[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 45. I’m really excited to speak with our guests today. In our prep work for this interview, I found both of them to be very thoughtful leaders that are running relatively young RAAs, and they’re evolving these businesses very quickly to best serve their clients. I think our listeners are going to learn a lot from them today. Our first guest is Michael Wagner, Co-Founder, and Chief Operating Officer of Omnia Family Wealth. Michael and his business partners launched Omnia out of Merrill Lynch right about the same time Reese and I launched PFI Advisors in late 2015. I don’t want to give away all the goodies on the firm. I’ll let Michael tell you their story in just a minute, but let me first just say welcome to The COO Roundtable, Michael.
[00:01:10] Michael Wagner: Hey, Matt. Thank you so much for having me today.
[00:01:13] Matt Sonnen: Perfect. Joining Michael is Ben Gurley from Heartwood Wealth Advisors in Richmond, Virginia. Heartwood launched in 2019 out of Wells Fargo Finet. Ben can tell you all about the firm and the various roles that he’s had as they’ve gotten the firm off the ground, but again, let me just say, welcome, Ben.
[00:01:32] Ben Gurley: Thanks, Matt. Glad to be here.
[00:01:34] Matt Sonnen: Perfect. As I said, Michael, I’m going to go to you first. Why don’t you tell us a little bit about Omnia?
[00:01:40] Michael Wagner: Sure, Matt. Again, thanks for having me. As you mentioned, we started the firm in 2015. We were a team in Merrill Lynch’s private bank and there were five of us when we came over in 2015. We now are up to 11 people as far as headcount goes. Our regulatory AUM is $700 million, but if you include all of the things that we advise on, we’re really talking more about advising on $2.2 billion in client assets.
Our ideal client is really, traditionally, it’s been what I would call a baby boomer or somebody who’s been more in that phase of life who has had a private business, oftentimes a family business. They may still be running it but in a lot of cases, they have sold it, but in all cases, they have a family they really care about. There’s something about our approach that gives them that sense of continuity. I’m sure we’ll get into it, but maybe a little bit about growth for the future is, as you mentioned, we’re a seven-year-old firm. We’re still very much the core advisors that started the firm. I think our next phase is really going to be hiring and bringing in more advisor talent so we can just do the great work we do for more families.
[00:02:58] Matt Sonnen: Well, the operations podcast here. We all know the challenges that you’re right at that inflection point of you had the core team and now you’re going to add to it. I think a lot of our listeners can empathize with the struggles, challenges, don’t call them struggles, the challenges and opportunities, we should say, that you have in front of you. Perfect. Well, Ben, why don’t you give us a story of Heartwood Wealth Advisors?
[00:03:23] Ben Gurley: Yes, happy to. Heartwood, as you mentioned, Matt, was– we went RIA in 2019 from the Finet platform. We’re with Pershing now as our primary custodian. Heartwood, the firm, was founded in 2013 and came out of Merrill. The three founding partners brought their business from Merrill in 2013 over to Finet and then went fully independent in ’19, so we are a pretty young RIA.
We’ve got about a billion dollars in client assets under management, 11 employees, that includes the partners of the firm as well, and I’d say that our ideal client is in that $10 million to $15 million range of investable assets. We’ve started to bring in, and we’ll talk about this later, but some integrated tax work and some other areas that might be more consistent with the experience that people might have at a trust department or at a private bank.
I think that for clients who are looking to get an integrated approach that covers not only the financial planning and the wealth management but incorporates some of those other aspects of their financial life, that’s where we are, I think, uniquely suited to help those clients. The path forward for us is looking at how we continue to build out that infrastructure, that service offering, to really get clients the maximum they can from a wealth management relationship and that’s the vision for the future.
[00:04:54] Matt Sonnen: Ben, you’ve had a fascinating career looking at your bio. You taught middle school. You’ve been in both private equity and investment banking, which I’m sure in private banking and investment sometimes you’ve probably felt like you were still teaching school. Walk us through your career path to where you are today.
