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RIA Disruption Series: How to Prospect and Acquire New Clients in a COVID World

In our RIA Disruption Series, RIA speakers have interactive and unfiltered conversations about the various types of disruption occurring in the wealth management industry today.

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Patrick Feigley: Joining here from sunny Austin, Texas. Before we get started, we at PIMCO care deeply about you and your clients. And we recognize that the current environment has been very challenging, if you could have had imagined what 2020 would bring us. So first and foremost, we hope all of you, your families, businesses, clients, are all safe and healthy.

Welcome to our RIA disruption series. Our focus for today's call will be related to client acquisition in a Covid world. All audience members will be muted for today's call. However we've enabled a chat function, which I'll be monitoring during the call. So if there are any questions or comments from the audience, please feel free to chime in with that chat function.

PIMCO has a long standing history serving the RIA community. As this channel has evolved and grown and embraced innovation, we at PIMCO have made sure our consultative sales model continues to meet the needs of our partners across the country. In addition to our innovative product offerings we have a group of investment professionals as well as our advisor education team that is here to help you and support you in any way.

Our focus on serving the RIA community is also evident in our community to select acquisitions such as Gurtin municipal bond management, a provider of SMAs to the RIA community. We also recognize an important thread within the RIA community, is a desire to learn and grow from one another, especially as we navigate these disruptive times.

As such, we're excited to introduce this disruptive series. It's a conversation on varying topics and trends in our industry, for RIAs, by RIAs. To that end we are pleased to be joined today by three panelists representing three different firms and business models to discuss how they're navigating client interaction and acquisition in these uncertain times.

We hope these insights provided in today's session will benefit those on the line. The intent is to provide content that would be widely applicable to RIAs of all different sizes and different business models. So let's get started. I'll do some really brief introductions of our panelists. I'll hand it over to them in a quick rapid fire to describe their firms in their own words. And we'll get rolling.

So let me start with Scott Hanson, who's a founder and senior partner at Allworth Financial. We also have Michael McDermott, president of Kathmere Capital. And finally we have Cleves Delp, founder of TDC Investment Advisory and TFO Phoenix. So I'm gonna stop there. I'm gonna hand it to each of you maybe to describe your firm a little bit more in a kind of rapid fire round. Let's start with Scott.

Scott Hanson: Yeah, thanks Pat. It's so good to be here with everybody. And it's an interesting time and I'm glad you guys are doing this disruption series. Allworth Financial, we specialize kind of in that middle class millionaire, that hard working, hard saver, who's approaching retirement [unintelligible]. We've got about 10 billion under management, a little over 200 employees. And we think the future is so bright for our industry. We really do.

Patrick Feigley: All right. Let's flip it over to Michael.

Michael McDermott: Thank you. Michael McDermott, president of Kathmere Capital Management, as we mentioned. We are based outside of Philadelphia. Out of the group here, we're probably the new kid on the block .We are a relatively younger RIA. We came from the LPL type channels previously.

And at 45, I'm the oldest person in our office. We have 14 people I believe as of today. And really serving sort of a mix between 401(k) consulting and private client. They really feed off each other. And I think that'll be a theme we may talk a little bit about today as well. So thank you.

Patrick Feigley: Thank you, Michael. Thank you, Scott. We'll flip it over to Cleves.

Cleves Delp: Thanks, Pat. One, I'd like to congratulate PIMCO for putting together this series. Truth is, it's lonely out here. Although we're fiercely independent, the opportunity to visit and learn from others is critically important. And again, thankful for putting this together.

I'm the proud owner of two registered investment advisory firms, one in northwestern Ohio, and this is what northwestern Ohio looks like by the way, called TDC Investment Advisory. That is a wealth management practice, as opposed to TFO Phoenix, which is a true family office. Each one of those firms have north of 3.5 billion of assets. The difference is that TFO Phoenix might have 200 families and the wealth management might have 1,400 families. We have a South Dakota trust company that we own. We have a high end personal lines risk management practice. And a life and estate planning practice as well.

Patrick Feigley: Excellent. Thank you, gentlemen. And let's get started with a few of the questions. This will be open to all of you. I'm gonna ask - I'm gonna target the question at maybe this first one at Michael, then maybe Scott you can take the second one, Cleves the third. But feel free to chime in in answering any of these. So let me hit the first question.

