Intro Hook

Unknown: how can you how can you tell if a firm is is going to sell what are the what are the signs it’s incredible what’s gone on in the marketplace over the course of the last 5 to 10 years what are some of the things that a smaller firm could provide that a larger firm can’t as effectively some advisers want something different based upon the Sweat Equity they put in their business they don’t want to be treated like everyone else I always say wholesalers are what are are the priests and the rabbis of this business I don’t think a lot of cial advisers know the amount of money that Asset Management firms need to pay just in order to be on a large independent broker dealer shelf where I mean potentially at a smaller firm you just have so much more accessibility we get this question a lot and advisers should be asking the question but I really want to frame it the right way advisors that have been displaced most advisers are asking that question have been the recipient of being burned or have having their firm sold out from underneath them and to to point the finger and say that smaller firms are more susceptible to this really would really would ignore a lot of the data over the last five years

Podcast Opening + Introductions

Corey: hey everyone thank you so much for hopping on the podcast today uh wh while there’s no arguing that larger independent broker dealers and Ras have some significant advantages out there in the marketplace it’s not a one-size fits-all model for everybody at the same time there’s significant benefits for financial advisers at the smaller and midsize broker dealers and Ras as well and just wanted to talk about that a little bit to get today the goal of this podcast has always been just to give unbias information to advisers at their Pace about the pros and the cons of all types of different business models and options and I thought a great person to bring on the podcast today uh is Jamie McKay he’s the president and COO of Strat Financial Alliance and he was generous enough with his time just to talk about his experience working at a midsize firms and some of the benefits that a financial adviser might want to consider um as they’re looking out there in the marketplace Jamie I really appreciate you hopping on today thanks so much

Jamie: thanks for having me Cory

Corey: yeah absolutely

Background

Corey: So Jamie I’ve known you for for a long time and I think one of the big benefits of of having you on this podast today is you just have a really broad experience in the industry can you just briefly discuss your your background and how it could relate to this conversation

Jamie: sure sure so uh you know it’s hard to believe I I’m coming into my 30th year in the industry um you know I started in I started in the industry in the mid 990s and I started in sales and distribution uh so I was a wholesaler for a long period of time originally starting in New England migrating down to uh the South uh at the U at the turn of the Millennia and um you know for a long time I’d worked with advisers gravitated to working with independent financial advisers and really kind of felt you know found my calling there uh when my kids got a little bit older I decided that I did not want to be traveling quite as much away from home and I decided to look for a different career and so about seven years ago I found a firm that had been in the business at that time for about 13 years and uh I’ve known some of their advisers and it’s kind of funny just like um just like children you can tell a lot about the parents by meeting the children I I knew a lot about this firm uh through its advisors and came and met with the CEO and founder of the firm Clive sloven and the executive team that was there just loved it originally just to do business development that’s where you and I met uh in recruiting advisors in that kind of holistic relationship uh about two years ago I was promoted to Chief Operating Officer as my boss uh is looking to obviously have a succession plan and then last month was promoted to president so it’s it’s been a great opportunity for me to to to manage the relationships of the advisers that that place their faith in the firm and the people that are here um and it is it is not without a a certain amount of of responsibility looking at at how a smaller firm can deliver uh something that’s unique compared to all of the large firms and opportunities that are out there and um you know we kind of do our thing

Corey: I appreciate it Jamie so just a little bit about your background in like in the wholesaling world you kind of covered the gamut right uh wirehouses big Independence smaller Independence and you were working pretty intimately with all of those advisers obviously

Jamie: yeah and and what’s interesting Corey is is you might imagine right right I always say wholesalers are what are are the priests and the rabbis of this business right

Corey: yeah

Jamie: so as as a you know from a recruiting standpoint a wholesaler will hear uh from an advisor very very often if they’re if they’re dissatisfied if they’re looking a lot sooner than a recruiter will so yeah some of my conversations that naturally bled into business development recruiting looking at holistic um having a holistic relationship with with advisers that would serve me forward in my career

Corey: yeah

Jamie: that started definitely in the in the wholesaling years but all CH all channels warehouses Banks regionals and and Independence