[00:05:14] Ben Gurley: Yes, absolutely. It certainly has not been a straight line. I left school, I went to the University of Virginia, and after that went to New Orleans to teach middle school math, which was definitely a unique, eye-opening, and formative experience. From there, I went back to business school at UVA, went to Darden and graduated there in 2013, and spent about three years working in the private equity investment banking space. From there I really kind of wanted to make a shift for a whole host of reasons but wanted to get to something that was a lot more personal and wasn’t quite as transactional. I learned a lot in a very short amount of time from that experience, so I’m very grateful for the hockey stick learning curve that goes on in that industry. That has really benefited my current role at Heartwood.
I came into Heartwood at a time when there wasn’t necessarily a super-defined path for what I was going to be doing. They needed somebody to come in and pick up some slack from a servicing standpoint, from a relationship management standpoint, but it was an agreement that, “Hey, we like you. I like the partners here. Let’s see how this evolves.” The more that I could add value to the firm, we grew out of that in terms of what I was willing to really take hold of and take ownership of in terms of firm responsibilities.
It’s grown into a position that is, I think Michael will agree, but into a relatively small RIA where we’ve got to wear a bunch of different hats. I’m a client-facing advisor, I’m a secondary relationship manager on legacy clients that have been here for a long time, I’m primarily in charge of firm operations, HR. We are all rowing the boat together and I think that it’s really been dictated by what the needs of the firm are in terms of how my role has evolved. That changed dramatically when we went fully independent in the amount of extra firm responsibility that was then placed on our shoulders.
[00:07:29] Matt Sonnen: Well, again, I think, most, if not all, of our listeners can feel your pain of trying to juggle so many different hats and do a little bit of everything. I think that’s the one common thread of all of our podcast interviews is, “I just kept raising my hand and they kept dumping more stuff on my desk. That’s how I’ve grown my career.”
[00:07:50] Ben Gurley: Yes, that’s right. That’s it.
[00:07:54] Matt Sonnen: Well, Michael, you’ve been in wealth management your entire career. You actually joined the family business. Tell us about your career progression.
[00:08:01] Michael Wagner: Yes, it’s funny. My entire career, I guess, my entire life really, I grew up in the business. My father has been an advisor for 40-plus years. Really, I went to school, originally studied computer science, found economics, and really developed a love for it. Once I graduated school I joined the family business, as you said. That was 2006. Things were still going pretty smoothly at that time, but quickly got to cut my teeth during the great financial crisis. At that time, we were at UBS Private Wealth Management. Due to a number of factors, there were some reputational issues with the firm at the time, we moved the business over to Merrill Lynch in 2009. Then, again, we left Merrill and went independent in 2015.
I’ve been doing it my entire career. I’ve moved the business I guess, twice if you want to think of it that way. Once from Merrill to UBS and then– I’m sorry, UBS to Merrill, and then Merrill to the independent world. I think you really do what’s needed at the time. We were a team of five when we launched. Somebody had once told me, “Look, you’re not going to get rid of your headaches, but at least your headaches will be your own.” All of these things started to pop up and you just keep raising your hand. Okay, I’ll take care of this. I’ll take care of that. and before you know it, you’re very much in an operational role.
At the same time, you’ve got your advisory responsibilities, too, and exactly as Ben was saying, you end up wearing all these hats. It’s advisor, COO, Chief Technology Officer, there are absolutely HR concerns in there as well. I like to think, in my role, I’ve done a little bit of everything here at the firm and it really helps inform decision-making and gives you perspective, I think, when you’re dealing with either colleagues or clients to just have a fuller appreciation of the big picture that everything that goes into making a firm like this run.
[00:10:07] Matt Sonnen: We both have touched on it. It’s rare, I would say, that both of our guests serve as client-facing advisors in addition to their operational responsibilities. Michael, I’ll go to you first on this one. Do you think being an advisor makes you a better operations person or is it the other way around? Do you think your operations experience makes you a better advisor?
[00:10:28] Michael Wagner: It’s funny because I do think it’s a little bit of both, but I’ll pick a side. I think that the operations background makes me a better advisor. Maybe it’s my background and what I was doing first, but like I was saying, knowing really how everything is built and put together and interacts with other processes gives me that much more confidence in our process and our system.