And let me shoot it to Michael here. Michael, can you discuss your primary method of client acquisition and prospecting before Covid? How has that process changed since? And what plans do you have to grow your business from here? Any changes with your strategy, implementation, advertising? Share some thoughts on that.

Michael McDermott: Yeah. So for our business, I think our marketing and our growth can be best described as sort of the passion or hobby marketing, so to speak. It's a lot of people that we share common interests with. We have golfers in the office, we have fishermen, we have wine people. I think it's those sorts of things that the business just evolved through sort of common networks.

I think in Covid what is abundantly clear is that it's gotten harder to get together. So those have been challenged. And while we haven't formally taken on entirely new routes or new paths with social media or anything like that in terms of a direct marketing focus, I think there is one thing worth mentioning that we have done, which is sort of the belief that the value of an advisor is always there, but probably is the most prevalent in 3, 4, 5 times over the course of a relationship.

And so one of the things we've done with clients, and it's been very effective with prospects, has been really describing what it has been like to be our client through the chaos of Covid. And that entails communications, it entails sort of portfolio moves and strategies, and just general behavioral, emotional support that we've provided for clients.

I think that that has been such a big thing because people have reflected and looked, many of our newer clients have looked at us and said, gosh, we just didn't get the type of support and professional support that we really needed. And when we describe to them, listen, here are the 12 commentaries that we wrote to our clients. Read what they said and when we said it. Here are the videos and webinars we did in the worst of the days. Here are the portfolio moves, again with reason. There are limitations on what you can say. But generally speaking here's what we did with clients and when we did it.

And to clients that had a positive experience, they're so happy to talk about that with friends. Because I think for the professionals that did rebalancing and did sort of the textbook things during the toughest down moments in the market, those were - those are things that people wanna hear. They like to hear that differentiation. 'Cause not everybody had that same experience.

So I think that that's really been a growth engine for us. And certainly I can't recommend enough for those that did the right work during Covid to make that part of your messaging.

Patrick Feigley: And Michael, just a follow on question to that. Do you go to your existing clients and have - reacquaint them with the communication that you provided to them during Covid and post-Covid, as well as prospective clients?

Michael McDermott: So yeah, I think we do. Certainly our reviews have sort of pinpointed on charts and things the dates for them personally that we made market tweaks, and just sort of reminded them of, listen, the world moves so fast. But here's what happened. And let's not - let's remember the emotional state we're in. 'Cause there are a lot of clients that right now we laugh in our office that they tell us that they were totally cool, calm, and collected during Covid.

And yet we remember the emails and the phone calls from them. So there's a little distorted view of reality, Pat. So I think that it really is helpful to make that a refresher in those meetings. And as a result, some of that creativity, whether it's creativity or whether it was just constant outreach during Covid, that has led to - I mean it's a few handfuls of new clients, truly, over these periods, just because friends spoke to other friends who were not feeling so confident. And some of our clients said, you know, you have to talk to this team. They've really been on it for us.

Cleves Delp: You know, Pat, as it relates to that, I think Mike's right on. This was a different crisis than for sure the financial crisis. And I really do believe clients felt differently about this. And they were not as panicked going into this particular deal. I think many saw it as a short term situation or felt that way. As nervous as they were maybe about other issues, I didn't feel the same pain as they did maybe in the financial crisis.

Second is, there's a little bit of like a promises made, promises kept theme that we're now talking to clients about. So as we went into this particular crisis, as Mike mentioned, lots of rebalancing, capital loss harvesting, all those things we promised our clients we would do for 'em. But they needed it all done at the same time and

So one of the things that we discovered that our firm wasn't good at was we have two full time traders. When every client needs to be attended to in a 30 day period, we had to deputize eight more. We needed 10 in order to do that job. What we learned is we weren't well cross trained. But I wanna tell you, we're gonna fix that going forward.

Scott Hanson: If I might just add on that, I appreciate - it's funny, I'm taking notes, 'cause I think reminding our clients all the things we did [unintelligible]. One of the things that we did, we worked with the [unintelligible] middle class millionaires. So the vast majority of our clients are in models. So it was really for us. I mean as you think about your practice, obviously when you're a family office it's very different.

But for those that work with mass affluent, the more you could have clients in models, and just it's automatic trades, we did three rebalances in about an eight week period. And it's seamless. It's just kind of click of a button.

