[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 51. We have two members of the COO Society joining us today. Both are running relatively new firms. Paces Ferry will turn five this year, and Flower City Capital will turn seven. I’ve been very impressed how both have been very deliberate in their plans for growth and honing in on their service offerings for clients.
I know we’ll learn a lot from both of them today. First up, joining us from Flower City Capital in Rochester, New York, is Vince Crane. Vince is the COO, CCO, and partner at the firm. I knew the founder of Flower City dating back to my days at Focus Financial, and he introduced me to Vince right about the time he joined the firm in 2018. We’ve known each other for quite a while now. Vince, welcome to The COO Roundtable.
[00:01:12] Vince Crane: Thanks, Matt. I’m excited to be here.
[00:01:15] Matt Sonnen: Great. Alongside Vince today is Zach Morris, Managing Partner and Founder of Paces Ferry. Zach doesn’t hold the COO title, but as you all know, when you are first launching a business, everyone wears a lot of hats, and Zach has taken on the operations responsibilities at the firm, so he’s more than capable of handling our in-the-weeds ops questions today. Welcome to the podcast, Zach.
[00:01:38] Zach Morris: Thanks, Matt. Happy to be here as well.
[00:01:41] Matt Sonnen: Great. Well, Vince, I’ll go to you first. Give us the story of Flower City Capital.
[00:01:46] Vince Crane: Flower City Capital was founded in 2016 in Rochester, New York. Our founder has a background in private equity and investment banking, so after a short stint at a local RIA, he couldn’t find a firm where he was comfortable sending his family, so ended up starting his own. That’s really our founding story, and I think it speaks to what we’re all about and how we do things. The simple thesis at the time was that there was a market for high-quality advice on the Fiduciary model, which we define as deep advisory relationships, a data-driven institutional caliber investments program that’s integrated with a proactive planning process that’s designed to create maximum value for clients.
All of that built on a strong operating platform with a friendly and caring service team. Seven years later, it’s been fun to watch that thesis play out as we’re now a team of five right in that sweet spot as a high-performing ensemble practice, free of institutional conflict and really in charge of our own destiny. We have two lead advisors, an associate advisor/financial planner. We have a dedicated client services manager as well as myself. We currently serve about 120 clients across the country, with about 200 million in regulatory AUM.
Our core client is between 1 million to 10 million. We do have quite a few that are larger than that and quite a few that are smaller than that as well. I would say we value the personal side of things more than specific wealth thresholds. It’s about valuing what we do and being a good fit for our full-court press approach. We’ve gotten to this point 100% organically by always doing the right thing, creating maximum value for clients, and focusing on our capabilities overgrowth for growth’s sake, and we’re planning on being here for another 30 years plus. We know that we’re going to get a lot of shots on goal and the challenge is to never lose sight of why we’re here in the first place.
[00:03:53] Matt Sonnen: That plan to be here in 30 years that we’re going to talk a lot about that you guys have done a lot very deliberately on planning the growth for the next 30 years. We’ll hit on that. Before we do that, Zach, tell us a little bit about Paces Ferry Wealth Advisors.
[00:04:09] Zach Morris: Yes, sure. Paces Ferry Wealth Advisors was started on September 20th, 2018. I give you the exact date because we still celebrate that as our Independence Day. It was the day my co-founder Jeff Diamond and me left JP Morgan to start Paces Ferry Wealth Advisors. We were fortunate enough to transition 90% of our clients to the new firm back then, and today, we manage a little over 300 million in assets depending on the market. Including the two co-founders, we have about six employees, and we provide comprehensive wealth management services for both families, and we have some corporations as well that we manage investments for.
The vision, Matt, is really to continue to build on our current foundation so we’re able to expand the services and resources that our clients have access to, but also be able to provide career growth opportunities to employees and ultimately, evolve into a brand and a firm that provides an experience that both clients and employees are unable to find elsewhere.
[00:05:20] Matt Sonnen: Great, and Vince, I mentioned you joined the firm in 2018. Tell us a little bit about your career path.
