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Hosted by Financial Advisor Coach, Ray Sclafani, "Building The Billion Dollar Business" is the ultimate podcast for financial advisors seeking to elevate their practice. Each episode features deep dives into actionable advice and exclusive interviews with top professionals in the financial services industry. Tune in to unlock your potential and build a successful, enduring financial advisory practice.
RaySclafani (00:01.656)
Today, we're exploring the evolution of advisory teams and maybe even staging a little French Revolution of our own. Think about this. The French Revolution wasn't just about overthrowing a monarchy. It was about resetting power, rethinking structure, and redefining what leadership looked like. In many ways, the same dynamic is playing out inside financial advisory firms right now. Founders...
who once led from the front are being challenged, sometimes quietly, sometimes loudly, by the next generation asking, is it our turn yet? Joining me to unpack this shift and much more is my good friend, Matt Barthel, Editorial Director at Barron's and one of the sharpest minds tracking the evolution of our industry. Together, we're gonna explore and dive into five big ideas and we're gonna try to do all of this in under 30 minutes. First,
What's your team's value proposition? It isn't the finish line, it's the starting gate. Where true growth lives in a world where referrals alone might not cut it, how to scale smart, especially when &A tempts you with shortcuts, what it means to truly let go and make room for rising talent, and finally, why the most powerful advantage today might just be being more human.
Let's get into it. Matt, I'm so glad to be here with you today.
Matt Barthel (01:31.708)
Great to be here with you too, Ray. Nice to see you. What's going on?
RaySclafani (01:34.828)
Nice to see you too. Yeah, all kinds of good stuff. So, okay, here we are. Let's talk about Teams value proposition first and foremost. I know you're not hugely a big fan of the title, neither am I, but it seems to be what everybody knows.
Matt Barthel (01:46.992)
It feels like if you say value proposition, people just turn their brains off because it sounds business school-y or something, right? And I agree, but I can't find a better term for it. We were just talking before whether we can find a better term for it that steps off to the side of the buzzwordy, but it's truly the place where everything starts. just to set expectations about where I am and what I said.
I do the Barron's rankings all the time and I have all this exposure to some of the top teams in the country. So I talk to them all day long. The best of them do a really good job of knowing what separates them from the sea of sameness out there, what differentiates them. And I have heard many advisors, in fact, I was just presenting to a group of Wells Fargo advisors at the New York Stock Exchange the other day.
And in conversation before, many of them were saying, well, I have this team, and now I'm trying to find the value proposition. And I get it, but it's almost like, as you said in the intro there, the starting point kind of has to be, what makes you special? What are you doing? What are the things that you are really, really focused on doing and providing to your clients? And then you work backwards there into the structure of your team.
into the roles and responsibilities that you're going to have there. How you're going to compensate people. Everything flows from what are you trying to accomplish, right? Are you seeing that in your coaching stuff? Yeah.
RaySclafani (03:12.398)
And what kind of talent are you hiring? 100 % I'm saying two things emerge on this value creation or value proposition. And one is that teams are expanding services that they're getting really smart about asking clients, what do you need and want? And it isn't just investment management. That's table stakes. isn't financial planning table stakes that what they're really finding out is that clients want someone to help make all of this easy, that it's getting more complex.
you know, the taxes, how do we mitigate taxes and what's the right time to sequence social security and what is the financial planning look like for a state tax and trust combined, you know? And so I think this expansion of services, advisors are telling me all the time that they're hearing more and more from their clients that if they don't expand services and look more like a family office, that they're just going to go elsewhere. And so that's one. The second thing I'm hearing pretty consistently
is that this notion of value creation's got to get more specialized. What I'm seeing among the best in our business is they're honing in their value proposition to say, we're going to be really expert at working with Fortune 500 corporate executives with concentrated stock positions, and we're going to know more about their stock option plan than like anybody else. And that's a differentiator. That's not the focus everywhere, all rich people as a target market kind of strategy.
