape the future. So, Michael, first of all, what do you think of my hypothesis? Is it correct? And secondly, what decisions are you making today that have an impact on that five year plan for for Aspiriant?

Michael Kossman [00:46:17] I would say that your hypothesis is correct. And at the same time, for large firms like Aspiriant and Mercer, the CEO is absolutely in that visioning seat. I would say that their visioning seat is more from an industry and sort of company strategic perspective. Much more so from almost like a 100 year plan than a five year plan. I think the COO’s role in an organization of our size is kind of to bring some reality to that, frankly. Not only think about things in the near-term, but along the lines of your hypothesis, yes, to think about that five year plan and what we need to be doing today in order to be prepared for whatever may come our way over that mid-term horizon. It’s for many client service people, and Loren can tell me if my hypothesis is correct there having been on the client service side, it’s really about next quarter. It’s really about my next client meeting. It’s really about giving the client what they want today. And in many ways, you need someone who isn’t serving clients to go “Yeah, but you actually don’t even really know what you’re going to need three years from now or five years from now.” And part of my job is to make sure we’re thinking about that. And we get out into the world and we have that perspective. It’s actually one of the parts of my job that I actually find the most interesting and the most gratifying is to think about where is the puck going in five years? What is that client experience going to look like in five years? How’re clients going to want to interact with us?  Is someone going to be sitting on their sofa, in their living room, and there’s gonna be a webcam on their TV and that’s how we’re having a meeting with them? Well, if so, I need to be thinking about that now because I can’t make that happen overnight. I need to make sure we’re building infrastructure that doesn’t need to be completely dismantled if that’s the direction that we’re going in. And you could take that analogy through to everything from cybersecurity to whether or not we produce quarterly reports. You have to think about the longer term, but then also think about what the needs are today, tomorrow, next month, and by the end of the year.

Matt Sonnen [00:48:51] Perfect. So, Loren, what are you doing on a day-to-day basis that ensures the operational cost today or scaling with the business and setting up Mercer for the four the five year plan?

Loren Pierson [00:49:06] It is interesting as COO, relative to my time as an adviser, Michael, the kind of answer to a question that you pose there. I think a great advisor lives in the moment and interact with the client on a daily basis. So as an adviser, that required my undivided attention and complete focus. That’s what makes a great adviser, somebody that can live presently in that client relationship on a day-to-day basis that requires other people in the organization that are one step removed from that and are thinking about the stategy and are thinking about the projects that we deploy each year to achieve the strategy. At our organization and sort of my role of COO there’s definitely a strategic element to it without a doubt. I operate with a really effective group of peers on our senior executive team. I have to represent the realities of how we’re going to execute goals and objectives that we set out. Then I’ve got to get my hands dirty like we referenced earlier and actually be able to deliver on those results. So sort of the framework I use is we have to, as an executive team, maintain our alignment on what the firm’s purpose and vision is like. Period. End of story. That’s the most important thing. Why are we here? What do we do? And we got to be completely aligned on that. And we’ve got to make sure that the organization is aligned on that. If we’re aligned on that, then in the process of setting goals for where we want to be in five years, if you don’t know where you want to end up, it’s awfully hard to figure out how to get there. Once you have those goals figured out and goals for what we want to service model to look like, what role we want to achieve profitability, margins, etc. Once we have those goals established, then really one of my core contributions is helping to build out the strategies that we’re going to use to achieve those goals. And the strategies end up being composed usually of projects. That’s sort of my increment of work that I think in. And I always remind my director that any of the projects that we do have to link all the way back up to what our purpose and vision as an organization are. So that keeps us focused in the sprints that we do along the way. I’m getting to where I need to be as an organization in five years while still maintaining who we are and who we decided to be at our core, which, of course, is our long term vision. I do love the variability in the day to day work. I love the fact that there are some days where I’m very much in the weeds and climbing the mountain together with my colleague. Then there are some days where I get to be reflective and think about strategy and how the different components of the organization relate to each other. So, yeah, even I even though I didn’t grow up dreaming about being a COO, it’s a pretty fun spot to be in. 

Matt Sonnen [00:52:19] You two are incredible. I had very high hopes for this interview. Given your backgrounds and your experience, you did not disappoint. So, Michael and Lauren, thank you so much for being here and sharing your stories with everybody.

Loren Pierson [00:52:33] Oh thank you, Matt. It was fun.

Michael Kossman [00:52:35] Yeah. Thanks, Matt. I appreciate you asking us to come on here, I think it’s been great. I’m sure Loren and I could continue to talk for a much longer period of time and bounce things off each other. The hour that we’ve had together has been really wonderful. So thank you for pulling it together.

Matt Sonnen [00:52:52] Yeah. Thank you. 

Loren Pierson [00:52:53] And I don’t think Michael and I have ever had a conversation last less than an hour. Usually it involves a cocktail.

Matt Sonnen [00:53:06] Am I am I the only one that’s been drinking this last hour? [laughter] Well, that’s a wrap on Episode 15. And I’m looking at Jay here in the room. If we follow our historical pattern, that means that we’re going to be putting out a blog post soon that recaps the top lessons from Episodes 11 to 15 so everyone can keep a lookout for that. You can get e-mail alerts whenever we post something new to our blog by going to pfiadvisors.com. Click on “Blog” up at the top of the page and then around on the right hand side of the blog page, there’s a subscribe button there that you can you can get notices. We’ve been posting stuff every week, either a new podcast or a new a new blog post. And of course, please subscribe to this podcast wherever you listen. I know we’re on iTunes and Google Play and Jay’s been posting it a bunch of other podcast hosting stations as well. So thank you all for listening, and we will talk to you soon.