[00:05:28] Vince Crane: Yes, I did join in 2018. I actually graduated college in 2016 and wasn’t sure exactly what I wanted to do, so I ended up also at JP Morgan, same as Zach as a business analyst in the investment bank. As an aside, I do think there’s a real opportunity for more student outreach from RIAs that there are alternative career paths within financial services.
[00:05:51] Matt Sonnen: Absolutely.
[00:05:52] Vince Crane: Anyway, at JP Morgan, I had a really great experience and learned a lot doing things that translated really well into the RIA world. Not really planning for that, but this was project management, process improvement, data analysis, things like that, working with different teams all over the bank, and learned a lot. I fortuitously met our founder Mike Rizzolo at a wedding and about a year later I joined FCC in early 2018 when we were both ready. Not sure I knew exactly what I was getting into.
It wasn’t a hard decision to move back home to Rochester with a real opportunity to do something special. At the time, we had something like 20 clients with no office space, and I barely knew what an RIA was, but this was my chance to help people and build a business, not just be one of 300,000 people at a giant bank like JP Morgan. 2018 and 2019 were kind of a blur in the best way. Week one, we had a second lead advisor join, which effectively doubled the firm, and I had to learn very quickly how to onboard all those clients.
We then had to outfit an office space with a phone system, document management solution, all the things that are necessary when you go from a solo practice in the front of your house to a real business in an office with double the number of clients. Shortly after that, we completely changed our back-end tech stack with the new reporting and rebalance system as well as consolidating two custodians to one, which was still a massive undertaking even at that size.
Over time, I was able to take over responsibility for more functional areas such as billing and reporting, the day-to-day portfolio management for all our clients, technology, HR compliance, and business management, and certainly considered different career paths within this industry, such as becoming an advisor. Even earned my CFA charter for a potential investment specialization, but I really found my home in the operations world.
Now that we’re a team of five, I still wear a lot of hats, we all do, but my role as the operations and business partner is to be a force multiplier for the team. For example, given this difficult market environment, we’re reorienting resources and refocusing on investments, or sometimes that may mean jumping in and assisting with a flurry of onboardings, and more broadly, it’s my responsibility, of course, with the other partners to make sure day in and day out, we’re living up to what we set out to do and really lead the charge in making the firm better through strategic projects.
[00:08:24] Matt Sonnen: Well, I hope you do say, “Jeez, I wish I had COO Society in 2018.” Because that’s really what we’ve designed it for. Is that maybe not the very first hire like you were, but someone in that first operations role that’s saying, “Jeez, I got to build everything here. What do I need to do? How do I need to do it?” Then with our monthly calls giving you the opportunity to reach out to other people in similar positions at RIAs and ask questions of hey, I’m implementing CRM for the first time, or I’m going to change this system, or whatever. Hopefully, that’s been helpful to you, but I hope you’re saying, “Jeez, I wish I had this during that growth period.”
[00:09:04] Vince Crane: Absolutely. I think that would have been tremendously helpful, and it still is helpful to have that network. I remember in 2018 going to Schwab Impact that first year and just was totally eye-opening for me, like, oh, there are still advisors who sell A shares and do all these other things. It was really eye-opening to learn about the industry. But I think COO society would have been great then and still is for that.
[00:09:27] Matt Sonnen: Well, thank you. Yes, great. Well, Zach, you mentioned JP Morgan ahead of Paces Ferry, but tell us about your career journey.
[00:09:36] Zach Morris: Yes, sure. My career started, I graduated in 2006 and did a short stand at a community bank, followed by a sort of find-yourself travel around the world for six months, where I went backpacking in South America and the Middle East, which I could do a whole hour on if you want to at some point, but I won’t go there today. Then I was in healthcare for about three years. My career in this business started in 2011 when I joined forces with Jeff Diamond at JP Morgan.
I started off by, I believe, like most financial advisors in the business and working 12 to 14-hour days, doing a lot of cold calling at the beginning. Really, we grew the practice at JP Morgan for several years. Around 2017 or so, we decided we really didn’t have the autonomy we needed to shape the client experience to what we wanted it to be. We decided to start looking around for another home for our business.