Corey: great that’s GNA be super valuable to to to this conversation today

Smaller Firms vs Mega Firms

Corey: so as as we discussed Jim you’ve been in the industry for you know a really long time when we’re going through the process and helping financial advisers um explore their options help understand what else is out there you know a lot of times especially when a financial adviser comes from a larger organiz organization sometimes they feel more comfortable just immediately going to a larger organization just because it’s what they know and as we discussed in the beginning of this call you know there’s obviously some some some strengths and benefits of some larger firms but it’s also our job to help pull financial advisers out of their comfort zone and based on what they’re trying to accomplish help them look at some other firms that maybe they wouldn’t have considered in in the first place and just just for our listeners today with the experience that you’ve had working with larger firms that you have working with strategic Financial Alliance in your opinion what what are some of the things that a smaller firm could provide that a larger firm can’t as effectively

Jamie: so you know look it’s it’s it’s incredible what’s gone on in the marketplace over the course of the last five to 10 years right um the largest firms out there uh as I call them the mega firms now because they’re even Beyond large uh they’ve done a they’ve done a great job of being able to serve the masses but you know just like just like in the example of Walmart right when you get to a certain size you can serve the masses but there are still people that are that are not served that want something different that want a more customized approach so I would tell you um that has been dramatized and more and more advisors are finding right just placed by this so you’ve got the you’ve got the rub you can be a small firm that that has the desire to provide personalized service but doesn’t have enough scale to really be be able to provide the resources and then you have the large firm that can provide a lot of the resources but it really can’t can’t spend any time or slow down to stop and make the personalized experience that so many advisers are looking for so I kind of talk about that not small but smaller firm is kind of in that quote unquote that Goldilocks that just right spot and there’s so many different things that you look at that that are you know I guess I would say resonating with advisor so number one you’ve got the ability to have a personalized relationship with the advisor so um if you look at finra’s definition of firms you’re looking at about 150 or smaller is a small firm 150 to 500 is a medium-sized firm and anything over 500 is is a large firm right so we’re right at that us but SFA Partners which is obviously a broker dealer a corporate ra and a standalone SEC registered ra by the name of strategic blueprint uh we’re at about 150 advisors so right on that cuss um every smaller firm is trying to get larger but that’s the real distinction remember it’s trying to get larger but not trying to get large so you’ve got the ability to have a relationship uh we boast that we know 99% of our advisers by their sound of their voice on the phone um what does that allow that allows for deep partnering the ability to know the advisor’s book of business at the granular level um really see the advisor Vision through their eyes larger firms are great on providing kind of a business model for advisers to follow smaller firms are better to being you know putting their ear to the ground and listening to what the adviser wants to accomplish so I I call that kind of real world constant state of AC Consulting

Corey: yeah you really don’t find that occurring at the larger firms and this bleeds over not only to the compliant standpoint right of advisers being able to proactively ask questions have relationships with their supervisors you know very often we’re not the first firm to say no we’ll we’ll ask the adviser what they’re trying to accomplish and most of the often we’ll be able to say you can’t do that this way but this is the way that you would do it so that active partnership is in clients it’s in the area of sourcing Uh custom investment solutions that a larger firm just wouldn’t have the appetite to to do some of the smaller offerings that a smaller firm could do um and some of it are just embracing the advisor’s vision for this business uh you know Corey I give this an example um gentleman joined us a few years back from New York in fact that that gentleman you had referred um I asked him he had loads of choices coming from LPL why did you end up choosing our firm he said you know what of all the firms I talked to you seem the most interested in what I wanted to do with my business really embraced my idea my vision and that’s the difference right is if a larger firm is embracing their Vision a smaller firm could really be embracing and partnering on the advisor’s vision and and that’s probably the the most distinguishing feature

Strategic Growth vs Growth at All Costs

Corey: so I want to dig into you know each of the things that you just mentioned uh a little bit more granularly but you know every firm wants to grow you mentioned that in in in the beginning of this but you know not every firm wants to grow for the sake of growing I mean there’s some firms out there that will take a $10 million producer a $50,000 trailing 12 production producer a 401k producer a you know annuity only producer there’s some firms out there that want to grow much more strategically they want really nice financial advisors that fit Niche that have a great personality that aren’t super you know high maintenance they want them to be a good cultural fit at the end of the day as well and then on the other side I’m not saying all big firms are like this but you know some larger firms they just grow for the sake of growing I mean they’ll take on pretty much every financial advisor out there and you know you can’t be all things to all people and have a truly you know amazing service experience for your clients it’s just not possible it’s not possible in broker dealer world that’s not possible for financial advisers I mean know imagine if you’re an adviser and you’re taking on every single client that that comes to you regardless of you know fit or investable asset size it’s sure it’s a recipe for not an optimal service experience