In my past life, there was this black box of operations and you knew that, for the most part, they’re all really well-run firms and things go well and according to plan, but there’s only so much control you have over it. Maybe it’s the control freak nature in me, but knowing every little bit of the process, really knowing how the clock is built gives me a fuller appreciation and greater confidence in what we’re doing. Again, I think it is a little bit of both, but if I had to choose, I think the operations background and experience is making me a better advisor.
[00:11:29] Matt Sonnen: Ben, what do you think? Does your client-facing work make you better at ops, or do you think your back office work makes you a better advisor?
[00:11:36] Ben Gurley: I would agree with Michael. I think that it really has made me more of a significantly better advisor for a lot of different reasons. One is just the technical knowledge around how everything gets done, how the sausage gets made, so to speak. Being able to speak, have that in the back of your mind when you’re speaking to clients and setting expectations and describing the process of onboarding or the process of money movement or the process of settlement times. Most advisors know a bit of that stuff, but I will say that being the one in charge of developing the processes behind the scene for how we actually implement a lot of those things for clients has been very helpful just having that inform my communication with clients.
I also think that this is speaking as well to going RIA, but having a lot more on our plate from an operational perspective is it just is so much more skin in the game in terms of the level of, what would I say, just ownership over the entire firm and how it operates and why it does what it does I think just raises the stakes in a really good way that I think aligns our interests more with clients and allows us to speak to clients from a place of integrity and a place of really having our full professional world invested in this independent firm I think is really a powerful thing. That doesn’t come out explicitly but I think it is a backdrop to how we present ourselves to clients and speak to clients about who we are, our brand, and what we do.
[00:13:19] Matt Sonnen: I know in a post-COVID world, everybody’s rethinking open floor plans, but historically I’ve talked to a lot of operations folks that have said, I have to sit within earshot of the advisor because when he or she is promising the client, “Oh, absolutely. That account will be open and the assets will be here by Thursday,” or, “Oh, sure, you’re alternative investment, we can get that re-titled into the name of your trust. That’ll be done by tomorrow.” They can be waving their arms going, “Three weeks, three weeks.” [laughs]
[00:13:44] Ben Gurley: Absolutely. Yes. That has happened before at Heartwood.
[00:13:50] Matt Sonnen: I think everyone would say that at least anyone listening to this podcast, everyone would say being an RIA is better than being in the captive environment, but running your own business definitely adds some operational complexities. How have you navigated those challenges, Ben?
[00:14:09] Ben Gurley: Yes, it certainly has. I’ll echo go Michael’s comment. It was the firm operations were a bit of a black box in at Finet. Really, all we got was, at that point, your monthly P&L and you understood how everything was coming out from a revenue and expenses standpoint. Other than that we were just solely focused on just the client-facing aspect of the business. Becoming RIA has opened up a whole world of possibilities, which is the extremely exciting and energizing piece of it all, but it also entails everything you need to do to make sure that your compliance program is on point and all the different things that a captive environment was handling for you are being accounted for and performed well.
I think the way we have handled that has been at first it was like drinking through a fire hydrant and you just have to take it in and figure it out on the fly. We’re still in the process of optimizing a lot of those processes and learning more about whether they be vendors or ways of doing things through affinity groups. We’re really trying to keep learning as we go through this process, which I think is key because we don’t pretend to have all the answers or the best answers to how we do things currently. I think one thing we have happened upon is that we want to keep as much flexibility baked into our structure as possible.
We want to take advantage of the fact that we are a small and independent firm and not layer in levels of bureaucracy or checking-the-box processes that while they might serve a purpose theoretically in terms of, okay, we’ve got to have a process for this and that, I think we’ve tried to really pare it down to what is the minimum we can do in terms of a formal process and allow for people to do their jobs and do them well without encumbering them with a whole lot of paperwork or extra steps that need to be taken just for the sake of process.
I think flexibility has been a key part of how we’ve tried to design our operations moving forward and trying to maintain as much of that, and also knowing that as we grow, and if we did start to add more advisors, we would have to start to implement more of those structures from the top down. That’s how we’ve handled it, is one, just getting it done, learning as much as we can to evolve, and then three is keeping flexibility in the system so we can stay nimble and stay on our toes and not bog our people down.