We didn’t know what independence was at the time. We looked at all the big firms, Merrill, Morgan Stanley, Raymond James, UBS got proposals from a lot of them and offers and they even did some home office visits. It wasn’t until we had a conversation with a gentleman from TD Ameritrade, he was a TD Ameritrade rep that we took on a whim. We said this guy wants to talk to us about being an independent advisor and laughed at the whole idea because we had no idea what it was at the time.
When we met with him and he was telling us all of these things we had frustrations with were things that are actually handled by the custodian. Not only did we not work for the custodian, but they worked for us. We started to look into this, and it actually started to make sense and seemed very possible to start a firm and make the leap to independence. We really liked the idea of being able to hold ourselves out as a fiduciary and act in a fiduciary capacity and drop our theory seven and be a fee-based advisor.
That was all very attractive to us. Matt, similar to you when you started Luminous, I was the one that was tasked with laying the groundwork for starting the business. It would’ve definitely been very helpful if we had COO Society at the time. I was relying on RIABiz and some other articles, wealth management, certainly had a conversation with you at some point about a potential assistance and a breakaway.
Really starting with a blank canvas of what technology do we need? How is this all going to piece together? What technology plays well with our custodian and how are we going to get our financial planning, our risk analysis software, and our performance reporting all to be on one client portal? It was really one step forward and two steps back to figure out how everything was going to work.
It took about a year to make it happen. In September of 2018, we set our date and made the launch. Actually, the week before we left JP Morgan, the week before we were about to launch, I found out that me and my wife were going to have our first child. It added a little bit more risk to the move, but everything worked out great.
[00:13:27] Matt Sonnen: It’s so funny, I just thought of this. I still have PTSD from those early days. My God, it’s 15 years ago since starting Luminous, literally this weekend and why it was on a weekend not even a weekday, I woke up Saturday morning and I said to Reese, “I had a dream about David Hou at Luminous Capital. He was screaming at me about the systems we were choosing. [laughs] Literally, this week, 15 years later. I still have PTSD from those early days, so I can definitely relate to what– And Vince, Vince told a similar story too but what you went through very recently.
[00:14:00] Zach Morris: Sure.
[00:14:01] Matt Sonnen: Yes. Well, I’ll stick with you, Zach. With the founding of the firm in 2018, how have you approached hiring? How have you determined what role or roles were the next hire to make?
[00:14:13] Zach Morris: Right. Well, two advisors coming out of a warehouse, what do we know about opening an account? In our first 90 days, we had to open about 450 of them. Our first hire naturally was a client service associate. That hire was a funny process because in talking to people, they said, okay, so you are starting a business, but you don’t have any clients yet and we’d have to explain to them, well, we have the clients, they’re just not there yet. Some people just couldn’t wrap their heads around it and it might have been a little too much risk for them to leave their jobs. I thought it was a great opportunity for anybody, but we really had to find the right person.
We eventually found somebody to be our client service associate who really wanted to be an advisor. We said that, once we got off the ground, we’d make them an associate advisor. When that happened, we had to hire another client service associate. I would say early on, our hiring was really based on need, sometimes even reactively. More recently we’ve shifted to a philosophy of really hiring to invest in the infrastructure of the company. Hiring ahead of need we feel is going to allow us to use the appropriate amount of time to train individuals so they’re ready to take on more responsibility when that time comes.
[00:15:46] Matt Sonnen: Great. Well, Vince, with your very deliberate strategy around growth, how have you approached talent management and hiring?
[00:15:54] Vince Crane: Well, ultimately, we care deeply about the outcome and the quality of our services. Whichever growth path we go down, that will really be the governor that’s driving the talent management strategy. We learned a number of important lessons along the way and we’re fortunate to have found the right people at the right time, largely through our relationships and networks.
I’m very proud of our team today but there were times had we been a bit more diligent in tracking our KPIs, we would’ve seen them flashing yellow for the most parts supporting the fact that everybody was over capacity. It’s fair to say we’ve grown just about as fast as we possibly could have and we’re able to hire at the right times to keep that going. We’ve become much more intentional about playing that chess match with detailed projections so we can make better decisions on who it is we need to hire and when.
That includes simple efficiency KPIs like AUM and revenue current client margins and other big data points. It seems weird to say but if our margin is too high that might mean we’re running lean and it’s time to hire somebody if we want to take on that next client. We also pay close attention to the client service queue to gauge capacity. If a money movement or an onboarding takes longer than it should, that’s a pretty good indicator.