Jamie: yeah you can’t you can’t do it I I mean the the the reality is from from a from a smaller from a smaller firm standpoint if you’re going to partner with the advisor um you’re looking for a good big give and take on someone that is going to fit um you are doing probably a little bit more on whether or not they’ll be a cultural fit yeah talking to an adviser last week and not gonna pick on any small any large firm but he said you know this large firm you start by entering all your information onto a website all your financials everything and they’ll actually kind of quote you a deal based upon intrinsic objective things which is fine right but you know what that made me think of Corey um made me think of Carmax right I mean that car a lot of people use CarMax but some people still want the ability to go in and actually talk to someone be like hey you know what I I’ve kept my automobile I’ve kept it wellmaintained they want to be able to get a better more personalized more customized deal so again I I can’t I can’t underscore the fact that there’s nothing wrong with the larger firms or their model they’re doing great just doesn’t serve everybody some advisors want something different based upon the Sweat Equity they put in their business they don’t want to be treated like everyone else 100 per. um so you you were featured in an article the other day that I read that Andy cowall wrote that I I I thought it was kind of the the impetus to have this this this conversation today but just in that article he talked about like four main ways that a smaller broker dealer could potentially come out on top and they were you know compliance support culture um and also just investment availability and if it’s okay with you I just wanted to talk about those main four areas and just maybe some like specific real life examples that an adviser can come from this podcast today just come understanding how a smaller firm could potentially pull out you know ahead there just from a compliance standpoint the fir the first one Jamie

Compliance

Jamie: sure um thank you um so so let’s let’s kind of talk about sequence you know I kind of underscored this before um it’s amazing to me I tell this story a lot there was h a video when I was first interviewing for the job to come to SFA Partners on the video the the head of supervision was on that video saying uh we start with the premise that our advisers are always trying to do what’s in the best interest of their clients and our our job is to help them accomplish that uh that was such a refreshing type of philosophy uh in this industry and that’s something that permeates our organization so if you want to talk from a compliance standpoint it is that idea that the advisor is trying to serve the client um that the that the company itself is align uh you’re not getting Corey you’re not getting a lot of what you hear every single day from advisers that are shunning the the larger firms which is they’re kind of managing to the lowest common denominator I’m caught in the crosshairs on so many different things not because of anything I’m doing but because rules they have to put in place to what you referenced earlier they’re taking you know a $100,000 production advisor and myself as an $800,000 production advisor that has a staff that are doing things the right way we’re having to put rules into effect so that they can manage those people at the bottom and you just don’t see that at smaller firms where as you mentioned before there is kind of this homogeneous group of advisers that are what I call you know of the good to great or the great to excellent model they’re already seasoned advisors most advisers that come to our company had already been at at least one to two other firms it’s kind of it’s kind of funny right is get people that have a financial divorce of that effect uh very very quickly they know what they don’t want in a relationship and so that’s why I would say um you know the difference between a larger firm and a smaller firm they might take newer advisers they might take people um that don’t have a lot of experience in certain things they might take an advisor think about it a lot of advisers that come from the warehouse channel that have never experienced working an independent model um they will gravitate to a to a large firm first so there’s not only the added effect of them making the move but then there’s the culture shock of working as an independent so uh a smaller firm from a compliance standpoint really can lean in have that personal wiseed relationship uh be able to know how the adviser does business so that they’re able to troubleshoot and and really be able to answer questions and serve the adviser far better

