EPISODE 27

[00:00:11] Luke Sonnen: Hi, I’m Luke Sonnen. Welcome to The COO Roundtable, powered by PFI Advisors. Here is your host, Matt Sonnen.

[00:00:23] Matt Sonnen: Thank you, Taryn, for that introduction, and thanks for allowing us to do this live version of The COO Roundtable. We’re going to banter back and forth like we would normally on the podcast, and then we’re going to open it up to questions. I think, Taryn, you’re monitoring those for us.

For those of you that aren’t familiar, as Taryn said, we’ve been doing this podcast for about two years. I interview two operations professionals, they don’t always have the COO title.  Today, they both do. We discuss the concept of professional management at RIAs. I believe there’s a big gap in our industry when it comes to the business side of our organizations. Even RIAs that have reached that elusive $1 billion mark, many times at their core, they’re simply four or five advisors that are running in different directions.

They’re under one common logo, but they’re really going off in different directions. When advisors leave the wirehouse or the IBD channel to start RIAs, I think they often struggle with making that mental shift from “I’m a financial adviser” to “Now I’m the owner of a financial advisory business.” Even when we speak to RIAs that are 15 or 20 years old, you can, a lot of times, get the sense that the owner is really identifying as a financial advisor first and as a business owner second. And that’s fine, they should solely be focused on clients and prospects, that really is their best use of their time. But in order to do that successfully, they need to commit to bringing on professional management, whether it’s the specific COO title or a Director of Operations, whatever title they want to give the person. Our podcast is dedicated to highlighting RIA executives who are fulfilling that role and are in charge of running the business rather than bringing on clients.

We have two sets of professionals today, Kara Armstrong, the COO of CapSouth Wealth Management in Alabama. And Kara is joined by Nick Maggiulli, COO of Ritholtz Wealth Management, headquartered in New York. Welcome, Kara and Nick.

[00:02:24] Kara Armstrong: Thanks, Matt. Great to be here.

[00:02:25] Nick Maggiulli: Thanks. Matt.

[00:02:26] Matt Sonnen: Awesome. If we were doing this normally as a podcast, I wouldn’t even bring it up, but since we’re on video, I wanted to—it was just so funny to me. Nick is the only person that’s ever sent fan mail. He was kind enough to reach out to me, and he said, “Matt, you’re a weird dude. You talk about Eddie Van Halen a lot on a COO podcast,” and he was kind enough to send me a replica of Eddie’s guitar. If any of you want to get on our podcast, we are taking fan mail.

Let’s get down to business here. Kara, I’m going to go to you first. Can you tell us a little bit about CapSouth Wealth Management?

[00:03:09] Kara Armstrong: Sure. CapSouth was founded in 2001 here in Dothan, Alabama by Donald Bolden, our CEO. He worked at Merrill Lynch for a little while, but he’s really an entrepreneur at heart. After about seven years there, he decided it was time to just set out again, and he founded CapSouth. His son joined him briefly after that and got a CFA. We’re about $650 million in assets under management, serving around 400 clients, 30 of which are retirement plans.

The total employees we have are around 21 employees in two offices in Alabama and Georgia. Up to this point, it’s all been 100% organic growth, but we’re actually looking to expand through M&A in the future. We’ve changed our structure to set up for that. In fact, that’s one of the reasons we are so heavily staffed for our size. We’re not looking to staff so much for where we are right now, but looking into the future, into our vision and staffing for that so that we’re ready to grow into that vision.

We have always been planning-focused. In the last 5, 10 years or so, I’d say we really had a heavily planning focus more on estate and tax planning, just really heavy focus on that. We also offer corporate trustee services as well as retirement plan services. I should also mention that we are FinLife partners with United Capital Goldman Sachs. We were actually the very first FinLife partners back in 2016.

We helped them develop that path. It’s really been a great relationship. It’s grown a lot over the last five years. It gives us, as a smaller company, the resources that we don’t have, but we are able to leverage their portfolios and their technology and just things that we wouldn’t be able to build on our own. We leverage those, but we maintain all of our ownership and all of our own decisions. It’s been a great relationship. We’re looking to leverage it more into the future as we hope to grow, like I said, through more M&A.

[00:04:51] Matt Sonnen: That’s perfect. We’re going to touch on a lot of what you just talked about. We’ll talk about technology, scalability, HR, and managing the people. We’re going to hit on a lot of the things you just brought up, but first, we’ll throw it to Nick. A lot of people know the Ritholtz Wealth Management name, but can you tell us a little bit about the firm?