When we’re running those projections, we have identified a few different growth paths forward and each one would mean a different team structure and talent strategy. Growing with our current clients is the preferred method. It’s the highest quality growth for obvious reasons. Then, of course, we’d like to organically add new ideal clients.
Another option is to add a third lead advisor. Frankly, for a number of reasons, there’s a pretty high bar to find to that person after multiple years of informal coffees and beers and even a more dedicated effort with recruiters, we still haven’t been successful in that search. It’s a tough environment to make a big change like that if you do have clients. I do think we’ll find a handful of those advisors over the long term but it’s much harder in terms of recruiting. One answer to that has been building an analyst training program with a clear path to becoming an advisor that just takes more time and effort over a long period of time.
Putting that work in now means that future growth is there down the road. We have a great team foundation of generalists and now we can just be really more deliberate in adding those specialists along the way, depending on which growth path we take. I’ll also say in organic, M&A is not really a core part of our strategy. It’s obviously a difficult market to be a buyer. We’ll continue to keep those feelers out there and are certainly open to opportunities but we’re just going to be really extremely selective looking for the right people and the right clients.
[00:18:39] Matt Sonnen: Well, once you have these folks on board, I’m curious what you both have done to shape the culture of the firm. Zach, I’ll let you answer this one first.
[00:18:49] Zach Morris: Okay. I would say that then the number one thing in our culture is really first service and client experience. It seems silly that it’s something that needs to be said but I feel like there’s a lot of firms out there that don’t really focus on service and don’t put the client experience first. One example I’ll give you is that everybody at the company has a piece of paper on their monitors and it’s got 10 different points that are just really service reminders. One of them that I really like says, never allow clients to do something for themselves that you could do for them.
It’s just a constant reminder that we’re in the service business and that we need to remember that every minute of every day. We treat everyone’s needs the same. We treat every problem like it’s our own. We also have very frequent communication with our clients, quarterly if not monthly for some clients, especially when we bring them on. We have a pretty strict regimen of talking to them on a monthly basis for implementation for at least for six months. Another big part of our culture is really a growth mindset.
I say that as, of course, we want the firm to grow. That’s going to be able to provide more services and resources to clients, but it’s also going to provide more career path opportunities for employees. We think that’s very important and something that we’ve really tried to build out more recently. We hired Herbers and Co recently in order to help us with building out these career paths. We’ve done this for both the client service department as well as the advisory career path.
The other part of our culture is really a learning culture, so everybody here is always learning, always looking for opportunities to learn and teach for that matter. I do training once a week on everything from 529 plans to complex trust structures or taxation of various executive comp plans. We also support and encourage professional development. Just this week I have my client service manager who’s in a full-week immersion project management leadership development program.
Our associate advisor over the holidays took a break from studying for his level three CFA in order to get a student loan certification so that we could help clients and clients’ children analyze their student loans and potentially lower their payments. I have a client service associate who’s getting his master’s in financial planning right now. Learning is certainly a very big part of our culture.
[00:21:39] Matt Sonnen: I love the reminders on the client service side. I love those 10 bullets that you have on everybody’s desk. That’s fantastic.
[00:21:48] Zach Morris: It is something that we take seriously, and I’ll share you all 10 points sometime if you’re interested.
[00:21:56] Matt Sonnen: Absolutely. Perfect, thanks. Vince, I’ll ask you, how have you approached the all-important concept of culture at your firm?
[00:22:05] Vince Crane: I think Zach hit on so many good points there. Strategically, we believe that the firm with the best people is probably going to win over in the long term. Naturally, a core part of our strategy is to be that workplace where the best people want to be. I think of culture as a key part of how we execute on that. It starts with our values of always doing the right things for clients. It’s easy to say that, but I think the little things really count.
For example, making clients whole through fee reimbursements, even if something wasn’t necessarily our fault or spending time with a family member of our clients who isn’t a client themselves after relative had passed, I think those things really add up and make a difference. It’s important to all be on that same page, but on a smaller team, every single person has a huge impact on the culture. We’re very protective of it and it also takes a lot of intentionality and care. At a foundation level, it’s so many things.