Corey: yeah so so I mean from a compliance standpoint I I I try to tell my clients this all the time there’s a humongous difference between what the SEC says you’re allowed to do as an individual financial adviser and what you know a five 10 15,000 person firm interprets that as their legal and compliance team and what they’re comfortable super uh supervising across all of those advisers and typically you know the larger the firm the the more tight those guard rails you know have to come in so I speak with financial advisers all the time and say Corey I just want to be left alone to do what’s right for my clients I’ve never had a ding on my u5 um I do the right thing my clients are happy and I’m just running into compliance things whether it’s from a marketing standpoint maybe they threshold for annuities or insurance or small cap stocks or alternative investment threshold is like way too small and they’re constantly having to ask for compliance even though this is something that their advisers are asking for I mean those are things that I run into where sometimes at a smaller firm when there’s 150 financial advisors and you know each one of those financial advisors by their name How They Run business things could potentially run a lot smoother and not that compliance is lack you just have you just have the confidence in in in in your advisors to you know let the Reign go a little bit

Jamie: it’s not even letting the Reign go a little bit but you know I’ll give you example how do you how do you how do you manage 10,000 plus advisors from a compliance standpoint you have to have parameters rules right you have to be able to follow follow those and those rules have to be pretty immutable right because of you know how many different supervisors that you have to maintain a smaller firm can really have guidelines and those guidelines can provide the supervisor the supervisor the basis to have a conversation but see that’s that’s what’s missing at a lot of other larger firms is in cases of questions our our conversations happening you know on a pick up the phone basis or is someone getting business kick back as a Nigo are they getting a you know what I would call a very impersonal email saying that this has been kicked back because of XYZ is there any conversation dialogue education or or was there enough a relationship that the that the supervisor knew that something was a challenge and reached out so that’s it’s proactive versus reactive uh you know hard cookie cutter rules vers guidelines that’s what you’re going to see

Corey: love it thanks for thanks for providing some color um

Support

Jamie: sure

Corey: what about from a support standpoint um I feel like this is kind of like the same the same answer um but from from a support standpoint you know servicing 150 financial advisors versus 5 10 15,000 I mean what what are some real world examples there that an adviser could take home that would be a benefit aligning with a with a firm like yours

Jamie: so for example right if if a large firm has posed the question where the advisor wants to something from a support standpoint and the firm has never done it before with a with a larger firm that could be know like like moving the Titanic right you have to be able to do the due diligence and really see not is it not is it effective not will it be make difference for that particular advisor but they have to be able to macro that for the entire audience of their advisor so very often at a you know from a larger firm standpoint if it’s a great idea but they don’t believe that they can employ it or it would be you know I guess I would say adopted by the masses then they’d be less inclined to do it versus a smaller firm they don’t have the same litmus test to be able to say unless we can do it for a thousand advisors we’re not going to do it so I’ll give you an example um now this goes back and a lot of firms are doing this now with no issues but you know probably about five years back we weren’t as a firm doing a lot of structured notes it’s not something we’d done didn’t mean that that that our advisers were doing something wrong but being independent our advisors were utilizing other things we had an advisor come to the firm that had used structured notes at their last firm and so immediately said look would you you you know would you do the due diligence on that this is what I’m looking to do and the answer was if it’s good for you and we think it would be good for others whether or not we get immediate adoption or not it’s something that we’ put on the platform and we did and lo and behold guess what that we we now do a substantial amount of structured Notes on The Advisory side as advisers talk um and that kind of leads me into the the last one which was kind of culture um

Culture

Jamie: great example on that so not only does the home office itself have great relationships with the advisers but at a smaller firm there’s a much greater ability for advisor to advisor peer modeling um the way that I talk about it for advisers that are looking at us is I say look our community you’re you’re always going to be in a place either to be able to pick up ideas from somebody that’s a mile down the the road on the path that you’re on or to be able to share ideas with somebody that might be half a mile back from where you’re currently standing and so caring is sharing with a community that’s based upon that you have the ability for advisors to share best practices in a much much greater uh higher velocity way and so I’ll give this as an example um back at the beginning of covid we had that advisor that was you know probably one of our younger advisers in his mid-30s um and he was on the same stage at one of our regional conferences with the the number one producer in the firm and the number one producer they were talking about strategies to what to do for clients um that where you want to offer a certain amount of inin at guaranteee the older more senior seasoned adviser was talking about annuities something that I’m familiar with and how he’s laded annuities and how he’s used utilized annuities and income benefits and death benefits for clients to embed a certain amount of guarantee this younger adviser on the stage talked about structured notes and how he’s utilizing that it was a great great topic and everyone at the conference got a lot from it but the magic that happened and the story that I want to tell is after that the the more senior H advisor reached out to that advisor who happens to be in our backyard in Georgia and asked him if he’d be inclined to fly up to Pennsylvania to meet with his team lo and behold here we are now several years later the number one firm for structured notes in our firm is that office in Pennsylvania so advisors teaching advisors are like kids in school teaching other kids in school they’re going to learn much faster than they learn from the teacher

