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EP 38 – Transcript

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

[00:00:24] Matt Sonnen: Welcome everyone to episode 38. We are a week behind in getting this out to everyone. We’ve been pretty consistent at releasing episodes the first Wednesday of every month, but as you all know, January was a bit of a trying month for all of us, both financially (the markets were crazy) and a lot of people were sick in January. We’re giving ourselves a pass. At this point we’re just excited to get out an episode at all so we have two fantastic guests with us this month. Let’s dig in. Jennifer Wagoner Kirksey joins us from Tolleson Wealth Management in Dallas, Texas.

Jennifer is currently the Managing Director of Wealth Operations, and according to her bio on their website, she is the firm’s first employee to grow her career from entry-level to managing director. As you all know, one of the things I really like to tackle on this podcast is how operations professionals can prove their value to their RIA owners and how they can work their way up that career ladder. We’re definitely going to be hitting on that today. Jennifer, thank you so much for being here, and welcome to the COO Roundtable.

[00:01:33] Jennifer Wagoner Kirksey: Thank you, so happy to be here.

[00:01:35] Matt Sonnen: Perfect. Well, joining Jennifer is Trevor Phillippi, the Chief Operating Officer of 6 Meridian in Wichita, Kansas, and like Jennifer, Trevor has worked his way up to where he is today. He was with the 6 Meridian team back at Morgan Stanley and then they launched the firm five and a half years ago. He’s held several roles on his way up to the COO role that he currently has. His bio on their website, it states, “Whether it’s overseeing human resources, technology, operations, or compliance efforts, he helps secure the foundation that allows the advisors to concentrate on what matters most.” You all can see why I’m so excited to have Trevor on the podcast. Trevor, thank you so much for being here.

[00:02:22] Trevor Phillippi: Thank you so much, Matt. Happy to be here.

[00:02:25] Matt Sonnen: Well, Jennifer, I’m going to go to you first. Why don’t you tell us a little bit about Tolleson Wealth Management?

[00:02:30] Jennifer Wagoner Kirksey: Sure, absolutely. Tolleson Wealth Management was founded in 1997, actually as a single-family office for the Tolleson family. Over the last 20 years, the firm’s really grown organically and by word of mouth into a private multi-family office, serving a select group of clients. Our vision is really just to help families navigate the complexities that accompany their wealth. Right now, we have 200 employees that serve approximately 200 families with end-to-end services.

These include things like strategic wealth management and financial planning, family engagement, and governance, investment management, trust and estate planning, tax and bookkeeping, private banking and strategic philanthropy. We currently have about 10 billion in assets under oversight, and we’re continuing to grow and bring on new families as we speak.

[00:03:19] Matt Sonnen: Perfect, and Trevor, hopefully I didn’t steal too much of your thunder, but tell us a little bit about 6 Meridian.

[00:03:27] Trevor Phillippi: Yes. Thanks, Matt. As you said, 6 Meridian was founded in September of 2016. We were 13 team members at the time, we broke away from Morgan Stanley. Over the last five years, we’ve grown quite a bit, both in terms of employees, assets, and clients. We’ve grown from 13 to 24 employees, with half of our new hires being advisors and the other half being either in asset management or in operational roles.

Rapid growth is really a product of three things: One, being an independent firm means that someone within the four walls is accountable for every aspect of the business, and I think you read a few of those in my bio. Second, our firm has grown in terms of clients and AUM, and finally, we continue to provide comprehensive solutions to our clients, so 6 Meridian has 6 exchange-traded funds listed on the exchange. We sub advise three fund-to-fund alternative strategies and we’ve expanded our financial planning solutions as well. As far as client growth, much like Jennifer and Tolleson, we’ve really grown the old fashion way, which is organically through client referrals and through centers of influence.

In December of last year, we actually took our biggest steps since forming our firm by entering into a strategic partnership with Hightower Advisors, which we believe will allow us to offload a lot of the existing work that doesn’t directly benefit our advisors or our clients, allowing particularly those of us in the operations role to provide better and more direct support to the firm, and to continue to enhance the solutions that our clients care about.

[00:05:20] Matt Sonnen: Great. Well, as I said in the intro, you both have worked at your firms for a long time, and both have held many different positions. Trevor, I’m going to go to you first on this one, give us the overview of your career and how you’ve zigged and zagged your way to where you are today.