There's a woman we work with and coach a team and have on and off for years Suddenly single women that have lost a spouse with brain cancer Like you would think there's five people in the country like that. Unfortunately, there's not there's quite a few So she's become an expert in working in that space So anyway, that's those are two big trends. I'm hearing around this value creation piece
Matt Barthel (05:01.17)
So I couldn't agree more. And I was going to say, you already did it. You did a great job of it. maybe Fortune 500 executives might be too broad. It might be like aerospace executives, right? And now you know everything about tax deductions that aerospace executives can take when they, I don't know what aerospace executives do, but exactly what you were talking about, really honing in on it. And that ends up being its own referral.
RaySclafani (05:10.464)
Almost too broad, right?
Matt Barthel (05:28.07)
mechanism, I think, or referral engine, right? Because, right, and this segues into the growth thing that we wanted to talk about here, right? Where is growth going to be found? think, you know, organic growth both in the RAA market and at the wirehouses is really, really, really tough sledding these days.
RaySclafani (05:30.51)
Yeah, because the branding is so strong, right?
RaySclafani (05:50.422)
And what do mean by that? What?
Matt Barthel (05:52.666)
So I've heard in various places that there basically is no organic growth in most of those places, that almost all the growth in the RAA space is &A based, or is people retiring and other people acquiring those practices. And then on the wirehouse side,
the stock plan businesses are generating huge amounts of referrals for a slice of wirehouse people, but that is a really, really large portion of what's happening and everybody else is having a real tough time. Part of it, I think, it's just harder to get your message through so much noise. So the more that you're able to figure out what you do,
RaySclafani (06:23.276)
very select group. That's right.
Matt Barthel (06:46.224)
and have that resonate with a group of people and then it creates a community that becomes something you're part of essentially, you're a hub of that community. That's one of the things that think that really generates that growth. mean, what are you seeing as growth strategies in your coaching clients? Yeah, please.
RaySclafani (06:58.158)
So, yeah, well, let me just amplify the message that you're sending here, especially in the RIA space. So there are some estimates. Saruli, I Tiburon study some 70 % of returns among the RIA channel have come vis-a-vis the capital markets. In a fee on AUM world where the long-term trend on equities is to increase, that fee on assets is actually a driver of growth
growth for so many firms, it masks that emperor has no clothes. It's like, whoa, hang on a second. So that's, think, an important point to draw out, that there are firms, and you may see it in the rankings, we've seen a massive expansion in terms of assets and growth. Two thirds of that growth, for those that are growing, comes vis-a-vis clients adding new assets.
expanding services for existing client two-thirds organic from existing clients and one-third new clients coming vis-a-vis a referral from one of the existing clients and that's about 70 to 90 percent depending upon the size of the firm so what what I'm saying is that organic growth both wallet share expansion and new clients is really limited to a very small group
of private wealth advisors in the US.
Matt Barthel (08:25.778)
To your point about that small group, we just published our top 250 private wealth teams ranking, which is essentially the biggest and best warehouse teams. That published officially on Monday yesterday. the growth among the top 50 teams on that 250 list is just absolutely mind blowing. So in 2020, at the beginning of the pandemic, when we published
ranking, which had nothing to do with the pandemic. The top 50 had total assets under management. The top 50 warehouse teams of 328 billion. That's a pretty big number. That number this year among the top 50 on this top 250 list is $1.1 trillion. So 242 % growth in over five years. If you look at the
RaySclafani (09:05.742)
It's a big number.
RaySclafani (09:18.062)
It's exponential.
Matt Barthel (09:23.626)
You know, those are impossibly elite teams and you fall off a cliff pretty quickly. I mean, even the teams that are number 50 to 250 on that list, those are still impossibly elite teams. But the growth is nowhere near that spot or nowhere near that percentage. It's still healthy. But as you said, the tailwinds in the markets have helped a lot of that stuff. I mean, that's starting to wane now. But you know, that
It is more, the growth in that cohort from 50 to 250 is more in line with some growth on top of what's coming from, has come from the markets over these years. So very small sliver of teams that are growing at a really fast rate. And, you know, this segs well into, you know, this, this topic that we were talking about of scale, like what, what does it mean? What does it provide? How much is,
growing just for growth sake, which happens sometimes, and how much of it is growing with purpose to try to achieve something that's gonna be good for your clients and give you an opportunity to do something that hasn't been done before or can't be done in the market, right? So that's what these top 50 teams are doing. They are creating breadth of services and depth of services that are basically firms within firms at Morgan Stanley, UBS, Wells Fargo, Merrill Lynch.