Corey: that’s great and I know I know just through the due diligence process the the flexibility and the advisers certain needs that advisers have had you you’ve made concessions and have worked through policies to make sure that like something would work for an advisor that would just never happen at a big firm so that’s that’s been something I’ve been very impressed with so so the last the last part that that you were talking about which was in that article was really in the area of investment Solutions product and due diligence and and that really is something a smaller firm that does it well that is put the resources can do to really out blank what a lot of larger firms are just unwilling to do um and that is you know have investment solutions that might serve only one or handful of advisors versus something that you have to approve that will be have massive

Investment Solutions

Jamie: we do a certain percentage in our business overall um as a firm with high net worth retail investors and we have uh done for for many years for the 20 years of the firm’s existence add a a portion in a specialty within the alternative Investments category um we have the ability to look at some um you know some private deals of which the size might only be 10 or20 million of capital raise a large firm it’s not even going to be worth them getting out of bed for that but our advisors that are looking to serve their clients can gain access to something like that here um that’s a differentiator to have quality duil diligence and to have access to products that will give um small independent advisers the ability to compete with um you know the likes of JP Morgan and um and and and Morgan Stanley is a big deal especially for that market of high net worth and ultra high net worth investor

Corey: yeah I mean that that that makes a a ton of sense um I I don’t think a lot of financial advisers know the amount of money that Asset Management firms need to pay just in order to be on a large independent broker dealer shelf where I mean potentially at a smaller firm you just have so much more accessibility so that’s that’s that’s another humongous benefit for sure um so I appreciate all of the the the examples that you gave Jamie um

Will the firm sell

Corey: whenever I hear whenever I talk with a financial adviser about a smaller firm um you know this is more of a more of a hard question especially when they’re coming from a larger organization they’re talking with larger firms if they mention that they’re speaking with a smaller firm it’s you know why would you do that in this world of consolidation that that firm is going to sell in in in in in two years that being said that’s not a blanket statement about all small firms I I I see it every day can you just can can you just dive into that comment

Jamie: thank thank you so much for asking this question right uh we get this question a lot and advisers should be asking the question but I really want to frame it the right way um advisors that have been displaced most advisers are asking that question have been the recipient of being burned or have having their firm sold out from underneath them right and to to point the finger and say that smaller firms are more susceptible to this really would it really would ignore a lot of the data over the last five years right a lot of the consolidation has really happened some of the larger firms so the real question that that I’d like to answer Cory if you don’t mind which is um how can you how can you tell if a firm is is going to sell right what are the what are the signs um first of all let me say that that there’s no firm on the planet right that doesn’t have a price for which it would sell so any firm says yeah we’re we’re we’re never going to sell hasn’t seen a price high enough however with that being said there’s a difference between a firm that is actively trying to and showing signs that it’s package pack packaging itself up to sell here kind of the litus test so number one um are they growing advisor headcount at all costs meaning are they adding $110,000 a year producers are they adding you know 20,000 are they looking at advisor um that have one two three four five or the phone book worth of regulatory disclosures are they just interested in growing Top Line without respects to bottom line that’s kind of number one number two right is have they skeleton crewed out or Consolidated service right one of the first things that you’ll see is people getting laid off or you know a firm that used to be made up of free firms now is being serviced by the back office of one firm and everyone else is let go well what does that du to the service quality advisors receive um the other and and this is one that you see a lot is when some of the recruiting tactics Use multiples um of upfront money where it doesn’t make any economic sense unless somebody down the road is going to be paying for that so those are really The Telltale things I always tell an advisor judge a company by its track record in what it’s currently doing rather less than by by what it says it’s going to do but if you look at a firm that is you know for example for us if that firm is adding is adding things to its platform if that firm is adding the next generation of management to the company if that firm’s service model is 3 to one on back office to advisors if they’re putting if they’re putting key emphasis on running the business versus packaging it up to sell it that’s when you know that you’re with the right firm and that’s regardless of size