Michael McDermott: Yeah. I would chime in the last thing there, is that I remember being with a very large RIA, sort of a 10 billion dollar firm locally, and we always talk about our business models. And we're behind them certainly in years and size. But we've grown a lot. But we are also in models, Scott. And they actually said to me, definitely play that up. Because to be able to talk to clients, at some points model portfolios sound boring and vanilla, and yet in a moment like March and April of this year, when you can execute on what you said you're gonna do, and when you can do it seamlessly and sort of on demand, that's a real story.

And so I think that the business model differentiation was another point of discussion that we had with clients, where we suddenly made that a bigger point in terms of the benefits of working with us, as opposed to perhaps wherever they were.

Patrick Feigley: Thank you, gentlemen. Scott, I'm gonna direct the next question to you and kind of expand on something you just brought up here, which is sort of models, but more specifically technology. So how has technology played a role in both your client acquisition and marketing in this new environment? Does technology [unintelligible] the other side, social media, anything like that?

Scott Hanson: Yeah [unintelligible] if you look at here we're all on Zoom calls. And during this season we've completed - we bought four firms and we sold ourselves to a new private equity firm, all via Zoom. I mean it's just kind of a crazy world we're in, how much you can get done. Certainly as Cleves pointed out, I think we all miss the hang out and chat with people in person.

But for us, a large part of our business acquisition was through live events. I mean last year we had 10,000 people across the country register for one of our live events. Like most firms our number one new client source is from referrals from our existing clients. But number two was this live event. And so we had people come to these education workshops. Well I can't expect 200 60-year olds to show up at a hotel for a workshop. I'd be on the top of the news.

So we obviously can't do that. So we had to pivot quickly to some sort of virtual. And as we all know, doing some sort of webinar is not - it's not the same as just doing a 75 minute PowerPoint presentation. So we had to get a couple things. One, get really creative on how we're gonna track people. But also a lot of kind of the mid-funnel marketing. And we've spent a lot of time internally on our website to capture a new lead that doesn't know much about the organization, how we really nurture that person to get them to the point where they're ready to meet with [unintelligible]

But as far as technology, we've got 14 people on our technology team. Five years ago we had two or something. I mean it's just - it's crazy how we need to rely upon technology, whether it's this whole videoconferencing. And we told our teams, like I don't know when we can meet in person with our clients again, so we need to make sure we're really proficient. And what does that - what does the consumer expect from us? What does the great consumer experience look like? I don't think it's just necessarily going and flipping on the camera and having a call this way. There's a lot of other touchpoints that we need to figure out.

And so we've spent a lot of time internally, like how do we make sure our technology is reaching out to our clients in the ways that they want 'em to. And how do we make sure that we've got a human interaction reaching out when they want that as well. So that's kind of a balance that we've been focused on and then we continue to focus on moving forward.

But we might be a couple years where this is a normal - I just saw a thing from Smart Assets had a survey, they said prior to the pandemic roughly 30 percent of new clients said they'd be comfortable with remote experience. That number is 70 percent today. So we might have a future where a lot of our clients are not in our backyard. They don't come in and meet with us and have a cup of coffee, that sort of thing. The entire experience is done this way. And if that's the world, how do we make sure we're great at this and better than our competitors, frankly.

Cleves Delp: Just a thought, and this is more of a pet peeve technology then is we're spending a fair amount of time on Zooms. Get your light right. Get your background right. Get your technology right. I mean I get it when clients do this regularly. But for us for goodness sakes, I mean I think I've got a halo light over here to my right for goodness sakes. I'm not saying I'm wearing makeup today. But I wanna tell you, we gotta get our game together as it relates to that. The light has to be in front of you, not behind you. And so that's just - that's a bit of a rant. Sorry about that.

Scott Hanson: Well my apologies. I'm in my Tahoe cabin today. So this is the background you got. [laughs]

Cleves Delp: Well Scott, you look great, for goodness sakes.

Patrick Feigley: It is a great point. I was on an internal call this morning. And I'm still amazed at how some people - you're seeing their forehead, or up their nose or something different. But it's so important getting the technology right from our standpoint. And also, Scott to your earlier point, it's fascinating how technology has changed every part of our business. Even as an asset manager side of the table, all of our wholesalers are account managers that are used to going out and visiting with clients. They're all internal wholesalers since March.

And how do we adapt, and what does post-Covid look like. Will we leverage technology more? Will we try to be more efficient and less driving to see clients? And I think the answer is yes on both of those. And it impacts every part of the business. So it's a really fascinating point. Michael, do you have anything to add to this?