[00:05:39] Trevor Phillippi: Sure. After graduating from the University of Kansas, I dabbled in the wealth advisory world as a financial advisor, but quickly hit the brick wall called reality and found out the hard way that I just did not have what it takes to be a solo advisor. At the time, I really had no idea that joining an advisory team, whether it was as an advisor or within a different role was even an option, so instead, I switched careers, I worked in retail banking for a couple of years, and then a couple of years in corporate treasury. I enjoyed my time in both roles, but always felt like I would eventually make my way back into the wealth advisory [firm] in some capacity, so during that time I continued my education.

I obtained my MBA from Wichita State University. Then I also pursued my CFA charter, which I received in August of 2014. I joined the team that would eventually form 6 Meridian in June of 2013 as an investment analyst focused primarily on quantitative strategies and also mutual fund manager selection. Then during and after the formation of 6 Meridian, I found myself spending a lot of time focused on the operational aspects of the firm, so technology selection, vendor, contract management, compliance, finance, policies and procedures, everything we refer to as running the business of an advisory firm. In September of 2017, I formally transitioned over to Director of Operations and a couple of years later to Chief Operating Officer.

[00:07:37] Matt Sonnen: That’s great. I love the story and how you realized what you didn’t love doing, [chuckles] and found your way around- full circle though, found your way in a position that you love at a firm that’s growing obviously tremendously and just partnering with Hightower, et cetera, so that’s that a great story. Then Jennifer, as the first employee to grow your career as your bio says, you grew your career from entry-level up to managing director. Tell us how you did that.

[00:08:07] Jennifer Wagoner Kirksey: Sure, absolutely. I graduated from Southern Methodist University with a degree in finance and actually started at Tolleson right out of school. At that time, we had less than 20 people and less than 500 million assets under management, so I’ve been with the firm and seen significant growth. Actually started in operations and quickly shifted into a role in our investment team. I spent six years doing hedge fund research and due diligence something that I was extremely passionate about doing but then there was a departure in our operations area.

At the time it was still a small group of three people from when I originally had started and the firm asked me to help fill a hole until we found replacement. I quickly realized that developing this department was the role I was really supposed to fill. Along with an amazing team full of hardworking and motivated people, I’ve really spent the last 10 years building an operations department from account opening, transactions, performance reporting and I really believe that my investment background helped create a bridge between the front and the back office.

It helped build trust in what I was doing and what I was building, and then five years ago, I was challenged with building bill pay and bookkeeping department to offer as a service for our clients. This is really new and challenging endeavor to be a part of a revenue business line. I really love this challenge and the work has been really rewarding. I’m so blessed to work at such an amazing firm that has really let me discover what my career path is without having to search elsewhere. Right now, I’m currently in school to get my MBA, and I’m hoping that I can apply that knowledge to our continuing growing business.

[00:09:39] Matt Sonnen: Well, as you can tell, I stalk everybody’s bios, and one of the things that I found fascinating in yours, Jennifer, it says your very first position was that of performance reporting analyst, and you guys even used that exact term. You did that back in 2003 and I found that amazing. You were way ahead of your time, because we’ve been speaking with firms a lot lately about that role. We actually just published an article in last week actually, highlighting the importance of the performance reporting analyst role.

What we’ve been explaining to a lot of our clients is- and you know this better than anyone, when an RIA hires Addepar or Tamarac or Orion or whichever performance reporting tool they’re using, you can’t just wash your hands of all performance reporting responsibilities. There’s still a lot of responsibility on the part of the RIA to have a power user, and some firms have several of these, but you have to have a power user who’s going to leverage that technology to its fullest. Talk to us how you’ve tackled performance reporting in that role and where you are today but just in general – How has Tolleson covered performance reporting?

[00:10:56] Jennifer Wagoner Kirksey: Sure. As you mentioned, that was my first role at the firm over 19 years ago. I’m really aging myself. I was hired to help the one person in operations manually do performance reports for our clients in Excel using admin access. That was somewhat feasible when we had under 20 clients, but obviously not scalable. As we grew, we actually stayed on our historical system until about 6 years ago when we moved to Black Diamond and this project was really a labor of love for me. We formed a project team that included various members throughout our firm. We looked at all the players and essentially landed on a solution that worked best for us.

As you stated, the system doesn’t run itself and it needs a team really around it to manage it. I currently have a team of two people managing the system, and we’re actually looking to add an additional person right now. I really feel like we’re only as good as our data, and so my team is really stewards of that data. Ensuring that everything is accurate, reviewing exception reports, setting up portfolios, creating custom reports. Some systems that we looked at were amazing and extremely customizable, which sounds great in theory, but when there are just too many options I feel like it could become very cumbersome.

We were really looking for a partner that understood our business. Is it perfect? No, but I usually go with the 80, 20 rule, right? It accommodates us 80% of the time and the other 20% my team fills in the gap. I do agree that having a team to support that system is definitely something that you need within your firm.