And the layers of generations that are working on these teams and the layers of services that come together into a cohesive whole that supports this value proposition that we were talking about is, it's just pretty impressive, right? And it is the beacon, I think, that we can hold up. Not every one of these teams is something you'd want to emulate. Every advisor would want to emulate. But the thing they are doing really well
and it's bearing itself out in the way they're growing is they are figuring out what makes them special and what their value proposition is. they're putting that first and foremost in front of people they might be trying to bring in as clients.
RaySclafani (11:31.982)
And that's what we're seeing as well, which is a true alignment of focusing on client first. Who is it that you want to serve in the future? Who is that ideal client? And then backfilling into, well, then how do we scale the services, the team, all of our workflow and processes, and our real value proposition for those type of clients? I'm pretty optimistic. Although most of the data
suggests that the overwhelming majority of advisors are not growing. I happen to be pretty optimistic, maybe because we're coaching many of the high performers and that's where Barron's and ClientWise aligns is elevating the standard of excellence and quality of care that advisors are providing clients. I'm actually seeing the best in the business invest in more focusing on the future, like three to five years out, knowing this great wealth transfer coming, knowing that
a large majority of the wealth transfer will be inherited by a woman, understanding that that the expansion of services and facilitation is what these clients are looking for. I'm seeing teams start to build scale and and sharpening their talent toolbox by attracting the right kind of people that want to serve the future client like they're they're gearing up like what a women want and what is what are these retirees want?
what are more affluent clients seeking and not just in the wirehouses, but even in the independent and RIA channels. I'm seeing pretty smart private equity come in and say, hey, you got to put a finer point on who are we built to serve and what are the services and strategy? It's one of the benefits that I see happening in the RIA space, especially with &A is smart money is now providing some professionalism and some guidance.
that we're not just going to rely on the capital markets, we're actually going to really grow this thing. And you can see it in firms like Merit Financial and Peter Maluk's Creative Planning and Jeff Deco's firm in Wealth Enhancement Group and Lido, Beacon Point here. I was talking with a leader at Beacon Point recently. So I am seeing evidences of that scaling smart for firms that want to grow organically. It's just not as
RaySclafani (13:53.378)
broad yet in the industry, but I think that's coming. Am I too optimistic about that, Matt, or do you see that transforming a bit with this wealth transfer?
Matt Barthel (14:00.018)
Well, so one of the issues there, and this is a of a generational thing going on, is that I don't think, I'm not overstating things. I was gonna say, maybe I'm just overstating things based on anecdotes, but I don't think I am here. In general, the founder generation, who are, say, my age, I'm 59, 60, 62, 63 years old, the people who built these teams from scratch, genuine bootstraps.
calling, finding clients, no blueprint for what the team should look like. And they're here in this glorious place where they built these things, right? They're at this place now where they're looking to the team and saying, it's in a place where now I have to be a CEO of something and maybe I didn't sign up to be a CEO, I'm an advisor. And also I am probably a person who's very good at growing, at growing organically, at finding clients and all that stuff.
So here's where the generational thing comes in. And I'd be curious to hear what you're hearing on your front too. This is out of the side of the mouths of advisors who are my age. This other generation, they don't want to work too hard. They are very entitled and they work for a year and they want a promotion. They don't know how to sell. They don't know how to prospect. They don't know how to close. I'm the only person who can do that. So I'm going to keep doing that. And I'm going to have this next generation basically be the servicing on my team.
Well, that worked for a while. And now you're at a point where somebody needs to grow. Somebody needs to figure out how to keep the growth going and keep the prospecting going. And it's going to be a different thing for the next generation. And they're not dummies. And they don't not want to work. We all know that. So I get it that it's different. But we can't just say we, meaning people of 59 years old and older, cannot just say,
This is a different generation. They don't want to work that hard. They're too entitled.