Building a thoughtful compensation and benefits plan developing a comfortable and flexible work environment, hosting team, building events and challenging each other to always get better personally and professionally. I think it makes a big difference if everybody understands their role and our strategy and sees the impact of their work in our clients’ lives and moving the business forward. Zach mentioned career paths. That’s a big part of our growth strategy to build advisors instead of hiring them. Also, is an important part of attracting talent for all roles at the firm. The way we envision that is a two-year analyst program where you’re going to learn a lot and have exposure to all aspects of the firm.
You’re going to do paperwork; you’re going to do portfolio analyses and financial planning. Then after two years, there are different paths, whether that’s becoming an associate advisor and then elite advisor or an ops specialization into technology or compliance. Maybe it’s an investment analyst or portfolio manager. We’re really excited about this program. Even though we’ve only had one person go through it, I think that’s a key part of our future growth and talent strategy. There are also some things about being at a smaller team that make culture more difficult. It’s easy to put our heads down and work hard.
We all have each other’s backs and want to lift each other up at the end of the day, but we are also people and it’s important to let some humanity into the office, especially when we spend so much time together. That just means honest communication, like any other relationship to work through issues and come out stronger over the al the goal is to, of course, make FCC a great place to work, but we think clients can feel the difference too when they walk into our office and know that everybody’s happy and healthy and motivated.
[00:24:42] Matt Sonnen: I love it. That’s great. As I mentioned during the intro, I’ve spoken to both of you for a while now and I’ve been very impressed with your vision and your planning around scalability in the businesses. Many RIAs will say, well, we’re young once we get to whatever that AUM number is, once we get to a certain level of AUM, then we’ll think about making the business scalable. We’re not really a quote real company yet. We’ll deal with that when the time comes.
Both of you have put systems and processes in place from day one. Vince, I’ll go to you first. Talk to us about some of the things you’ve implemented to allow the firm to continue to serve more and more clients without your service level dropping as you’ve added all those clients.
[00:25:24] Vince Crane: I would say building for growth is one thing, but the more important goal for us was more thinking about operations as a real strength. That’s equally valuable as the advice side of the ledger. It’s embedded within everything that we do as a business. All the strategy and vision doesn’t mean much if we can’t execute on it, both for clients and from running the business perspective. We’ve seen what happens when operations aren’t a strength and the simple idea was we’re building this for the next 30 years.
What if we do it right the first time and build a powerful chassis upfront so the business is more valuable and not necessarily dependent on these rainmaking advisors. To get to that point, we did live in the belly of the J curve, I would say, for a year or so in 2018 when our team was expanding and we were reinvesting in technology and people, but it didn’t take long to get to the other side of that. A few examples of that reinvestment in building out the chassis were we reinvested heavily in building a centralized reporting and portfolio management system. On an ongoing basis, we spend a lot of time ensuring clean data, books and records.
This connects with our investment philosophy with consistent model portfolios where all portfolios are managed to the same parameters. That allowed us to trade all client portfolios in a matter of hours in March 2020 when the market was on fire. It means our entire billing and reporting process can be completed within days of quarter end and we have accurate client data and firm data at our fingertips without the need for some serious massaging for timely metrics and reporting, things like that. Another big one is systematizing financial planning wherever we can.
These are things like for my year-end tax processes and always evolving inventory of our planning tools that lyses that we can draw on or even just the consistent meeting prep and post-meeting processes. That’s a tricky one because advisors need discretion, and our clients aren’t robots. That standardization and efficiency actually results in a better client experience and more value created. A more recent example is alternative investments, which are frankly a bit of a nightmare from an operations perspective for so many reasons. Since 2021, those have really added value to client portfolios and hopefully, they will continue to do so.
That’s why we’re currently building our own private fund that’s only open to FCC clients. We’re not doing this as a money-making enterprise. The goal is to make the process easier for everyone and increase accessibility. We’re built to be scalable and I’m confident we could onboard 10 new clients next quarter and nothing would break. As the operations and business partner, I feel great about that. If there are any problems with our growth, it’s not operations trying to keep up, but we always say we’re trying to be better, not bigger, which are not mutually exclusive. There’s this very natural and healthy tension between the two.