[00:05:09] Nick Maggiulli: Yes. The firm was founded in 2013 and we’re headquartered in New York City. Currently, we have about 33 employees, we’ll be adding 2 more at the end of this month. We have a little under $2 billion in assets under management, and that’s mostly been basically all organic. We don’t acquire firms or anything like that. We do acqui-hires. That’s about 30% of our total assets that come from advisors joining us, but we don’t buy books straight up.

Then the other 70% has been organic. I would say about 10% of that is referrals, but that’s really picked up more in the last couple of years, as we’ve only been around since 2013. Referrals are something that you get with your track record, people and clients have to talk about you. But as I said, about 60% is going to be from something I just call “content marketing.” If guys know anything about Ritholtz, we have a bunch of bloggers.

I’m actually a blogger as well as the COO. We’ll get to that in a second, but we have a bunch of bloggers, we have podcasters, we have a YouTube channel with almost 70,000 subscribers. Now, our CEO, Josh Brown, he’s on CNBC a couple of times a week. You may have seen him on there, but all of us are just out there doing content marketing, and that’s how all the leads have come to us that way.

Our ideal client is probably in the $3 to $7-million range, it’s been our go-to for a long time, but now we’re starting to expand our services. This is still not public yet, but we’re going to be launching a high-net-worth group in the future. In addition, we’re also spending a lot more time this year, focusing on a robo platform, it’s a partnership with Betterment for Advisors.

We have something called Liftoff. That’s our robo platform. We’re also focusing on that. Although typically, the $3 to $7-million client has been our bread and butter, we’re really starting to expand into a lot more high-net-worth clients and also clients on the robo platform. That’s our main thing and in terms of how we’re going to grow going forward, it’s just more of the same really, more content marketing, more just putting our message out there and finding people that it resonates with, right?

We don’t pay for leads or any of that. They all come to us. That’s the one nice thing about being here and why I think advisors joined us, because they don’t want to be on the phones all day calling and all that stuff. The leads come to us and say, “Hey, I like Josh” or Barry or Nick, or whoever it is. Then we talk to them about managing their money, and if there’s a good mutual fit, we move forward. That’s what we do.

[00:07:33] Matt: Perfect. That’s the firm level. Now let’s talk about you guys individually. Kara, I’ll go to you first. You came into this COO position through the CFO route, which is interesting in and of itself. Today you’re the only female and the only non-family member on the firm’s board of directors, which is also interesting. Tell us a little bit about your personal journey and how you became the COO at CapSouth.

[00:07:59] Kara Armstrong: Sure. I do realize that the finance route is somewhat of a strange route to get to COO, but it was actually, it’s the reason I’m at CapSouth. Prior to CapSouth, I’d been in accounting at a government contractor for a number of years, and they moved their headquarters right around the time I had my first child. I knew I wanted to get back into the workforce, and I knew I was not made to be a stay-at-home mom.

I started looking, and CapSouth was looking for a part-time bookkeeper. I started part-time bookkeeping and a little bit of HR. It wasn’t anything fancy, but it didn’t really take long to get involved in a lot of other aspects of the business. It was, I think, Matt, you’ve mentioned a lot, that “raise-hand mentality.” I had a lot of that just being interested in the different parts of the business and pulled into all different areas, but I think it really was key to my growth at CapSouth.

As I got pulled into all these different areas of business, none of it was a career path at all, looking back. I can see, though, how it was preparation for where I am today. Being able to touch all those different pieces helps me understand the business better and to do my job better, to be honest. Really, none of it actually came with a title, to be quite honest there, too.

I think it was at one point I remember emailing a client, and I was talking about their documents and their accounts and realized that “Why in the world is the bookkeeper emailing about this?” I went to my supervisor and said, “Can we at least upend my title with something else? ‘Bookkeeper and’, because this just doesn’t really make sense.” I would think at that point, we landed on something like Assistant Vice-President because nothing else really fit.

It was actually around that time in 2015 when I began attending board meetings, and there again, it was the finance route that led me to that. I was there just to present financials at first. I joined the board meetings. I would present the financials and sit around and listen and got an inside seat into what was going on, but I do believe that it was my job with the finances that really gave me that sense of ownership because I was in charge of the books and presenting those financials.

I had a sense of ownership that I wouldn’t have had elsewhere. I actually strongly believe in replicating that through other employees, trying to give them something that they have ownership of, it’s not just a job. They ultimately want the company to be successful, so they want to contribute to that. Back to the board member, I was sitting in on board meetings, and eventually, they just started asking my opinion and allowing me in and accepting me as one of the board. Then I actually was named as one of the board members of the treasurer, at one point.

It’s like I said, it was the father, his son, and his son-in-law who were the board members. As I joined, I was an outside member, but I grew, as I became a full-fledged member and a mediator as well, into their family relationships. I was able to stand in the gap when it came to those relationships.