Michael McDermott: You know, the only thing I would say is that we have really made a push to continue to make our value proposition about the experience, which really ties into everything they just said. But the investments being just part of the experience, but everything just sort of making sure that the client sort of in the theme of demonstrating earlier what you did, we've sort of tried to really get sort of a systematized process to say almost a checklist, sort of a doctor visit type of thing, where we say do we go over all of these various things.

And we're turning that into a technology as we speak because we realized that that's really the future, like Scott said. If 70 percent of even new clients would be willing to never meet us, that meeting better be off the charts, or they're just not gonna be willing to pay the premium pricing. Someone will be willing at some point to undercut you from a fee perspective. So yeah.

Scott Hanson: Not to interrupt you, but to that, Michael, it's like also if you think about that, it's like what other touchpoints do we need if this [unintelligible] it's a 45 or 60 minute meeting. What kind of follow up email do we need? Do we need like a personal letter to arrive a couple days later? How do we make that relationship stronger when we can't break bread with somebody, or even share a cup of coffee, or just sit eyeball to eyeball?

Michael McDermott: It's all about the total experience. Again, defining that in a multitude of ways. But that's really been our key focus is how does the client feel because it's not gonna be all about performance. If it's through the computer and it's about performance, then those relationships will always be at risk, good years, bad years. That'll fluctuate. So it has to be more.

Cleves Delp: As a takeoff on that, and our expression about that is be more and do more. Not unique obviously to us, this is the direction that our business is headed, is finding other ways to serve clients. So we talk about helping families be families, again not unique to us. But one of the things that I think we focus on is every activity that we engage in no matter what part of the business it is, somewhere we've gotta tie that back to helping a family be stronger, and wiser, and better.

And that mentality has really evolved in the last five years. And I think it's particularly emphasized when we get to the environment that we've been in here recently. Part of the process is I think for all of us is the emotional support process. So managing money is part of it. And all the estate planning or taxes or whatever, that's part of it.

But the other part is the emotional part of the journey. And so particularly here, Pat, one of the things that I personally have tried to do is be positive. And it seems like a small thing. And it's so easy to get caught up today in all the things that we ought to be worrying about. So I literally share with our clients respectfully, because I understand not everyone's had the same experience, is this year is one of the best years of my life.

I've had a chance to spend more time with my adult children, which is total bonus time. A total thing that I never would have expected and it's so cool. And I got to see my kids work from home. Take your dad to work day is not a thing. And so to observe my kids in that situation was really, really cool.

The other part of that too is perspective. So today I appreciate stuff that I used to take for granted, going to church, going to a restaurant, going to a ballgame, seeing my kids play sports. Those are all things that I candidly took for granted. And I wanna tell you, I don't right now. Every time it's richer, it's deeper, and it's better.

So sort of in a unique way, this has been a wonderful growing experience. And again, I say that with all the respect because I recognize not everybody had that same situation. I think about those particularly in New York, you're in a 600 square foot apartment. I can't even imagine the experience that you had. So I say that respectfully.

Scott Hanson: You know, it's interesting, if I could just add to Cleves, so we were talking about technology, and then Cleves went to this very emotional connection with clients. And I think that's [unintelligible] balance these two. And frankly most clients don't need to hire us. They could set up an account online, do everything they - use a robot advisor, it's a lot less expensive. They use us for a reason. And a lot of it is that guidance that we provide.

But frankly sometimes it's just - and I actually think some of the greatest value we provide is keeping people from making mistakes from which they cannot recover. But it's a lot of that just personal connection, and just really saying like how are you really doing right now, and having the 15 minute conversation about someone's life. And it's those sort of things that brings that inner connection, that trust. When they really trust you, that's when they're gonna totally follow your guidance, that's when you could be the best advisor possible.

Patrick Feigley: Yeah. These are great - I mean it's really fascinating points. Everybody who walked into this year is walking out of this year in a very different perspective and a very different experience than they anticipated when they walked in. Cleves, I loved the comment, take your dad to work day. We've also, depending on age of your children, I've had take your dad to school day many days. I'm done with that for a while.

But yeah, it's fascinating this topic of like technology and how we're adapting that. But also this emotional side, how are we engaging with clients. And staying positive is I think a really important theme. And everybody's [unintelligible] has been different. Michael, anything to add to that before we maybe move on?

Michael McDermott: No, nothing else on that.