An efficient, high-performing team of 12 members in 10 years or so would be a great outcome. That just means we have considerable optionality within the system to weaponize all the work that we’ve done when the time does come to take advantage of the right opportunity.
[00:28:29] Matt Sonnen: Great. Zach, Vince was talking about those reinvestments. Talk to us about some of the investments that you’ve made and the processes you’ve implemented to allow your business to scale.
[00:28:39] Zach Morris: This is something that I’ve thought a lot about and from day one, as you mentioned, Matt, have really focused on making sure that every process that we implement is scalable. I remember asking our client service associates very early on is this process, if we did this five times in one day, where’s the breaking point? Or 10 times in one day, where’s the breaking point? They would laugh and they’d say, we only have one of these requests today. Why do we have to plan for that? I always thought it was very important because we want that fifth request to have the same experience.
Going back to, as Vince mentioned, having good processes also leads to better client experience. It also leads to the ability to train new client service associates and new advisors. If you have three different problems that each have three different solutions, that’s nine different things to train somebody on. If we can just pick out what’s the optimal solution? What’s the optimal path for each one of these problems then it’s much more scalable. It’s much more trainable.
Making sure that whatever process that we had was not proprietary to the person that was doing it, but it was recordable, and it was repeatable, and it was trainable. When we were planning the launch of Paces Ferry Wealth Advisors, coming out of the wire house world, there were a lot of inefficiencies and so I started a wish list of automations that I wanted to be able to implement when we started. I sent this wish list to Salesforce as a possibility for our CRM system and they came back with a proposal that was a small fortune and probably more appropriate for a firm 10 times our size.
What we did was we ended up building out a lot of these automations over time. We used something called Zapier, which allows you to connect one program to another or even have a “if this, then that” relationship within a single program and this allowed me to build out automation such as if it took five steps or 10 steps to do a check deposit, send a text message to the client, put it in a compliance-friendly format and also create a task for the money to be invested.
This could be done in two steps through automation. Same thing with taking a note and creating a cash to raise the request, phone messages, instead of everybody requesting that a phone message be delivered to them in different ways, we are able to create automations so that it just got delivered to them in every way possible. Nobody ever missed a phone message.
One of my favorite automations from early on and we do a lot of video meetings now, so we’re not going to lunch with people as much, but early on I had an automation that I could take a picture of a business card and it would automatically add the person to our newsletter, add them to our CRM system, send them an email, say nice to me through here’s my contact information and it would also send them a LinkedIn request.
Scalability and automation is going to be the way of the future and also a way that advisors in firms are going to be able to compete and really, being able to achieve that bionic advisor where I don’t think that the human tut is going to go away, but I think advisors are going to have to be able to do more with less and be able to provide the optimal client experience. We also implemented Eclipse in 2019/2020 as our trading software, which was a large enhancement to everything that we were doing before. Similar to what Vince mentioned, the ability to trade multiple accounts at once really allows us to be a little nimbler in times like 2020.
[00:32:40] Matt Sonnen: I’m going to jump on my soapbox here for a second and I know I’m preaching to the choir with our audience, but what you guys are both talking about, I get so frustrated when I hear and you hear it often, unfortunately, in our industry, oh, that’s operations, they’re back office. That’s back-office folks. We are more concerned with our client-facing folks, and they may not say it outright, but through their actions, we value the client-facing folks better, but the operations team is the ones that are building the actual client experience that the client-facing folks are going to be executing.
Again, I’m preaching to the choir with our audience, but you want your one hundred and first client to feel the same experience as your first client and you want all of them from one to 101 or 1,001, whatever it is, you want them all to feel they’re your only client. The only way you can do that is through having all of these scalable processes that both of you are talking about. That’s my soapbox for the day, but that leads right into the next question we were going to tackle.
One thing that we’ve talked about in the COO Society, we have an entire course dedicated to it, is the pros and cons of having a centralized back office versus more of a pod structure. I’ve always called it the pod structure, where each advisor has their own dedicated service team. Zach, how have you approached this decision of centralization versus what I call that pod structure?