CapSouth always said family really, absolutely comes first, and that includes their family. I’m really actually thankful for the opportunity that’s been given me because they gave me this opportunity and invited me to be a part of the board, and now I’m full-fledged with a voice on the board. I can pay them back by being a buffer in those family relationships and helping them to keep peace.

Let me backtrack for a second to get where I got into operations. In 2016, we had a Chief Compliance Officer and Director of Operations who resigned. The leadership came to me and asked if I would like to take on compliance. That was a hard, “No, I have no interest in compliance and never will.” They then came back and said, “Well, what about operations?”

I thought, “That sounds interesting. Why not?” That led to a period where I knew I wanted to do it well, I wanted to do these operations well. I just didn’t know what it was, it was just this big concept. I did whatever an intelligent business person does— I googled “RIA Operations”. Still, at that point, I didn’t know what my ultimate career path was. The CFO route and the COO route were both in front of me, and I didn’t know what I wanted.

As I learned more about operations, I realized it was way more exciting than finance. Maybe not everyone would agree, but I think the operational part of it is just more exciting. After a lot of internal debates, I had one conversation with Heather Fortner of SignatureFD. She might not even remember this, but it was a fun conversation. She told me, “Forget where you’ve been and what you’ve done and what’s been laid out in front of you. What do you want to be, and what do you want to do? Just go after it.” So I did.

It was in my next annual review that I told the CEO and the then COO that within three to five years, I wanted that role. I knew that eventually, that COO would be stepping up into his father’s role, and when there’s a vacancy, I wanted to be ready to take it. It was actually one year from that day that I was named COO at CapSouth.

[00:12:42] Matt Sonnen: That’s awesome. You mentioned you’re raising your hand. My official answer when people say, “Well, what does the COO do?” I say, “The official answer is the COO takes the owner’s vision and executes that vision through both people and technology.” That’s my official answer. The real answer is just the COO does everything else that’s not getting done, just pretty much anything.

That’s how a lot of people have gotten to this role, you just raise your hand and say “I can handle that. Oh, this isn’t getting done, this isn’t getting done.” Gary Bonner said, “I’ve hung every picture in this office over 20 years. I’m Chief Operating Officer, but one of my tasks has been hanging up pictures.” Others have said, “I watered the plants.”

In my COO days I’d go around and one of the many things I was in charge of was the toner. I was always afraid that the biggest client would be coming into a meeting and we would have forgotten to replace the toner. I was always like, “Somebody’s got to be taking care of the toner in the printer, I’ll do it.” I love that. Yes, it is, it’s all about raising your hand.

Nick, you mentioned your blog, and you’ve also had an interesting evolution to come to the COO position. You actually started and you still are a data scientist. Tell us that story and how you wound up in your COO position today.

[00:14:03] Nick Maggiulli: Yes. It’s a different pathway than, I think, most other COOs. I graduated with an economics degree and right after college, I worked in an industry called “economics consulting” or probably more popularly known as “litigation consulting”, so working for a lot of big law firms. I really wanted to focus on technical skills, doing a lot more quantitative work.

While I was there for the first couple of years I was mostly an analyst, and then eventually, they actually opened a data group. That’s how I became a data scientist. I just focused on programming, learning a lot more tools, and things like that. I liked the job, it was great and everything, but I just didn’t think the industry was right for me. I didn’t want to stay in litigation consulting forever.

You’re working like the lawyer, so it’s legal hours type thing, so it’s a lot of billable work. I was like, “Hey, I really like finance.” I started blogging, doing all that, and actually caught the attention of some of my now-colleagues who said, “Oh, you blog and everything?” I was like, “Yes.” They were like, “Do you want to be an analyst?” I’m like, “Not really, it’s not really my thing.” They’re like, “Well, we do have a lot of data, we don’t know what to do with it.”

I was like, “Oh, that’s great because that’s my job. I can be a data scientist for you guys now.” “Okay, come on board.” Obviously, I think they thought it was a big risk at the time because how many RIAs have a data scientist? Practically zero, very few, especially if their sizes aren’t even a billion yet. They brought me on, I’ve been analyzing data ever since. You can think about all the data that happens within an RIA’s process.

We have our blog, any paid user we’re getting, we’re tracking that all the time, stuff like that, the types of content we put out, what’s working, what’s not working, et cetera. You have leads coming in from that, then you have a whole sales process with a funnel, so you have all your CRM data. In our case, it’s Salesforce. Then at the end, after clients join, we then have to allocate the money, so then there’s the Investment Committee, and how do we allocate that money?