Patrick Feigley: I wanna explore a little bit more of this - we talked about children and parents - this concept of like intergenerational client experience or intergenerational communication. Younger generations, millennials are really comfortable with technology. Baby boomers and other generations are less comfortable. They've had to become more comfortable.

How are you dealing with that? Is it kind of happening organically? Or are you being really proactive in terms of like how you communicate with the different generations within your books of business or client profiles?

Cleves Delp: So one of the things that we've spent some time developing now I think for a year and a half is gonna finally come to fruition I hope soon, is what we call Right Track, TDC Right Track. So it's next gen financial education. This is where we literally build a video studio in our office, and we have home grown the curriculum, and done the building of this next gen stuff.

So clients like asking - solving the problem who's gonna be my successor trustee, and we created the South Dakota trust company. One of the things they want us to do, which they find very valuable, is educating the next generation. So we've built this digital tool. It's gamified, it's fun, it's got videos in it, we have different presenters, it's got accountability, they gotta report back.

And I wanna tell you, when we introduced this as a possible offering, we said would this be of interest to you. I'll tell you, it's the number one thing that hit their hot button. They love this notion of next gen education.

Michael McDermott: That's really good. One thing I would say, Pat, just about the dynamic of the next generation, is that we have seen a number of clients who have sort of called meetings for us and their 25 or 30 year old child. And we've sort of faced a few questions about, well why don't we just buy for mom or dad or both. Why don't they just own all Tesla, and Zoom, and Microsoft, and Apple, and Netflix, and faced literally those questions.

And so that's been one of the learning points that we've had to do, which is to sort of be delicate about respecting the learning curve of that next generation, who is having some fun, actually been pretty successful just because they've picked a few of those names. And communicating delicately the differences between their parents and their needs and their situation.

And so that's been a real learning experience. And if clients that are 55 or 60 aren't communicating that, they could be hearing some of that from their kids and maybe the advisor just isn't aware of it. So for us though the key thing is that we've tried to in terms of bridging the gap have communication that is useful to all parties. So we create - we don't subscribe to outside newsletters and things. We create our own podcast, it's called A Wealth of Advice, so which has a name that means it's a little bit beyond just investments.

We've had things about raising kids, and we've had things about books that we like. We have videos that we do, we have articles. So we have a whole bunch of different communication points that we think can meet a variety of generations. And I think that that's pretty useful. Because in today's world, I think people can sniff out sort of canned third party newsletters, and realize that they're not from your voice.

And so we have made a real point, and our chief investment officer here is very strong, the writing and the messaging of that. So that's been a real priority for us.

Scott Hanson: It's interesting, I think that's why - one of the reasons we're seeing so much consolidation in our industry, if you just look at every quarter of the [unintelligible] having some sort of canned newsletter on  a monthly basis is just not gonna cut it. I mean clients want interaction with their advisor. And these larger teams [unintelligible] things that you guys were discussing, it's like - it's a real differentiator and a value add to the client. And that gets a little more difficult for the kind of mom and pop advisor, the one man advisor trying to keep up on all these things. So it's an interesting [unintelligible]

Cleves Delp: Take off on those two points was, one, what just straightforward strategy was, I think there was for us a consolidation in client assets, where as we visited with 'em, we would simply ask the question, if we knew they had money elsewhere, has that advisor called 'em. And if they haven't, why not? So that was one.

Two, we had a fair number of clients with cash on the sidelines. And we took the opportunity to encourage them to take advantage of this opportunity, not knowing where it was gonna go of course or they could get worse. So we experienced a significant amount of growth within the existing clientele. And just no more complicated than asking 'em have other advisors that you're trusting, have they talked to you. Or even new clients, same question.

Patrick Feigley: Gentlemen, I'm gonna start to look at some of the questions here in the chat room. I wanna make sure we're keeping on time. We've got about 15 minutes left. Time is flying. And wanna make sure we get to some of these chat questions. I'm gonna read it verbatim here. Michael and Scott both talked about the role of models in their business execution this year. Can you outline if and how you have adjusted your models, communicated those changes to clients? So kind of this role of model portfolios and how-

Scott Hanson: Yeah. I'll just speak real briefly. So we're not market timers. I don't think we're that smart. And the folks that we work with, our typical client has somewhere between 500 and 5 million dollars with us. So it's really middle of the fairway type investments. It's all publicly traded securities that we use. So it's really simple to have models built in. And the majority of our assets are qualified dollars, mostly IRA rollovers. So it's really quite simple on doing some rebalances.