[00:34:10] Zach Morris: Sure. This is something that I’ve read a lot about, learned a lot about. I would say at this point we are still young, so we haven’t had to make a full decision on which way we’re going to grow into. I do feel every firm and advisor and client service associate team has a gravitational pull to the pod structor and I think without intervention, that’s where everything typically goes, but I feel the centralized client service department allows for some more continuity of the client relationship. If, for instance, a client service associate leaves the firm or moves to a different role or even goes on vacation, I think that the pod structure and when I’m referring to the pod, I know there’s many different ways of looking at it.
I’m thinking more of the totem pod structure of advisor, associate advisor, client service associate and I think it lends itself also to the ability to have more proprietary processes. This person does it this way, this client service associate does it this way. I also feel it doesn’t lend itself to as much career mobility for the client service associate.
If they’re the only person that that advisor’s relying on, then they might feel a little pigeonholed and may not feel as though they can dabble in marketing or maybe they want to explore the possibility of going into operations or even focus more on financial planning and take on more of that role for even other advisors. I say that all with the caveat that I’m sure there’s a happy medium somewhere and probably the answer for us eventually would be some hybrid model.
[00:36:07] Matt Sonnen: Vince, how have you decided to structure the back office at Flower City?
[00:36:13] Vince Crane: It’s funny, I have a very similar thought to on that as Zach. It’s an ongoing conversation, but it’s so fun to think about these things as we look forward. At the moment, it is a moot point for a five-person team. We do have two advisors with their own clients and they collaborate with each other and assist each other’s clients and each of us on the support side is cross-trained as one big service team for all of our clients, which, I think, is actually a real strength, but we will continue to specialize with future hires, putting those right puzzle pieces in place.
That forces the question. My ops team initially wanted to centralize everything for a more consistent, compliant client experience, control, efficiency, all the things, but I think our thinking in this has evolved with our growth strategy, which really comes down to who our ideal client is. The high-level plan is to have fewer deeper relationships and a pod structure is making more and more sense for a lot of reasons. The value proposition is not to be the lowest cost provider or even the most differentiated, it’s about providing the most value to each of our clients, respectively, which needs a more personalized approach.
We think a pod structure is probably the best way to deliver that, at least, for everything on the client-facing side. That’s where I think, like Zach, a hybrid approach is probably where we’re headed in the near term. We are going to be selective on hiring that next advisor, which means building pods consisting of a lead advisor and a service advisor is not only a key part of how we’re going to grow and make things more efficient with the lead advisor being able to focus on the relationship and less on meeting prep, but it’s a better way to deliver that high-touch customized service to high net worth and ultra-high net worth clients, but on the backend, there’s still a lot of room to standardize and centralize all of the processes for that efficiency and consistent client experience.
That might mean two advisory teams of two and then on the support side, we might have two client services, team members, maybe a dedicated portfolio manager, and another analyst potentially that are all working together to support those two advisory teams with the same processes. One challenge though, I think about is how not to develop silos or that shirts and skins mentality, but across pods. I think our answer to that has to come back to culture.
[00:38:33] Matt Sonnen: I think your analysis, it’s what we included in our course as well. The more complicated the end clients are, the more gravitational pull towards that pod structure you need. You need the service team to be very close to that particular client and that complicated household. Smaller clients, less complex clients that can be centralized, but when you get into the ultra-high net worth area and a potential household could have 40, 50 account numbers, you need that pod structure where the people servicing it, trading in it, et cetera, they’re closer to the client. I think you’re looking at it the same way I do.
[00:39:15] Vince Crane: Absolutely.
[00:39:16] Matt Sonnen: Then that all leads to, you mentioned, so your end client, your ideal client, that’s where we’ll go next. Very much tied to the scalability of the firm is determining what types of clients you’re going to serve and what services you’re going to offer them. Vince, I’m going to stick with you. I think your ideal client has shifted somewhat over the years. Talk to us a little bit about that.
[00:39:36] Vince Crane: Yes, it has. I think so much of our strategy over the last seven years was learning when to say no and what we ultimately arrived at was to stay laser-focused on our core one to 10, two to $10 million client, because that’s what we do best. It allows us to tailor all aspects of the business and the value chain to those clients. Early on, we were involved in a number of CFO consulting arrangements. They provided stable monthly cash flow when we were in that J curve.