There’s data stuff that can be done all throughout there. For example, I’ve helped the Investment Committee do backtest on portfolios. It really just started as me being a data scientist and being really technical and working throughout the organization. Then I got into the COO role while I was basically talking to the CEO, like how Kara was, which is just having a chat and then I was like, “Hey, we don’t have a COO. I think this is a role that I could fill because I’m one of the few people in the organization who really works with everyone.” I really do work with everyone across the organization. I work with operations, I work with trading, I work with the content creators who are our marketing side, I work with the Investment Committee, everyone, the advisors, every person in the firm, I really do work with.

I was like, “I’m one of the few people that just have a full view of what’s going on across the entire firm.” I think my technical skills are a real help for them because as RIAs are becoming more and more technologically advanced, having some sort of technical background is really helpful. I think we’re going to start seeing more COOs with those types of technical backgrounds in the future, at least at those firms that are definitely more technologically advanced and using a lot more of these tools going forward. That’s the short story of how I got there.

[00:17:00] Matt Sonnen: You mentioned Heather Fortner. I touched base with her right at the beginning of COVID when everybody was sent home, and I said, “Hey, how’s it going?” She’s now been promoted since to CEO. She’s not running the firm completely, but she said, “Yes, as COO, I’m the one that has my hand in every aspect of the firm. I’m just leaving my calendar open every day to just jump from where I can go help trading, I can go help client service, I can go help reporting and the data analysts, et cetera.”

The COO role is doing a little bit of everything, so I love it. That’s always my favorite question, asking your personal backstory. The advisor track is always pretty straightforward, but as we both have said, there’s so many different ways coming up the operations track into the C-suite, there’s a million different ways that you could have taken.

My second favorite is just to say, “hey, in your words, and we’ve been talking about this a little bit already, please describe how your role as COO impacts the organization.” Nick, I’ll go to you on this one first. How do you think your role affects the organization?

[00:18:13] Nick Maggiulli: The analogy I like to use to think about the COO role is like a ship. Using the ship analogy, the CEO is the captain or the one saying, “Hey, I want to go that direction.” That means that the advisors and the operations team, or the actual people doing the work, are the ones interfacing with clients. These people are the ones rowing the boat forward, so to speak, they’re putting in the energy, actually getting us where we need to go because, without them, we would be doing nothing.

You can think of the CFO as making sure everyone’s fed or something, make sure everyone’s comfortable on the boat, basically. Then, what’s the COO doing? I think as you defined it, the COO is really making sure that the boat gets to where it needs to go. We’re making sure the CEO’s vision comes to life. The CEO says, “Hey, I want this to happen,” and then I’m trying to make that happen.

Using the ship analogy, once again, it’s like making more efficient oars so every oar is 10% more efficient, so it takes 10% less energy to move forward. That’s one way a COO could help, or if I’m making sure everyone’s rowing in the same direction at the same time, coming up with a process or procedure that’s not wasting time within the system, that’s another way in which you can make things more efficient for the company. I think of it like that. That’s the way I would define the COO role.

[00:19:26] Matt Sonnen: That’s great. Kara, in your words, how do you define the role?

[00:19:30] Kara Armstrong: Me personally, I know it’s a little different for every COO, but I define mine as twofold, it’s bridging relationships and also finding solutions. When it comes to upper-level management, a lot of companies, people will have this level of respect or intimidation really, even especially from newer or younger employees, that makes them hesitant to approach management.

From day one, I’m always trying to be as approachable and open as possible, open-calendar, open-door, and I feel like people are more comfortable. I think that the vulnerability that I have with them helps them. They have a means to talk to a board member and an owner of the company without the intimidation they feel with others. This intimidation is common. I really enjoy removing those barriers and just being open and creating that opportunity for people.

On the other side, I really do feel like finding solutions is a big part of it. A lot of people can recognize a problem but finding the right solution can be more difficult. When someone brings me a problem, I actually get really excited about it because I feel like it’s an opportunity to improve. In fact, one of our core values is “driven to improve.” It is my favorite core value because I always think there’s a better way to do something.

There’s always something else out there. I love going outside of our organization, finding ways to do something, and bringing it back in. I’m not a visionary myself. I’m not even a creator, really, but I like finding solutions that are already created, adapting them to our organization, and then using them to improve CapSouth. For example, as we were just talking about compensation, when we saw the industry moving away from just a strictly commission-based structure for advisors to a salary-plus-bonus full-time structure. We were also working in teams. Honestly, the commission-based structure did not incentivize teamwork. We knew there was a problem that had to be fixed. I did what I do best. I went out to someone, I found someone from my study group, HIFON. She’s just years and years ahead of me, you know her, Stacey McKinnon. She gave me a framework to work with. I took that, and I poured hours and hours into it, to make it to something that would fit within our structure.