RaySclafani (15:57.038)
Yeah, I think that's too broad a stroke. I don't think that's true at all. In fact, I see just the opposite. These young, eager next-gens are like, hey, can I have a little bit of the steering wheel? You know, I want to learn to drive. I don't need to be CEO by Friday. But the thing about leadership development is it's a performative opportunity. Just like the visor mat you're describing. You know, they learn by scratching it out, know, bootstrapping it up and making a lot of mistakes and
What I learned a long time ago is when you talk to these senior professionals have been around 10, 20, 30 years or more, they're the first ones to admit, made a lot of mistakes. In fact, made more mistakes than I got right. And when they really tune into that, they are willing to provide these performative opportunities for next gen who don't have to, by the way, knock on every door or make every cold call. They're, they're, inheritors.
of a pretty successful business in many cases with a brand already established and a client roster that's impressive and a referral stream that's impressive. And they're probably pretty good at meeting the heirs of their clients kids. I will say there's one other thing I do hear quite frequently from the next gen, however, and that is, in fact, I had a young woman.
42 years of age say to me recently, I asked her about her team and the firm she was on. In I was at the Barron's Teams Conference in the hallway. And I said, well, how's it going for you? And she said, it really resonated with me watching you interview the three folks on stage. She said, I hear my advisor who is 62 years of age say almost every year, you know, I plan on retiring in five years.
And it's like every year she says, he says the same thing. And I'm kind of at a point where, you know, the candle has burned to the bottom and I'm either out of here or he's gonna really start handing over the reins and letting go to make room. She says it's me and two others. And that's the French revolution, you know, that I was talking about at the top of this episode.
Matt Barthel (18:13.234)
So this is 100 % happening. I'm very proud of coming up with this French Revolution thing. don't have a good brain for that kind of stuff, but I did come up with this particular thing at our independent conference in March where this is a female-focused thing too. There's women who have been in the industry for 15 years, 10, 15 years. They're 38, they're 42. Maybe they had kids, maybe they don't, but they're
they're at a stage of life where they're ready to be shot out of a cannon and go 25 years now and kill it. And they've been told that the thing is going to be handed down to them, right? That the practice is gonna basically come to them. And it's not, as you said, that those retirement dates are pushing out. And I get it, we all get it. This is a founder saying like, this is mine, mine, mine, it's my baby, and I can't take my baby and hand it over. But you have to, and you have to figure out how to let go and then let somebody else
Do a transition where the person you're handing it off to is going to do it differently than you're doing it because they're different people and it's a different time, but how do you manage that? And that to me is sort of the nuts and bolts of the succession planning. I know you're so good at talking about what to do and how to structure it, but the real thing is sort of like the emotion attached to it and how that...
the emotional and the, is my baby and the inability to kind of let go of it, which is totally understandable again, can kind of stump the nuts and bolts of what have to happen. Do you see that?
RaySclafani (19:48.366)
Totally. But I think you got to pull the heartstrings. Every top advisor that I've ever talked to, and I feel so blessed to have been working in this industry for so long, the ripple effect these top advisors have with their clients and their communities is exponential. when I ask advisors who are in their 60s, it's like a rhetorical question, but like, do you really care about your client? Do you care about how they're going to be served in the future?
And in most cases, you know, they'll tell you and I'm sure you hear it all day long. It's like, I care about my clients and I've I've either explicitly or implicitly implied that I'll be there with them through life transition. And now they want their kids served and they want, you know, a deeper relationship with multiple members in their family and their spouse. And and so these advisors who really tune into sort of the heartstrings of the business.
and these families that they deeply care for, if they've done a good job at attracting talent, the question is how do you go about evaluating the talent that you have on the team? And if you don't have it, how do you attract it? And then ultimately, as a steward of this great business that you've built, how do you successfully start to transfer some of the responsibilities in running this business more so?
you see when you do the rankings, those top 1200 firms ranked nationally, the best of those businesses have the next gen that are making decisions. They're making P &L decisions, they're investing capital, they're thinking about marketing differently, they're connecting with the families differently, they're expanding services, they're recognizing that technology is moving at a rapid pace and that they've got to keep up with the dynamic.
ever ever changing dynamics in this industry. And so that whole notion of letting go to grow is key. But there's something else in here, Matt, that I'm I'm watching closely. I had an RBC advisor in Florida call me really upset one day. I'd known him for many, many years and we'd coached his team prior. He did a really good job at building out his team and was in a pole position when it comes to the fact that his clients got to know the other team members.