But just because our disciplines and the bands we had in place, it's not that we looked at the virus or something and said, oh, there's gonna be some change. But in February, we communicated the exact dates to our clients in February, we did a rebalance where we sold some of our stock position kind of right, I think it was two days after the peak. Not because we're clairvoyant, just because our - we had some discipline in our investment strategy.

Then right in the midst of the pandemic, we bought more stock, but essentially getting back to those bands again. And then when the markets rebounded back up, we sold off a little [laughs] - we sold stocks again. And it's not that we're trying to time the market, it's just basic asset allocation, having the discipline going in, and having the models and the technology set up beforehand. So when this thing came, it was - there was no emotion involved in it, there was no major discussion, it just kind of happened.

Michael McDermott: Yeah, and so we're in a similar place. So our models are for some clients 100 percent. So our core model is primarily ETF based. And for some clients it's 100 percent of what they own. And some clients it's 50 percent. And we put some satellite allocations around something more boutique or eclectic, an outside manager, an alternative.

So but with us the clients would get some sort of a communication when we made those trades. It doesn't get down to the security level. But we would just be broad and we would say, for example, on March 17th or 18th, right around there, was one of our rebalance dates, where we said based on market movement down, US and international equities have reached sort of the limits under which we would consider rebalancing. We just wanna let you know we bought more equities, we sold some of the fixed income, to put us back into balance. If you have any questions, please let us know. We had webinars that tied into that.

So it's never really on a security level the communication. But it is specific enough so that the clients sort of know what we're doing. And you can imagine on March 17th or 18th, there was a little bit of a gulp when we were communicating to clients that we were buying into the equity markets, 'cause it still went down until the 23rd.

And we had a few people that asked us about that. And we just said, listen, we're following the textbook. This is our playbook, this is how we do it. And later on they reflected and realized what a prudent move that was. But only doing it via models, it does allow us with the right CRM system and the right sort of email setups, we can do that rather quickly and efficiently.

Patrick Feigley: Excellent. Thank you. I'm gonna hit on another question that's come, I'm gonna rephrase it a little bit. We have an election coming up in five days here. This isn't about the election results, but it's more about regulation. It's more about the potential for regulation in our industry. How are you guys thinking about that, not based on specifically the election, but just kind of industry regulation over the next  impacting the RIA market over the next two to three years? Is that something that's on-

Scott Hanson: I spend no time worrying about those things. If they come, we adapt and adjust. There could be all kinds of regulations. I mean if you spent too much time focusing on things that may or may not happen in the future, you're not gonna be spending time on growing your practice, growing your business. So I tend not to worry about those things. When they happen, then we deal with it, we adjust, we adapt. But until that time, I really don't worry about it.

Michael McDermott: Same with me.

Cleves Delp: Makes sense.

Patrick Feigley: That was an easy one. Good stuff. Another question relates to employees. So each of your practices are large. And you have employees and advisors on your team. How has this impacted - and any changes in terms of how your staffing - I think Cleves you talked about this a little bit earlier about staffing needs - but can you talk about your thoughts around staffing and in a post-Covid world how the staffing might look different?

Cleves Delp: So again, I think I talk in themes. So for us, it was like individual freedom guarded by personal responsibility. So what that meant is, our colleagues each know their own situation better than any of us. So each situation deserves special consideration. And they can only provide that. So there is, at least in the beginning, they needed to evaluate what they were comfortable with as it related to how they were gonna operate with us.

And then you had to break it up geographically. Because we have offices in different parts of the country. Each environment was different. Northwestern Ohio was not the same as Phoenix, was not the same as Greenwich, Connecticut, by the way. So you had to be respectful I think of the geography.

And then there is the component of making folks feel safe. So we do this for our clients in a financial way. I think we deserve to do that for our colleagues in a work environment. So I felt our role, my job, was one, to take responsibility for the decisions made, and they can look to me for those. This isn't by committee. This is a place where no one knew exactly what the right answer is, so somebody I guess has to take responsibility for that.

And then two, do all you can to make 'em feel safe. And I was thrilled and surprised by how badly our colleagues wanted to be back together with each other, assuming they felt safe. And so from that perspective it was sort of reassuring and cool to see. And like I think Mike mentioned, I'm a little older than him, but I am the oldest person in our organization as well. And they have different perspectives that deserve respect.