I’m also an Excel nerd. I love Excel. With the help of our president, we moved to a salary-plus-bonus full structure over a period of two years. We feel like it really does incentivize the teamwork that we really want to promote at CapSouth.

[00:21:47] Matt Sonnen: That’s great. 2020 was just such a – you can say it was a “survival year”.  Many were saying “Let’s just stay alive.” We’re hoping 2021 is going to be more. I’ll go to you first on this one Nick. Again, hoping we’re out of survival mode and into normalcy, what’s your biggest initiative for 2021?

[00:22:11] Nick Maggiulli: For 2021, we have two big initiatives we want to do. The first one is to really focus on training because, for us, 2020 was actually a pretty good year, despite all the craziness, remote and COVID related. Because a lot of attention was directed to financial media, my blog had record views. All my colleagues had record views on blogs, podcasts, and downloads as well.

As a result of that, as we grew a lot, we really needed to focus on training. We really changed a bunch of processes, we tried to make things more efficient. At the same time, this year, we’re really focusing on training again. Our head of execution at our firm, she right now is working on building our training curriculum. I’m trying to help her with that. Whether that’s RWM-specific training or that’s training for Salesforce or CRM, things like that.

That’s one of our big initiatives this year is to really just scale up everyone and make sure we’re all on the same page, just to make sure we’re all growing in the same direction. In addition to that, I think the other big initiative we have this year is growing our robo platform. As I spoke about earlier, Liftoff, last year, I think we had about $10 million in assets and we’ve been doing it for only a couple of year.

It wasn’t really a big priority we had worked on, but now, this year we’ve definitely kicked that up. We’re almost at $20 million now in our growth rate. We want to get to $50 million by end of the year, but it’s looking closer to maybe $35 million right now, but we’ll see. We’re trying not to just really push forth on that.

We know over the long-term, this is the right thing to do. It’s really focusing on our clients in the future. The people that are reaching out to us now and joining us on Liftoff and doing all the stuff with robo, those are the people that are going to be our full-time wealth management clients, 10, 20 years from now. We know that. For us, a big push is not to think about “Oh we saw there’s a minimum to join us when we had this robo”, but now it’s like, “No, there’s no more talk of that.”

There’s no minimum, any one of these people can become our clients. We’re really focusing on that, going forward. I think that’s also because we’re focusing more on things like YouTube and other channels that do cater to younger audiences who happen to have less assets. I think those are our two big initiatives this year, training, just scaling up, helping everyone build better skills, and then growing the robo platform because I think that’s where the clients are coming from in the future.

[00:24:38] Matt Sonnen: That’s great. Kara, what are you most focused on for this year, going forward?

[00:24:44] Kara Armstrong: Well, Nick, I can second that with training. We definitely are going to have to focus on that more. We realized that. We’re actually, right now, really focused on efficiency. I’m officially calling it the “Year of Efficiency” for us. The president and I started the initiative this year to really eliminate inefficiencies in our business. I mentioned that we do some extensive financial estate and tax planning.

As we customize our product more, it is less replicable and scalable, in a lot of ways. We do have some really impressive spreadsheets out there, but they require a lot of knowledge, and it’s very time-consuming and prone to errors. Our goal this year is just to get rid of every spreadsheet and find software to replicate these manual processes. We started right now with just one-on-one meetings with each employee to ask what slows them down, what manual spreadsheets are they using, and what takes the most time?

It’s actually really enlightening as we’re meeting with these people, especially when you meet with multiple people in the same role, you start to hear some common themes of what is really taking a lot of time or what is becoming a roadblock in what they’re trying to do. Ultimately, we just want to optimize each person’s effectiveness.

We’re just in the data-gathering phase right now. By the end of the year, we’re hoping to have gotten enough data to pinpoint areas of improvement and find new software, and just cut down on manual processes.

[00:25:59] Matt Sonnen: Perfect. It’s really the COO role, especially in the RIA industry, this whole idea of professional management is a little bit new to the industry. It’s just a blank canvas, and you’re making it up as you go along. What have both of you done to educate yourself in this role? Are there any books you’ve read or any study groups you’ve joined? I’ll throw it to Kara first. You had mentioned HIFON. What else have you done, Kara?

[00:26:31] Kara Armstrong: Well, I’d have to say that HIFON is one of the main things. It’s really been instrumental in shaping me just because it’s grown so much. Like I said earlier, the first thing I did was Google, and I came up with podcasts. The first podcast I think was Kitces’ podcast with Shaun Kapusinski of HIFON. That’s where I found it. Honestly, the collaboration and openness in that group is like none that I’ve ever seen.