[00:12:29] Matt Sonnen: Yes that’s great. Then Trevor, you and I have spoken at length around the nuances of successfully executing around performance reporting. What advice do you have for our listeners?

[00:12:43] Trevor Phillippi: Matt, you hit the nail on the head with the article that you mentioned. When we formed 6 Meridian in 2016, one of the many tasks that we that we had was to select a performance reporting tool. We did, and I became the de facto power user as you put it. It worked for a while, but as our clients became more complex, as the customization of the tool became more important, we hired a technology analyst a couple of years ago that quite honestly I expected would spend the majority of his time within our CRM. However, because of the importance of reporting, both in terms of the accuracy of the data, absolutely essential, but as well as the level of customization that we do like to provide to our clients.

He spends three quarters of his day in the performance reporting software, whether it’s recording transactions for our alternative assets, signing securities to an asset class universe that 6 Meridian has selected, linking client accounts to the correct household, researching client advisor questions and so on and so on. He isn’t even the one that handles billing. He spends a majority of his time within that software. The complexity and customization available in today’s products is certainly a double-edged sword. My advice is really this, the reports are only as useful to your clients as the level of attention to detail that’s put into the them.

The complexity of your investment offerings and the complexity of your clients will determine the level of effort that you need to put into performance reporting, and that’s certainly been the case with 6 Meridian. The process is continuously evolving. What worked for our clients a couple of years ago wouldn’t have been good enough today and what’s good enough today won’t be in a year or two. You have to devote time and energy to it. You need to stay up to date on the product features that are rolled out. You need to ask for feedback, direct feedback from your advisors and from your clients, and you need to be creative.

[00:15:26] Matt Sonnen: I don’t think we’ve touched on this on the podcast before. It’s so important. I just want to make sure we’re not saying the tools are broken by any means or this is any one- oh well you don’t need this dedicated resource if you’re using X system versus if you’re using Y system. It has nothing to do with that. This is just- and you said it well Trevor, this is the complexity of performance reporting. It’s so important. Like I’ve said, I’ve been talking to a lot of clients about it. It really is the RIA’s responsibility to run the software that you’ve now purchased.

I’m glad we’ve touched on this, and you both raised a lot of good points, so thank you for that. Then, next step in talking about performance reporting. When we sit down with the client to go through their portfolio, in the “Old days,” it was very much an asset management conversation. We’d tell the client, “Hey, you had a great quarter. The S&P was up 2.1% and you were up 2.3% so you should feel really good about that.” Those numbers don’t really mean anything to the client, or even weirder the conversation was, “Hey, you should be so proud. The S&P was down 2.3% and you were only down 1.9% so aren’t you glad you’ve hired us?” It was just a weird conversation.

Our industry as a whole has shifted away from that asset management conversation, and we’ve expanded the number of services that we’re offering clients beyond just investment management. The entire conversation with our clients has changed. With that kind of background, Trevor, I’m going to go to you. What services has 6 Meridian added over time that has changed the conversations that you’re having with clients today?

[00:17:14] Trevor Phillippi: A couple of years ago we were evaluating the financial planning tool that we were using, which to be frank was chosen at the time because it was what we used at the former wirehouse. We had recently brought on a few younger wealth advisors so they had the time, they had the enthusiasm, and they had the tech acumen to really analyze and perform some deep due diligence on the solutions available in the marketplace.

Previously, our financial plans were tailored to clients with relatively straightforward financial lives, nothing too complex. We really flipped that on its head and selected a tool that could provide deep analysis and insight for even our most complex clients. We found this to be an incredible value add for those complex and valuable clients. Everyone, regardless of wealth or financial complexity, appreciates being walked through an analysis that covers their financial lives in a way that is easy to understand. It’s not just about determining the likelihood of running out of money during retirement anymore.

Estate, cash flow, tax, charitable gifting, strategies, are just a few of the topics that we cover within our financial planning analysis. We’re able to connect our clients’ outside accounts to allow for instant updates, which is great. It seems anymore that we spend less and less time reviewing and explaining specific performance numbers and instead focus on the bigger, long-term picture.

[00:19:07] Matt Sonnen: Well Jennifer, what is Tolleson doing beyond just investment management to provide value to your clients?

[00:19:13] Jennifer Wagoner Kirksey: Sure. As I mentioned in the beginning, we really are a full-service firm. We do everything in-house, which is why we have 200 employees serving 200 families. This really allows us to be intimately involved with each client family. We have what we call specialty teams and those include the investments, philanthropy, tax and the one that I oversee, bill pay and bookkeeping. This is a service that many have shied away from because it’s time and people intensive, but it’s been such a huge win not only for our firm but for our clients.