[00:17:05] Matt Sonnen: I love it. Michael, how have you juggled the increased operational burdens that come with firm ownership?
[00:17:12] Michael Wagner: Yes, and I’ll dovetail off of something Ben just said in terms of not bogging your people down. I think a lot about when you go from, let’s call it the wirehouse world or what have you, to the independent space, you are suddenly granted with all this freedom and flexibility. You’re the master of your destiny, everything’s modular and plug and play, you can change your vendor relationships and whatnot, but with all of that flexibility comes a lot of risk. Somebody once said design is the art of saying no to things, so to be really intentional, especially with a smaller team, being mindful that we only have so many hours in a day and that bandwidth is not infinite.
Sometimes in these conversations you feel like the wet blanket. Where you’re throwing out all of these, your colleagues are throwing out a lot of wonderful ideas and you get to be the one who’s like, well, have we thought about A, B, and C, X, Y, and Z? All of a sudden the mood sours and it’s been a challenge to not take stuff like that personally because it’s all just business and this is what we do and it’s all for the betterment of the organization. I think that’s definitely been one of it or one of those items is how do we cope with being able to do whatever we want and at the same time focusing on the things we really need to be doing. I think time and experience has helped me and the team deal with that.
[00:18:49] Matt Sonnen: I’ll just throw out there, I think the two biggest lies, I hate using that word, but the two biggest lies told to advisors thinking of starting their own RIA. One, “The RIA space is amazing. You just outsource everything,” and it’s like, really? Yes, I’m going to have a compliance consultant, but you still need somebody that’s in charge of that. Oh yes, you’re going to have an IT firm, but you’re still going to need somebody that if the power goes out and something needs to be rebooted, somebody physically on-site needs to go and unplug stuff and plug it back in, whatever it may be.
That’s number one. It’s, oh, it’s totally easy, just outsource it. Then two, on that point, I say this a lot, Integratable does not necessarily mean integrated. You’re all, everyone’s told, “Yes, yes, we integrate with that,” and, “Oh, yes, we’re integrated,” but getting data to flow freely across multiple systems and things is not nearly as easy as everyone is led to believe.
[00:19:50] Ben Gurley: Ditto.
[laughter]
[00:19:54] Michael Wagner: I think it’s usually us on the call who end up being the person who gets to go in the closet and restart that server or gets to be on the phone call at the outsource consultant, and that’s part of the curse, right? Of making everything look so easy is that all of a sudden, just more and more things get thrown at you and it’s not always so easy.
[00:20:12] Matt Sonnen: That’s right. Well, I mentioned in the intro that you both have been very thoughtful about evolving your businesses to meet the needs of your clients. Ben, I’m going to go to you first. Talk to us about the services that you’ve continued to add to your platform over time.
[00:20:28] Ben Burley: Yes, absolutely. The biggest one most recently was we actually brought in a tax team so that’s been a huge change for us. It’s been wonderful for clients who are doing their tax work with that firm. The integration that we have, the communication that we’ve got between the two entities has really been a huge step up in what we’re able to deliver for clients. We’re working through how we expand that and improve upon it. There have been ways in which we’ve grown where we’ve actually brought services “in-house,” like the tax. It’s technically a separate entity but we’ve got a very tight level of integration on that.
Then there are other places where we’ve had to, it’s a little more arm’s length. One thing that we’ve really been pushing on recently is finding really quality property and casualty brokers that we can actually have a relationship with and bring them in to the point where we feel extremely comfortable having them in a meeting with our clients and helping clients think through their entire insurance picture and how that could be better optimized or improved.
We’ve added that. We’ve also, through BNY Mellon, the bank, so the brokerage custody side of Bank of New York Mellon is Pershing, but then, of course, there is the behemoth that is BNY Mellon. They offer an incredible range of lending and credit solutions and so we’re tapping into that. Leveraging partnerships along the way because there is only so much you can do, especially if you’re trying to avoid infinite complexity from a compliance perspective. In terms of “in-house,” which I think is the ultimate goal and the ultimate dream would be to have all this sitting under one umbrella, which you do have in these big wirehouses, but then of course you get the attenuating circumstances of all the oppressive compliance and procedure and bureaucracy that goes along with it.