RaySclafani (22:11.682)
There was a great degree of trust that was built. He called me and he was really sad and I couldn't quite figure it out. I'm like, man, you made all the right moves. You got the right team. The clients trust those next generation. They see him as advisors, not service people. Cause in his case, he had taken a couple of the support people and they had gotten their CFP. They started sitting second chair in these meetings. They started advising the clients and what he had done successfully was help transfer the trust.
where the client saw that service person elevate and become a real advisor, not just a support person. I thought that was pretty powerful. I said, why are sad? And his response was remarkable. He says, Ray, I don't have anywhere to go. My wife told me not to come home. I can't play golf five days a week. And so, Matt, I'm watching pretty closely. There's a whole movement of advisors in our industry that are looking for the next stage of what purpose is going to be.
where they can make a difference. And so I encouraged him to start to ask his clients who had big philanthropic sort of mindset and had a good giving strategy in place and donor advised fun and what they were doing with their time. And it was interesting, he has now got a community of about five clients that he's now doing some mentoring of young kids at the Boys and Girls Club. And he's getting involved in a couple of charities where they're building houses in Mexico.
you know, for underprivileged families. so he's slowly but surely kind of coming around to, you know, like what's next for him. But I'm surprised how many advisors haven't spent the time to think about like, what's next?
Matt Barthel (23:52.882)
I agree, and the answer is, this is all I've ever known, is going 100 miles an hour, straightforward, building things. They're builders, and that's what they've done, right? So I get it on the one hand. But one of the things that I'm seeing more and more, this has just developed in the last two or three years, is I think many of the founding advisors are getting better, many of the people we talk to in the rankings, at saying, I'm going to stick around.
But I am going to let go of the reins. So the wisdom that somebody brings, you know, I'll drop a name like Marvin McIntyre at Morgan Stanley, who's in his 80s now. has AJ Fector as, you know, a partner in the, who's younger in his 50s. They manage their succession so well and so gradually over time. Marvin's still around. He's still in the office. He's doing, he does a lot of work, but now he's doing
What's pleasurable for him to see his grandkids and play golf and do all that stuff. But he's still very much connected to the clients that are near and dear to him that he wants cared for. And also he's there tutoring everybody saying, here's a good way to go. He's bringing value without having to work 100 hours a week or something.
RaySclafani (25:03.342)
That's great.
RaySclafani (25:10.712)
Well, and that's really key, I think the wisdom you see enough of these capital market swings and, you know, navigating clients through volatility and life transitions. I had an advisor in Dallas here. He he I always ask advisors like what wisdom can you bring to others? He said, you know, I recently had a conversation with my team about like how to attend a wake. And I thought, man, that's kind of creepy, but yeah, right. I get it.
you know, there's there's a you know, understanding how to be available for the family and how to
Matt Barthel (25:42.364)
You can bring my mom into that. My mom's good at that too. Always keep talking and keep smiling is what you do and I've learned it.
RaySclafani (25:44.992)
Is she okay? mean, yeah, but there's crazy wisdom and sitting as a chairman and, you know, in your firm and providing, you being of counsel, you know, to the next gen is really key. Okay. I want to make sure we're smart on our time here. Let's get to this last topic. I think this is important that perhaps the most powerful advantage is being more human in a world where technology is just, you know, if I hear AI one more time,
you know, the SEC hasn't necessarily come out and provided a whole lot of guidance on privacy and data collection and data storage. You know, we're still waiting on it for cyber, let alone on all this new AI. You know, I'm seeing more and more advisors that everybody's recording meetings now and, you know, storing that data and automated workflows and emails. What I'm curious about from your perspective is how do advisors see this Hugh tech sort of coming together and, you know,
Where does the robot not have that emotional intelligence and trust building skill so that the advisor has that advantage, know, sort of a, you know, moving forward over the next few years? What's your line of sight into some of this tech and AI?
Matt Barthel (26:55.314)
One of the thing I wanted to say about AI is, know, we all, everybody takes it as an article of faith that, it's coming, it's gonna be a thing, it's gonna be transformative. And everybody's talking about it as though it's in the future. And we are a couple of speakers at our most recent conference who were like, this is not optional, and this is not like it's gonna happen in 2032. This is gonna be like, you know, in October, it's going to be a big deal, and it's gonna be affecting your practice differently than it is right now.