There’s a discussion board where you can post questions and topics, and people will jump in with either advice or just sometimes saying, “Hey, I’m in the same spot. Let’s talk about it.” There’s the document archive that alone is worth an annual fee. Then most importantly, it’s just the willingness to talk and help each other. It’s, honestly, the reason I’m here today. It was the relationship that I built through HIFON that ultimately introduced me to you, Matt, and it’s why I’m here.

Outside of HIFON, like I said, podcasts, I really love listening to podcasts, your podcast, and other podcasts. Then there’s the people I hear. When I hear a voice that really resounds with me, I’ll start following those people. I’ve mentioned Stacey McKinnon already. She’s one of those people that I follow. I feel like she has a really strong voice in the RIA operation space, and she’s a huge advocate for employees.

I’ll listen to anything she says and like I said, Kitces’ podcasts, anybody I can find who is in the operation space. I’d read some books, but I feel I get a lot more from those podcasts. There is actually a funny story about Shaun. When I went to my first conference, which was the Insider’s Forum, which is also very useful, I was actually standing in line behind Shaun at the cashier.

I heard his voice and thought, “That’s the guy that started my study group” and told I my coworker. She, of course, encouraged me, “Hey, introduce yourself.” That time, I idolized people like him and Heather Fortner. I felt like just this little baby in the industry, and I was terrified to introduce myself. In case you’re wondering, no, I did not introduce myself.

Thankfully, we are past that. I know Shaun now, and just the other day, I had a call with him. I’ve been able to move past that. It’s relationships like that that have really just built me up to educate me to where I am today.

[00:28:36] Matt Sonnen: Perfect. The operation side of our industry is a great community. Everybody’s always open to people reaching out and asking for best practices and things. Nick, where have you turned to for self-education in this role as COO?

[00:28:51] Nick Maggiulli: Before I was COO, it’s funny enough, I read a book called How to be a Chief Operating Officer that book is by Jennifer Geary. I read her book in summary for the RIA space. I thought “Wow, this is a role I can really go into.” I first did some research online. I read her book, and that’s what really motivated me to actually apply for the position and say, “Hey, I know no one’s in this role.” That was one of the first big steppingstones for me.

Then after that and I promise, Kara and I did not work on our answers together, I swear – I was going to mention HIFON because I’m part of HIFON as well, High Impact Financial Operations Network, that’s helped. It’s been interesting to hear other people’s perspectives. Everyone’s been really helpful there. That’s been a big piece. I’m telling you we did not coordinate this at all, but Stacey McKinnon of Morton Capital is actually one of my mentors.

I’ve actually called her, and we’ve had a couple of conversations one-on-one where I’d said like, “Hey, we’re going through this process, can you give some insight on that? Is this supposed to take this many steps?” She’s like, “Actually, ours takes even more steps, you guys you must have something else.” It’s funny, just hearing that and getting verification from someone who’s obviously, more established and knows the industry better.

For me, it’s network, talking to people, it’s books that I’ve read. Lastly, obviously, The COO Roundtable has been a huge resource for me. Once I was first in a role, I remember when I first reached out to you, Matt. I was like, “Hey, I’m new to this role. I don’t exactly know everything I’m doing, but I’m really just trying to learn as much as I can.” I mass-listened to episodes.

I still have an Excel file with all my notes for the first 20 episodes, I think, where I was at the time, and I just mastered notes on everything. That’s how I found Stacey and a bunch of other people. Anyways, yes, that’s how I did it. It’s just trying to get as much information as I could. This podcast has been really helpful for me to learn about how everyone does it and like, “Oh, wow, these people are going through the exact same thing I’m going through.”

I don’t really keep a very busy calendar either because things just pop up. Inevitably, they have to pop up. It’s like, “Oh, this thing came up, and I have to solve that.” It happens all the time. Yes, those are the resources I use.

[00:30:58] Matt Sonnen: Perfect. We’ll do one more question and then we’ll open it up for audience questions. This one’s a tricky question. With the COO role, you get into this ironic situation where it’s a behind-the-scenes role. It’s ironic because the harder you’re working, the better you are at anticipating problems and they don’t really become problems. And the harder you’re working, you can get into a situation where the rest of the firm, the employees, and the owners of the firm say, “Hey, that COO has got a pretty easy job. Nothing seems to really go wrong here.”

I know quite a few COOs that limp into their annual review. They’re covered in sweat. They’ve been working like crazy all year and the owner says, “Hey, pretty easy year. Not too much happened. I didn’t see anything on fire this year.” How do you balance that? You are behind the scenes. Our primary role really is to allow the advisors to just focus on their clients.