We’ve been trying to figure out how do we best package that in integrated holistic, hate that word because it’s bandied about so much, but for lack of a better term, approach in a way that uses our open architecture, which I think is one of the primary advantages of an RIA structure, by integrating either formally or at arm’s length with trusted partners and vendors to have those services available for clients.
The other things that I would say, and this is so basic, but I think it’s worth mentioning, is that just the ability to communicate with clients, having outgoing communications that are our voice, give voice to Heartwood and how we think about things, it’s just something you couldn’t do on a captive platform. Just being able to send out newsletters to clients and communications about– We had a communication go out recently that was just about the car buying versus leasing process. Being able to have the freedom to do that has been incredible and I think adds a lot of value to clients’ experience with our firm and education and other things.
Really getting away from, we never really did the sales seminars and we still don’t, but bringing in people from, like, we’ve got one coming up on high-end travel and we’ve had one on the college application process. And we’ve brought in a senior living consultant to talk to clients about the expansive world of senior living options. Again, that’s somewhat basic and I think something that a lot of firms do even in a captive environment, but just the freedom and the flexibility to be able to dream up what we want to present to clients and then actually execute on it has been a huge improvement at our firm since going independent.
[00:24:34] Matt Sonnen: Very cool. Yes. Michael, I know you’ve done a lot of cool things at Omnia from a service perspective. Talk to us about that.
[00:24:42] Michael Wagner: Yes, and as Ben was saying, I think what’s so cool and exciting about this is being able to really custom tailor your business for your client. I think a lot about our multi-generational practice and we’ve been able to go deeper with that. There were industry stats around where I think by the time when the first spouse dies, you’ve got like a 50-50 shot of keeping the account, by the time the second spouse dies, you have less than a 2% chance of keeping that relationship always struck us as crazy. We’ve been able to really go deep with client families at multiple layers of the generation because we have a multi-generational advisor group. Beyond that, a lot of the things that people are looking for in that segment are, are continuity, right?
We hired a CIO, a Chief Investment Officer a few years ago which centralized a lot of the decision investment making, allowing our advisors to really focus on servicing the relationship. Sure they’re on the investment committee and have a lot of input there, but it fundamentally changed the way that we work as a firm and the way that we interact with our clients. It provided bandwidth like I was saying earlier, to do more and different exciting things. We’ve started to do some of our own in-house funds for clients, which is not something we ever would’ve really been able to do at any of the big banks and that’s been exciting. Continuing to add whether it’s different reporting options, as Ben was saying too, how you communicate with clients I think has changed.
I think through the pandemic, we really recognize the need to meet people where they are rather than I guess a good example is I don’t have clients like banging down the door wanting to come back in for in-person reviews. It’s been a lot on Zoom and we figured that would be one of the first things to come back but we’re still doing a lot of Zoom meetings. We’re doing newsletters, but we also started doing videos within the last year. Because I think, for whatever reason, all of our attention spans have gotten shorter. It may be the same piece of content but we’re delivering it in a few different ways. There’s a written newsletter, there’s a video people can read, and really just trying to, like I said, meet people where they are.
I think there’s an element of almost hospitality to that which we can go into, making people feel comfortable and having that touch point and just knowing that we’re out there. Continuing to use flexibility and nimbleness to our advantage but lean in where we think it can really make a difference. We’re all here at the end of the day to make a positive impact in the lives of our clients and do whatever we can to make it easier for my team to do that on a daily basis.
[00:27:34] Matt Sonnen: Well said. Well, everyone knows that the holy grail in the wealth management space is organic growth. If you aren’t growing, you’re dying is the famous saying. That focus on growth it sometimes creates conflict between the sales staff who feel they are the true drivers of growth, and then the operations staff who, unfortunately, sometimes are viewed as merely an expense on the income statement and not a driver of growth for the organization. This podcast is for nerdy operations folks, [chuckles] and I put that nerdy label on myself more than anyone, so I’m saying it lovingly, I’m not using it as an insult by any means. [chuckles]
Michael, talk to us about how you’ve learned that without process and infrastructure in place, your firm simply can’t support the growth of the organization.