You need to make this focusing on AI and what it can do for you. What are the opportunities? What are the threats? And incorporating it is just so, so huge and it's impossible. It's so daunting for the rankings themselves. It's like, we're trying to think this through and it's so daunting to rethink everything you're doing. The reason I mentioned the speed with which this will be coming in and is that when that happens, it's going to happen everywhere. And when that happens,
I just changed my bank from Citibank to USAA. I did it because I answered the phone. And sometimes it takes 20 minutes, but when you hang up the phone, everything is done. And it isn't like you're on some decision tree or you're on some AI-generated chatbot or something, and you can't get done what you want to get done. that's a of a dull front and center thing, but it's like...
RaySclafani (27:59.256)
That's crazy, right?
RaySclafani (28:19.33)
No, no, that's not dumb at all. That's real. Yeah, 100%.
Matt Barthel (28:22.576)
the humanity of that and also that there's personality attached to that of people who are trained to interact with you a particular way. And when you hang up the phone, you're like, that organization just did a great job of serving me and getting me what I needed. And I used to be at Citibank for 39 years and I just closed out that relationship because I couldn't get that. I couldn't get anybody on the phone. know, are you, you know, what roles do you think as you're, you know, as you're in your coaching, you know, travels?
What roles do you think are most ripe for promoting this humanity basically in a practice and the connections that can.
RaySclafani (28:59.106)
Yeah, there will be far more advisors that get skilled and trained on active listening, powerful questioning, how to partner with a client to make decisions from a collaborative perspective. You're going to see more and more emotional intelligence training and developing of leaders skills in those areas, because that's where the differentiator is going to lie. That's the humanity aspect of this. And then those advisors, I think that find creative ways to
create faster workflows and operational efficiency and like create an experience that's easier for the client. I use the word facilitation a lot Matt because I think facilitation the root word is facile, which means to make easy. And you know, when you're calling Citibank and we're going to bash Citibank here just for another sec because I exited a Citibank relationship when we moved our corporate offices from New York to Dallas for that same very same reason. I found myself.
you know, press one, press five, press three, press two, and then, you know, leave a message or get a call back and you just couldn't get anybody to help you. And so I think the advisory firms of the future will find ways to make easy and create an experience that's enjoyable and will build trust in that human way with clients and not lose sight of that. And every advisory firm that is deepening relationship with clients,
this is a relationship business. Those would be the firms that I think that'll win bigger in the future.
Matt Barthel (30:26.674)
Couldn't agree more. And I think that, you know, paradoxically, the advent and the rush of AI coming in and automation that's coming in is going to result in more humans on the best teams. You know, I'll just throw out another 2020 to 2025 stat, which is that the average top 50 team in our top 250 was 14 people in 2020, and it's now 34 people.
Now that grew along with the assets that we talked about before, but this isn't a thing where you're looking for fewer people to serve more assets. think the best of these teams are getting more more good at the human things. And that's going to be part of their value proposition going forward and their differentiation. And it's the thing that's going to make them most sticky as, even as we get more efficient, more humanity is going to mean more clients, I think.
RaySclafani (30:55.074)
That's more than a double. Sure.
RaySclafani (31:23.032)
So let's do this again and our next episode together, let's pick a data point and really go deep in a particular topic. What do you say? All right, well, everybody, that's a wrap on today's conversation with Matt Barthel of Barron's. From revolutions in leadership to the redefinition of value, scale and growth, one thing is clear. The most enduring advisory businesses are the ones that evolve with purpose, not pressure. If you're a founder,
Matt Barthel (31:31.344)
I think it's a great idea.
RaySclafani (31:50.964)
Ask yourself after listening to today's episode, what do I need to let go of to grow? And if you're a rising leader, consider how am I preparing to step up with intention, not just ambition? And for all of us, are we building teams that are not only efficient, but deeply human? Thanks for joining us on building the billion dollar business. If you found today's episode valuable, subscribe, share it with your team, leave a five star review.
And if you want to explore how we can help you and your team grow with purpose, check out the links in the show notes. If you've got particular topics that you want to hear from Matt and me for future episodes, just drop us a line at ray at client wise.com or feel free to leave a message in the show notes.