They made us better practitioners. We were also advisors to a number of 401K plans, and for a time debated investing in growing that segment with the specialized software and ERISA expertise and all the things that go into it. Both of those led to great relationships with business owners on the high-net-worth side. We truly believe, especially on the 401K side, the best thing we can do in that situation is to design a clean plan and lower the fees as much as possible, which is a very different business model than what we do.
Within the core high net worth offering, we’ve generally as skewed niching, even though that’s the prevailing wisdom on how to compete as a young advisory business. If you’re a great family that we enjoy working with and need help with planning and investments, that’s where we shine and we like having a diversified client base because we want to help more people and we believe it makes us stronger. Even though we don’t have specific niches, the clients do generally align and do a few different profiles. A typical FCC client is near or around the peak of their career, looking for someone they can trust when things get complicated across all aspects of planning and investments.
We also love working with retirees whose plans are largely on the rails and really value more the advice and the operational execution. Lastly, a lot of people call them Henry’s, that’s what we call them high earners not rich yet. These clients are accumulators, they’re business owners, they’re executives who we want to work with for the next 30 or 40 years and grow our careers together, even if they don’t have a million dollars right now. They also reduce our average client age to about 50 and ensure we have that embedded future growth over the next however many years.
That’s really our sweet spot. It doesn’t mean we couldn’t help in more of a family office capacity or work with someone who’s saved 300,000 for example, but they are different business models. Even after all that, they’re hard conversations. We recently did just a simple website upgrade, some simple marketing efforts, and we’ve been generating cold leads for people who have never heard of us before consistently, and it’s fantastic, but they’re not necessarily great fits with everything I just mentioned.
We try to stay nimble and adapt in all aspects of the business. I think that’s really the consistent theme for all the things we’ve talked about where we’re excited for the future, but it all comes back to taking great care of our core clients and always getting better.
[00:42:33] Matt Sonnen: Well said. Yes. Zach, how have you thought about Paces Ferry’s ideal client and the service offering that you want to deliver to those clients?
[00:42:42] Zach Morris: A similar event. I think every RIA goes through a process where they fine-tune their ideal client over time and we’re no different. Dating back to our early days at JP Morgan, we met with a lot of different people in a lot of different stages in life. What we found was that the people that ended up working with us and really ended up finding the value in what we did, were in this late-stage accumulation or distribution phase. The services we’re providing were really comprehensive retirement planning, consulting on social security strategies, business exit planning, sometimes even guidance around simple to complex estate planning.
Even sometimes going with them to their estate attorney’s office sign as a witness on their wills. These types of things don’t necessarily lend themselves to or are as attractive to maybe a Henry. Our typical client is somewhere between the age of 50 and 70 in the late-stage accumulation or distribution phases of their lives. While the principles that we utilize are good for people in a wide range of net worth are sweet spot, typically ends up being around 1 to 10, 2 to 10 million as Vince had mentioned. Also, we have a handful of ultra-high net worth as well as some people with a couple hundred thousand.
As I mentioned, our client service culture is that we’re really trying to provide the same level of service to every client no matter what their net worth is. We also have another set of services that we provide to executives at any age so they could be in their early 30s to late 60s, but really, they have more of a complex wealth scenario where maybe they’re getting executive comp, restricted stock instead of stock options, non-qualified stock options. They really lean on us for advice along with the retirement planning but also the advice on execution strategies and coordinating with their CPA to help minimize taxes as they exit those strategies.
[00:44:56] Matt Sonnen: Fantastic. Vince and Zach, after spending time with you both in our COO Society community, I knew you’d be fantastic guests. I think our listeners have learned a lot from both of you today and how you’re growing the business. Thank you so much for taking the time to be with us today.
[00:45:13] Zach Morris: Great. Thanks, Matt. Thanks for having us.
[00:45:15] Vince Crane: This is great. Thank you, Matt.
[00:45:17] Matt Sonnen: Awesome. That is a wrap on episode 51. We will talk to everybody soon.