[00:28:22] Michael Wagner: I don’t think it’s nerdy at all, Matt, or bad at all to be nerdy. Look, I think I learned it personally. Just recognizing how much more I can get done when I’m organized. We want to talk about automation or integration and that’s all wonderful when it works, but I think of being like really well organized and prepared as being like the early version of automation. You can get so much more done individually and as an organization when you have your ducks in a row and so that’s been huge. Yes, it’s communicating that sometimes to your colleagues who may not feel that way, but I think I’m fortunate to be on a small team where you could say we’re relatively flat and there is a lot of appreciation for everything that everyone here does.
There’s an element of culture there because that’s just not the place that we want to come to work at every day. I guess this does exist in organizations. Maybe it was more in the wirehouse world where there was less, there were literal walls between operations and everybody else. I think it is really important. It’s a force multiplier is really what I’m getting at. If you can have your ducks in a row, be organized, and have your operations in order, you can do so much more with the same amount of time. I think that’s really important and I think, honestly, your better advisors understand that.
[00:29:58] Matt Sonnen: Yes. It’s so funny you mentioned the walls between sales and operations. My first job at Merrill Lynch, right out of school, I literally worked in “the cage”. That’s what it was called. [laughs] [crosstalk] You need to talk to Matt Sonnen? He’s in the cage, go talk to him. [laughs]
[00:30:14] Michael Wagner: Like, how does that make you feel warm and fuzzy?
[00:30:17] Matt Sonnen: Right.
[laughter]
[00:30:20] Matt Sonnen: Well, Ben, from your perspective, how do you see operations driving organic growth at the firm?
[00:30:26] Ben Gurley: Yes, I think we’re probably similar to a lot of firms out there. Our primary driver of organic growth has been referrals from existing clients, and I think that when you boil it all down, this business is about relationships and I think everybody says that, but thinking about what that actually entails in building a relationship the client puts their trust in your firm to handle their investment management and their financial lives is really their experience and I think that the operations is the backbone of that client experience and if you can’t deliver on what you tell a client you are going to do for them, then the trust immediately is gone.
I think that’s where the operation side of it is so vital because you could have the best rapport with somebody but if you don’t actually execute on what you tell them you’re going to execute on and do it correctly and in a timely manner, then you’ve lost all that rapport and what’s it worth? I think that’s the biggest thing is that our operations team here enables us to build relationships with clients that are based on actual evidence of us being able to do what we tell them we’re going to do. I think that is fundamental to the business and fundamental to them at a cocktail party or with their family bringing Heartwood up and saying, hey, we really like these people because they’ve done what they said they were going to do for us and I think that’s vital.
I think the mistake that’s been made in the industry is mentally separating too when I think being on an RIA platform brings that into full focus, which is, they are indivisible. They’re one and the same in terms of the client-facing advisor and the support behind it from an operations perspective that allows them to really deliver for a client. I think that it’s critical.
I also think that, and Matt, you would probably have more insight on this than Michael or I, but I think depending on the firm’s situation or where you’re at in your growth cycle is and I think that ownerships are a really important piece of this too, is having ops people who potentially have ownership in the firm because that level of commitment and skin in the game I think makes a huge difference mentally and really sets you up for a long term track for success because you’ve got people on the boat who are being incentivized by the growth of the firm and have a meaningful commitment to the firm moving forward. I think that is something that would probably be a really good shift in our industry is to recognize the ops people as owners of the firm as well. Maybe a lot of firms are doing that but my sense is that probably not a lot are, so.
[00:33:28] Matt Sonnen: Yes, my goodness, I could go a whole episode on just that topic, but absolutely, the “ownership” mentality is so important, and we do talk about it on this podcast, again, more from the how do you promote your career? Again, we’ve even said it on this one, raise your hand. You’ve got to raise your hand, you’ve got to raise your hand, and I do believe that the ownership mentality, how do you get the ownership mentality? Well, the easiest way is give ownership. If an operations person literally has a small equity stake in the growth of the firm, they’re more likely to raise their hand, “Hey, that needs fixing, that needs fixing. I can do that. I know none of us have time, so I’ll take it on myself and go fix that.”