Corey: I I I I love that that’s that’s super helpful um Jamie why don’t why don’t you just tell us a little bit about um SFA um as a whole

SFA overview

Jamie: sure uh so SFA the uh SFA Partners is essentially a company composed of a broker dealer uh which was originally founded over 21 years ago uh it has its own corporate raia but then we also uh back in 2017 created an SEC registered Standalone raia called strategic blueprint and this is really utilizing top technology uh for advisers that really want to accentuate uh advisor as portfolio manager um use an Institutional C Ian um and have all the type of Technology CRM Black Diamond everything that you’d want to if you were having and creating your own raia experience for your clients is what we wanted to create with blueprint and it’s the fastest growing segment of our business it’s grown from 200 million to 400 million to 800 million to to to 1.6 and now we’re resting somewhere around 2.6 billion um with only 57 advisers uh in strategic blueprint so um we think going forward more and more advisors Corey are going to have that question about dropping completely ainal relationship although 80% of our advisers right now with blueprint are hybrid we have the availability for an advisor that wants to be advisory only and I think over the next 10 years I think we’re going to see a lot of advisers kind of you know ripping off the Band-Aid and making that decision uh and the last part of SFA Partners is an insurance services division called SFA Insurance Services uh which is powered by Pinnacle um as our marketing organization out of Jacksonville Florida so you’re getting the benefits as an independent advisor to be able to really be able to do the business uh in the area uh that best serves your clients regardless if that’s transactional by nature or if that is um that’s uh advice for fee

Corey: awesome I I appreciate it Jamie and um you know where where where we’ve had success together thus far has been in strategic blueprint and just just just one thing that I would mention if let’s say that your answer you know to um you know if a firm is going to sell is wrong and financial advisers still have serious concerns about a firm you know selling if you’re doing a significant amount of Feebas business and you’re part of an raia and they wind up selling to a less than ideal acquirer and you don’t want to go along once your assets are at a custodian like Schwab or Fidelity or whatever it may be if you don’t want to move along with your firm when they when they wind up selling it’s a one-page document a change of ADV form to move to another raia you’re you keep your client’s data password stay the same the client portal stays the same it’s minimum disruption so if you truly want the benefits of a smaller you know a smaller firm and you want that culture you want the investment availability you want the really consultative compliance you can do so and if anything bad ever happened you know where they sold the the rip cord is extremely easy to pull much easier than at an independent broker dealer so that’s just one other thing I wanted to add

Jamie: it’s it’s a great thing to stress but remember that that doesn’t even mean you know Corey that doesn’t even mean that the firm is selling or anything like that it it’s simply with being with an Institutional custodian that’s a skin in the game for the firm right meaning if they don’t manage a relationship from a service and from an economic standpoint and from a technology standpoint the advisor can always unplug and then plug in either to another ADB or somebody else with a competitor or they can plug into their own advv at some point so you always tell people look if if we’re doing what we’re supposed to be doing the relationship is elongated it’s going to last a real real long time our skin in the game is how unsticky you are to maintain your relationship with us if we’re not delivering what you need and I love that I love that amount of accountability at a firm because it’s something that a large firm that that has a you know that has a corporate ra they don’t feel it in the same way

Wrap-up

Corey: awesome Jamie I I really appreciate you hopping on the phone um I think you added a ton of detail in terms of some of the benefits of of of a smaller firm for the listeners of this I’m not endorsing a large form firm or or a smaller firm I just think it’s really important through your due diligence process to try to take a look at all different types of firms and learn what you like and learn what you don’t and just constantly keep track of that along with someone like myself to just really help narrow down and get tactical in terms of what firms are are is the right fit for you the more that you look the more that you learn uh the more you’re going to understand what you want and the more the more targeted that we could get in our search so be open-minded and you definitely will not regret it throughout the search process but Jamie once again I really appreciate the time super informative

Jamie: thank you so much for having me Corey it was a pleasure

Corey: absolutely [Music]