We’re paying their bills, we’re doing their financial reporting, and it’s really helping the advisors navigate conversations with the clients that we haven’t really been able to have before. It’s a really sticky business line, and it really allows us to be connected with the client in their daily lives. This is just one of the things that we do that’s- I feel like different and unique. Like I mentioned before, we also have philanthropy and tax, and those things are also exciting as well.

[00:20:10] Matt Sonnen: Perfect. Well, as everyone knows that listens to this podcast, I have a massive chip on my shoulder with our industry’s overall attitude, that, “Operations folks merely add to the expenses of the firm, and it’s really the salesmen and the saleswomen that really add the true value around here,” I hate that. With these added services and our industry’s overall goal of adding value in all areas of our clients’ lives, I’m hoping that the word is slowly getting out there that operations adds to the value of RIA’s in immense ways.

Jennifer, in an operations role, you’ve been able to ascend to the managing director position so I’m sure you have an interesting take on this question. In your mind, what role does operations play in the growth of RIAs?

[00:21:00] Jennifer Wagoner Kirksey: Operations is really an integral part of a growth of any firm. We are what I like to call the backbone of the organization. I really want to make the advisor’s job as frictionless as possible, so I strive every day to work towards that goal. What processes are burdensome, manual, not effective and I try to tackle those head on. I’m there to help them. I’m there to get them where they need to go and so I actually feel really supported in my role and I think my firm does a really great job of understanding the importance of needing a strong infrastructure to operate at such a high level, whether that’s investing in technology and people or process and procedures.

Having a strong operations team built with strong team members who really understand the business is really the key to excellence. Something I’ve always disliked, Matt, is the term back office. I’m still working on what that term should be, but I think it’s something more than that, for sure.

[00:22:02] Matt Sonnen: Absolutely. Trevor, what are your thoughts here?

[00:22:09] Trevor Phillippi: Yes, I agree with Jennifer. I think it’s really up to the leaders within operations to set expectations for how their team is going to add value to the firm and to the advisors and ultimately to our clients. At 6 Meridian, it’s not enough just to stay out of the advisor’s way and make sure things don’t break. That’s certainly important, but that’s just basic blocking and tackling. My belief is that those in operations should view advisors as our clients. It’s certainly not us versus them and it’s far from it, actually. We’re looking at how we can prove our value to the advisors, just as they’re having to do for their clients.

Now, one important component is for those in operations, as Jennifer mentioned, to have at least a foundational understanding of the services that we provide. I know that for me personally, having that background in investment management and having experienced how difficult the job of being an advisor is, really gives me an appreciation for what they’re doing and is really the motivational driver for me to support them. In order to do this, we focus on the things that add the most value.

We look for ways to improve performance reporting, of course, we have clear communication and accountability on tasks, processes, and tracking for important recurring projects, and we always have a mindset of continual improvement in both communications and technology solutions. Our goal is to take as much off of the plate of our advisors to allow them to focus more of their time and talents on client service and prospecting.

[00:24:10] Matt Sonnen: I like how you framed it. I think that’s fantastic. Talking about value of RIAs and the growth of RIAs, I feel that every firm right now that I’m talking to is hiring, if not for one open position, they’re trying to fill multiple open roles right now. Jennifer mentioned her performance reporting team is looking for a new member. It’s just not an easy time to be hiring, partially because there’s so much demand from RIAs all over the country so we’re all competing with one another, but just overall, the employment dynamics are challenging right now as well. Our last blog post of 2021 was simply titled, ‘wake up and smell the talent shortage.’ Trevor, talk to us about how you’re going about hiring at 6 Meridian right now.

[00:25:01] Trevor Phillippi: Yes, Matt, it’s difficult out there, there’s no doubt about it. When we posted for an open position for the technology analyst that I mentioned back in the fall of 2019 we had 50 applicants, not all were qualified of course, but we had enough to bring a few in for interviews and we eventually hired one of those candidates. In the fall of 2020, we posted for an open position for a client relationship manager and the list of applicants had fallen to maybe a dozen or so, but we still found a qualified candidate and hired her. In the summer of 2021, we posted for another client relationship manager and had maybe four applicants, none of which were qualified for the role.

We had that job posted for much longer than the previous two examples and we are still looking to fill that position. As a smaller firm, but still well known in our market, we feel we have not only the privilege but the obligation of being highly selective in our hiring process. Firm culture is everything, and the last thing we can afford to do is to make a bad hire and disrupt a great thing. The labor market right now is testing our commitment to holding those ideals, so we just started utilizing the recruiting and talent management department within Hightower, and I am hopeful that this will help us in our search.