“Hey, you go do what you guys do best. We’ll do what we do best.” How do you do that, balance that with getting credit for all the hard work you’re doing? Kara, I’ll go to you first. What do you point to at the end of the year that highlights your success in this role?

[00:32:17] Kara Armstrong: Sure. I know and I agree, it’s really hard to put a metric on a COO role. You may throw a couple of numbers out there, but it’s really hard to just have some numbers to measure “Hey, are you being successful or not?” Personally, I evaluated myself. I feel like it is my goal and my responsibility to develop and maintain our employee experience.

I’m responsible for the employee onboarding and maintaining and improving technology and processes the employees use each day. I have to provide encouragement and guidance, solve problems and remove obstacles, and then simply just help them to be as effective as possible in their role. I think of it like our client experience. You put an emphasis on that because it can set you apart and make really loyal clients.

I think the same goes for the employee experience. If employees can’t use the technology efficiently or have inefficient processes that slow them down or if they simply feel ignored or unheard, you’re not going to be able to compete in the talent marketplace for long, and you’re not going to have loyal employees. You constantly have to be assessing and improving that experience, so that’s what I focus on.

I do that through employee surveys. We use our HR vendor, Paylocity, which is also really great for a lot of other things, but you can do surveys through there. I really strongly believe in the power of giving people a voice. Give them the chance to tell you what’s going on with them. Do a monthly culture survey and a quarterly service standard survey. We do all of these, and I use them to pinpoint areas where we can improve and ultimately, to measure my success.

At the end of the day, I serve our employees the way our company serves the clients. They are my clients. It’s our company purpose to challenge our clients to define and live their best financial life, but it’s my personal purpose to encourage and enable our employees to define and live their best career life. I feel like if they can do that, then they’re going to be successful, and CapSouth is going to be successful, and ultimately, so am I. That’s how I measure my success, really.

[00:34:19] Matt Sonnen: Yes. I’ve talked on other episodes, sometimes the advisors say, “Hey, COO, you don’t deal with clients.” What you just said, “No, I do. I have plenty of clients. My clients are the employees of the firm. They’re not the external clients, but I’m helping the employees. I’m removing the obstacles for the employees so that they can then serve the end clients, but I have plenty of clients, as the COO.” Absolutely. I like that you said that. Nick, how do you balance being a behind-the-scenes guy versus getting credit for all the hard work you’re doing?

[00:34:50] Nick Maggiulli: I think I’m very fortunate in the sense that of the four founders of the firm, the original founders, three or four are not client-facing. Only one of them was an advisor, so the other three are not. Because of that, I think they realize all the work that goes into running an RIA, and it’s not always just the client-facing people.

As a result, I don’t think I need to have that credit thrown on me in that sense. I think, for me, I agree with what Kara is saying. As long as you’re doing everything right, and you’re trying to help people solve their problems and helping them be their best, that’s the key there. I don’t think it’s the end of the year where they’re like, “Oh, our COO is not doing anything,” or “Oh, our COO is not revenue-producing.”

I don’t think they look at the world that way, which is a great thing for me, so it’s very fortunate. How I judge myself is when someone asks me to do something, how effectively do I get it done? Do I get it done? Do I not get it done? What things can we do? What things can we not do? For me, I’m always just trying to judge myself on trying to figure out how well I’m fixing other people’s problems, basically, and that’s it.

People say, “How many bosses do you have?” I’m like, “Everyone’s my boss.” When someone says, “Hey, get this done,” I just get it done. That’s how I think about it, a servant-leadership type thing. That’s the way I view my role, trying to help everyone to be better. I don’t think I need that recognition when the firm’s doing well. That is the recognition itself that everything’s moving forward. We’re still moving in the same direction, basically.

[00:36:23] Matt Sonnen: That’s great. We’ll open it up to questions. I think they’re just going to pipe them through.

[00:36:31] Taryn Burgess: Great. The first question is, did your firms implement any new initiatives during the pandemic that you plan to keep long-term?

[00:36:47] Nick Maggiulli: Kara, do you want to go first?

[00:36:48] Matt Sonnen: Kara, I’ll let you go first.

[00:36:49] Kara Armstrong: Sure. I don’t think we really initiated any new initiatives. However, we did change some things. Before the pandemic, we did have one fully remote employee and advisor in another state. I think what the pandemic did for us was broaden that into enabling us to actually retain other employees that we otherwise wouldn’t have been able to. Some employees have issues with childcare, or they may need some flexibility in their hours.

They can’t just work in the office, 8:00 to 5:00, so because of the pandemic, we realized that we can trust people to work from home. They can work remotely, we can all work remotely. The level of trust across the organization, I think, has increased. Now, we’ve got three employees that are in states where we don’t even have offices. It’s all because we have been able to broaden that idea and trust each other, and I think it’s because of the pandemic. That’s going to go forward into the future, absolutely.