I think you’re spot on, and then the only other thing I’ll say there is when we do our “operational diagnostics” at a firm, the very first thing we do, which throws people a little bit is, hey, can we hear your marketing pitch? They go, “Well, I’m not asking for marketing, I’m asking for operations.” Right, but I want to hear what promises are being made to the prospects and how are you positioning the firm because operationally then, we have to actually execute on the promises. Again, having the ops team really incentivized to fulfill on those promises I think like you said, ownership is the quickest and easiest way to get there.
[00:34:50] Ben Gurley: Absolutely.
[00:34:51] Matt Sonnen: Yes.
[00:34:52] Michael Wagner: Yes, I agree 100%.
[00:34:53] Matt: Sonnen Yes. Well, that actually leads well into our last question. I want to talk about talent. It seems that every RIA is struggling right now to hire and retain employees, so Michael, I’ll go to you first, how has Omnia approached talent management?
[00:35:12] Michael Wagner: Yes, look, honestly, this was something that I handled myself up until this year, so you wear a lot of hats, that’s what we’ve been saying. I’d be putting the resumes on LinkedIn, Indeed, what have you, and you just get this flood of interested parties, let’s say, who may not actually be qualified for the job, and then fast forward to this year where post-pandemic, you’re hearing all of these horror stories about how difficult it is to find people, especially anybody that wants to step foot inside of an office, and then what pay expectations are.
Look, my bandwidth personally has changed since a few years ago and priorities changed. We decided to work with a recruiter and it certainly cost us money. Not only did we have to pay the new hires more than we were used to paying. Obviously, the recruiter also has their fee, however, the amount of time and stress that had saved me was worth it. These were qualified candidates. I went from having to call through 100 resumes, get that down to 50, and then have a number of short phone calls, the whole process down to really coming in at a much later stage of the game where you had really qualified prospective employees and made things so much easier.
It’s interesting because I had a very different approach pre-pandemic and it’s hard for me to do an apple to apples from one to the other, but we’ve had to be more deliberate in what we need the person to be doing because we’re spending more money on it and it’s more important to us than it was, and it’s been, I think, a better process for us even though it’s caused more money now in the new era, let’s say but you try to be very deliberate.
One thing when the people do finally join us is you never know what it is that they’re going to grow into and what role and contribution they ultimately play for the organization. We try to expose people. If we hire an ops person, we try to expose ’em to advisory and investment as well, and likewise for any of the other teams in the firm because we want people to identify a passion. If they’re going to be here for life, really, it’s going to be because they connect to something and they develop a passion in it.
It may not be what we hired them for in the first place. We’re totally open to that change and I think you’ve got to be open to that change because people even evolve over time and what interests them now may not have interested them a few years ago but it’s so expensive and time and money to have turnover, especially like excessive turnover, that we really invest a lot in our people to expose them to everything and keep them on for the long haul.
[00:38:14] Matt Sonnen: I’m speaking more than I normally do but I’ll give my two cents on recruiters because I’ve had that same evolution in my thinking. I was very anti-recruiter earlier in my career, and “Oh geez, that’s not worth it,” and at some point, you have to, it’s not is the recruiter worth it, it’s is my time worth it? The way you said it, right, is if they’re saving you time, considerable time in calling through all the resumes and going out and actually speaking with people that aren’t necessarily looking for a job, that are employed, you’re missing that with job postings.
They may not be looking at job postings but a recruiter is going to reach out to people that are currently employed in a position similar to what you’re looking for and try to woo them over. All of that in my mind, makes it worth it, and then the one other thing, I think that the RIA industry is very bad at defining roles and responsibilities and I think working with a recruiter to write the job description from the get-go, they’re going to have you lay down on the therapy couch and talk to you about what is it you’re looking for? How do we define this role better?
They’re going to help you figure out exactly what this person should and shouldn’t be doing and then they’re going to, I believe, communicate it better than most to the candidate so that they have a clear definition of what they’re being hired for. A lot of times, we post a job description, somebody accepts and you say, “Well, good luck, I’m too busy to train you but I expect you to understand what you’re supposed to be doing here,” and I just think recruiters add a lot to that whole process.