[00:26:41] Matt Sonnen: Yes, I think your experience- I like how you actually quantified it for us. I think that experience is very similar to what other firms– Including PFI. We were working with a recruiter. They were sitting on a job description since November and we just hired this month for that position, whereas that same role in 2019, I used the same recruiter, I gave him the job description, and literally within two weeks of me placing the call in to the recruiter, I had already hired somebody. Your math is consistent with what I’m hearing all over the country. Jennifer, how is Tolleson managing this weird labor landscape right now?

[00:27:25] Jennifer Wagoner Kirksey: Similar to what you just said, we’re currently feeling the pain. I went to our website this morning. We actually have 25 positions open on our website, four of which are mine and it’s a real struggle. It’s really challenging right now and we’re seeking out people every day in all kinds of various ways, recruiters, LinkedIn, reaching out to former contacts. I really feel like COVID has created this disconnect between people and their employers and well, I do love this newfound flexibility that the pandemic has created. I think there’s something to be said for the connection when someone’s in the office.

Right now, what I’m trying to focus on is working hard to make sure my people are engaged and aligned with the firm’s vision, that they feel appreciated and heard and taking care of them is my utmost priority while continuing to deliver this high level of service that our firm is used to. I really hope that a differentiator can be our culture, that we can attract long-term employees that want a forever career. I’ve been really blessed to have my entire career here because people have supported me and lifted me up along the way and I hope to do the same for my team. My role focus right now is keeping the people I do have really happy and continuing to search out new talent for our business.

[00:28:42] Matt Sonnen: Yes. I think you both raised an interesting point of, it’s very tough out there, but do you bend on your service standards? Hopefully, we’re not going to get that. I don’t think we’re there yet where, well, they’re only half as good as I would’ve hired a couple of years ago. I don’t think we’re there yet, but it’s an interesting conversation that I know a lot of firms are having. Well misery loves company, so it’s at least helpful for everyone to hear your stories, and to know that they’re not alone in this, so thank you.

Despite this tough labor market and despite an overall stock market that has not cooperated with us over the past month, if you take a further step back, it really has been a tremendous two years of growth for our industry. I think that every RIA has experienced record growth over the past 18 to 24 months. The question I have for you guys is looking ahead to the next 24 months, what are you most excited about? I’ll go to Trevor on this one first.

[00:29:52] Trevor Phillippi: Sure. I’m excited about a number of things, both specific to 6 Meridian and the industry at large. For our firm, we’re excited to utilize Hightower, as what we feel will be a springboard for growth, so allowing all of the members of our firm to spend less time just, “Running the business,” and focusing more time on improving relationships with existing clients and bringing on new clients through innovative asset management products, comprehensive planning, customized performance reporting, and exceptional client service, which is what we’ve been known for, for all of these years.

For the industry at large, I’m most excited to see the continuous, ever expanding technology innovations that are coming to the market, the competition that it brings and then the race for continuous improvement that comes along with it. Finally, for the investment landscape, I guess the expectation for some turnover and perhaps turmoil in the market, and the skills that our advisors have in guiding clients through that, as well as the unique investment offerings 6 Meridian has created that perform well in such an environment, I believe will remind our clients why they chose to work with 6 Meridian in the first place.

[00:31:27] Matt Sonnen: Jennifer, as you look into your crystal ball, what excites you about 2023 or 2024?

[00:31:35] Jennifer Wagoner Kirksey: What excites me the most is that I actually have a seat at the table to help drive our firm’s strategic growth. Our business continues to change and our clients continue to get more complex. I’m really thrilled at the opportunity to find the firm solutions to meet those needs, especially with financial technology, like Trevor had mentioned, making sure all of the pieces of the puzzle fit together to accomplish great things, and serve our clients in the best way that we can.

[00:32:03] Matt Sonnen: Well, this has been a great conversation. I am such a nerd. I get so excited about this stuff, but the stuff, the topics we covered in this conversation have been really great. I know both of you have such tremendous experience. I know our listeners have learned a lot from both of you. Trevor and Jennifer, thank you so much for being here today.

[00:32:23] Jennifer Wagoner Kirksey: Thank you, Matt. It’s been a pleasure.

[00:32:24] Trevor Phillippi: Thank you, Matt.

[00:32:26] Matt Sonnen: Awesome. Well, everyone, that is a wrap on episode 38. Thank you all for listening, and we will talk to everyone soon.