[00:37:46] Taryn Burgess: Great. We had another question. It’s, how do you manage trading, internal traders, or any outsourcing? What is your total FTE in trading departments?

[00:38:00] Matt Sonnen: Nick, well let you do that one.

[00:38:02] Nick Maggiulli: Sure. We have a director of trading and then we actually have one other trader. We have two traders within the firm, and they do everything internally. Honestly, of all the areas I know, it’s the area I actually know the least about because they just do it so well that we just don’t have issues. We obviously use some software for that, but we don’t outsource anything like that. I wish I could expound on that more, but I just don’t know too much about the ins and outs of how we do trading.

[00:38:30] Matt Sonnen: Kara, do you want to take a stab?

[00:38:32] Kara Armstrong: I don’t know that I’ll be much help either, just because like I mentioned, our relationship with United Capital, we outsource a majority of our trading to them. We do have some internal trading, but the advisors manage, and they mostly handle that themselves.

[00:38:46] Taryn Burgess: Great. We have one last question. It’s, what are the main technology challenges your firm faces?

[00:38:56] Matt Sonnen: That’s a good one. Kara, we’ll go to you first on that one. That’s a good one.

[00:38:59] Kara Armstrong: Sure. Technology challenges for us are integrating all the different pieces. I feel like we’ve got some great pieces. We use Salesforce as well, and I’m actually becoming an allied admin and learning more and more about how to customize it, but when it comes to integrating all the pieces of technology, that seems to be the most difficult. I want to get Salesforce integrated all the way into Schwab so that we’re entering that one-time and never entering again.

It’s not there yet. We got some great integration through United Capital that goes all the way into the client portal, but then there are always little glitches between MoneyGuidePro and the client portal. There are just things like that where I feel like the hardest thing is getting a one-stop integration. In fact, this is something that’s come up in our HIFON group recently.

I think there’s maybe one out there, but for the most part, there’s not really a place where there’s a one-stop-shop where you can get your statements, enter code request, it’s going to go back to the CRM. There’s just not that place or that portal. I feel like the tech pieces, getting them all in place and then getting them all to talk to each other, that’s the hardest part for me.

[00:40:06] Nick Maggiulli: I would say the same thing. I would say it’s the same thing for us as well. It’s like everything’s about getting systems to talk to each other. Our stack is pretty good right now. We’re using Salesforce as our main CRM, but we use Orion for all the reporting, the client portal, and all that, and Orion’s building out a lot of stuff.

Orion even has advisor now, which is an intake for prospects to get information in once, but still, it’s not just like once that comes in, we can sync all of that to Salesforce. We can sync a good amount of stuff but not everything. It’s still a process of getting everything to talk to each other. We’re getting better at it, but I think this is going to be the big challenge going forward for all RIAs.

Even as technical as I am, I’m still not at the level where I can fully understand every type of API out there and make them all. It’s still like there’s levels of technicality and logarithms get harder as you go up the scale. Even for me, who I feel like I’m pretty technically advanced, I’m like, “I have no idea how to make these two things work, and I have to talk to this development team and this development team and get them to work together.”

That can be always a challenge. I would say that’s it. In the future, it would be ideal if I could just have one location where someone, as Kara was saying, they put in information once, and I never have to answer it again. You shouldn’t have to verify a social security number seven different times. If it gets messed up in one place, now the whole application is messed up, and it just creates all sorts of headaches later. It’s about, how do you get data and data integrity and then also make it easy, too? I think someone’s going to solve that, I hope, but maybe it’ll take longer than we think.

[00:41:45] Matt Sonnen: The number one question I get just as a consultant is about integration, and I think that’s the most popular blog post we’ve ever written. It was called “Integratable Does Not Necessarily Mean Integrated” because all of the technology vendors say, “Hey, we’re integratable with everything.” Getting it to actually be integrated is another story.

It’s possible, but it does take a lot of work. I’m obviously biased, but I think it does take a dedicated Director of Operations, COO – you do need somebody that that’s their primary focus.

This has been a lot of fun. We’re right up on time. We timed it perfectly. I want to thank both Kara and Nick for being here and sharing your expertise. I think everybody learned a lot from both of you.

[00:42:29] Kara Armstrong: Thanks. It’s been a pleasure to be here and great to see you both.

[00:42:33] Nick Maggiulli: Thank you. Appreciate it, Matt and Kara.

[00:42:35] Matt Sonnen: Awesome. Thanks.

[00:42:35] Taryn Burgess: Thank you to everyone.