[00:39:50] Michael Wagner: Somebody once said to me, fees are only an issue in the absence of value.
[00:39:54] Matt Sonnen: Yes. That’s exactly right, so Ben, talk to us about how Heartwood is handling all this HR stuff?
[00:40:03] Ben Gurley: Yes, absolutely. Echoing Michael, we clearly, I think everybody wants to find competent people. I think that the harder thing to solve for and the harder thing to teach is the cultural fit there as well. That is harder to find, I think, and is a little more nebulous in terms of how you define it. I think one of the things that we have really focused on, we always say, let’s just get the right people on the bus and then from there figure out where we go. Certainly, that is at odds with, or not at odds but confirms what you were saying about our industry having a tough time developing a job description. I think that we are guilty of that to some extent.
We clearly are hiring people for a role, like for instance, a client associate. Beyond that, giving them the flexibility to figure out, like Michael is saying, figure out what they enjoy beyond their core responsibilities and letting them pursue those things within the firm. The cultural piece, I think, is really, really key. I think we’re always keeping in mind when we’re hiring, the client experience, and if there isn’t a, someone could be the most competent person in the world, but if there isn’t a cultural fit there and they don’t have the same values that the firm has in terms of client service and down to just like how you speak to a client on the phone, then it’s not going to work out. I think that the cultural piece for us is huge. The competency piece is, we got to have it, but the cultural piece is the next level up, and much harder to find, frankly.
Then from there, our staffing philosophy or strategy is really to give flexibility to people within reason. We have people here who have young families and in are all different stages of life, and not having one set of criteria for every employee that they must follow and working with people through the nuances of their particular personal situation to enable them to work, because if they are a cultural fit and they are good at their jobs, then we want to keep you. We’re willing to have different arrangements across our staff to accommodate that. I think that’s been really big in terms of employee retention and then also comp.
I think that we would rather pay someone above market comp and keep them incentivized and have a real incentive to stay at the firm than trying to get blood from a stone and negotiate a more middle-of-the-road figure. I think that that has served us very well, is investing into people as part of our growth strategy. Because I would say that one of the biggest things we’ve seen from a growth perspective organically is that as we have taken on more people who have got experience in this industry and are typically coming with a network of both professional relationships but also client relationships, is that that has really fueled a lot of our organic growth in the last 18 months, is bringing on really wonderful people who are known in their communities and them telling that story of why they came to Heartwood, and that has prompted a lot of good conversations with prospective clients.
I think that you can’t divorce– All this is bundled into a firm strategy. Then that’s where I go back to that idea that segregating out or creating verticals around operations in marketing and in HR. I think, obviously, you’ve got to do that from how are we going to execute on specific tasks, and who’s going to do those? You’ve got to see it, from a comprehensive perspective in terms of how all these things influence the others, and think about it long term and not get too bogged down in well, “Hey, we’re paying this person above market and we don’t really know what they’re going to do yet.”
Well, you can always make adjustments down the road, but I think getting the right people at your firm and letting them, have the flexibility and the independence and the confidence of the partners here to flourish has been a really important piece of how we’ve steered the firm through the last six years.
[00:44:33] Matt Sonnen: I can’t thank you both enough. I put a little pressure on you in my opening comments. I sold you both as very thoughtful leaders running these growing businesses, but you both nailed it and lived up to my high expectations. Thank you, Ben and Michael, for being here.
[00:44:50] Michael Wagner: Thanks, Matt. I really appreciate it. Thank you, Ben.
[00:44:53] Ben Gurley: Yes, thanks, Matt. Thanks, Michael.
[00:44:56] Matt Sonnen: Well, I’m going to do a quick cheesy plug for the COO Society just because we’ve been talking so much about HR in this episode. We spend a lot of time talking through HR issues on the COO Society platform. You’ve all heard me say many times that I think 75% of a COO’s job is HR. We have courses covering how to write a job description, where to post your job openings, how to properly onboard and train employees. Be sure to check out coosociety.com to learn more. With that, I will say it is a wrap on Episode 45. Thank you, everyone, and we will talk to you soon.