Michael McDermott: What I would add to this, and I love everything you just said, Cleves, about the personal freedom, but individual responsibility. On our side what really worked for us was having the right tools in place. So we have the right CRM system so that we can properly delegate. There are no sticky notes going back and forth between desks in our office. And therefore when we weren't at the same office anymore, we already had the right systems.

We implemented - by good fortune we implement Microsoft Teams 60 days before Covid. And without that we probably would have been lost. So to those teams that haven't quite figured out virtual yet, look at Teams, look at Slack, look at some of those systems to sort of keep your interoffice discussions and chats out of email. That has been a really effective platform for us.

And I would say the one challenge relative to our organization has been for me just trying to understand the bandwidth of each employee, how busy or how open, how much capacity does each person have. Because if we're in the office, I can run by somebody and say, hey, do you have time to take something on. It's very difficult to sort of - for me to measure that.

And that's the biggest challenge I've probably had is just sort of at times wondering if people are not at full capacity or if they're overwhelmed and just simply not knowing.

Scott Hanson: Yeah, if I could follow up on that, a couple things. One is [unintelligible] within our systems a couple years ago, great technology. We monitor pretty well how productive people are in the organization, particularly our advisors, client service, people in the portfolio management trade and all that stuff. So whether they were remote or in the office, that really hasn't changed much.

But I think there's two major issues that we're struggling with and dealing with, some positive, some negative. One, it's how do we have that interoffice connection, that communication, that camaraderie, when we can't meet face to face. And having some sort of virtual [unintelligible] or something just does not - that does not really replace it. So that's a challenge. And we still haven't quite figured that out.

I had spent some time with a friend of mine, he had sold a company that was 100 percent virtual, with 90 employees, a year prior to this. Just happened that was his model. So I said, Brad, how'd you figure this stuff out. But I think the second thing, what's really helpful for us is, prior to this we wanted employees to be - if they're [unintelligible] one of our teams would have been in our headquartered office in Sacramento. Now I don't really [laughs] care where someone lives.

I mean if they're an advisor, it's important they're gonna be close to their clients. But other than that, I mean I was talking to a new employee. And then someone scheduled a meeting with a new employee. I'd chat with them and I said something like whereabout in town does he live. And he says, well I'm in Los Angeles. Oh, I didn’t know you're in Los Angeles. And I could care less where he is. And so I think that's one thing that's gonna be a positive. I mean you can be a very centralized organization, but yet have people spread all over the world.

Cleves Delp: I think the expression goes something like, never miss the opportunity to fix things that you couldn't fix in any other environment. And so I just sat in one of our executive committee meetings just yesterday. And they went through the various efficiencies and the cost benefit of implementing these, which I promise you we would not have focused on if it weren't this environment.

And there are really simple stuff to looking at IT vendor contracts and all sorts of things. Of course the whole office space, and how efficient can we get there, and now can we attract employees all around the country, because people work virtually. But again, I see so much opportunity and good that has come of this, that we literally a better and strong organization.

And I wanna tell you, I think our clients focus on our stuff, and solving the problems we've been asking to solve more during this environment than I've experienced before, in part because they were at home. And they were looking for ways to also get better. And think we in some cases provided that outlet for 'em, which was some cool and great work.

Patrick Feigley: Excellent. Thank you, gentlemen. I'm gonna do one last question. It's gonna be really rapid fire, so maybe 30 seconds response or so. But I wanna give you each an opportunity to - just any closing comments. And maybe if you could identify for us what are one or two of the biggest either opportunities or threats that you see for the RIA over the next two to three years. Michael, sorry to put you on the spot, but we'll start with you 'cause you're unmuted.

Michael McDermott: You always start with me. So gosh, let me think about that. The biggest opportunity I think is the footprint of your client base. I think the general acceptance of previously there would have been some - for me on the east coast to get a new client and have them entrust us with everything on the west coast, there probably would have been a plane ride at some point before they made a decision, unless the referral and the relationship was just abnormally strong.

And I don't know that that's the case. So I think that there is the opportunity, whether it's with your team or whether it's a client base, to really take it on to a national - I mean I'll say national, I guess theoretically it could be international - but to a whole different basis there. I think that the threat certainly continues to be sort of compression of fees, and differentiation, and all those sorts of things that is always sort of our top priority in making sure that we are providing maximum value in all areas of our clients' lives, that we really justify and earn our fee.

And I think that'll continue to be sort of the biggest thing that we as RIAs need to continue to focus on. Clients need us more than ever, but there will continue to be just a heightened sense of fees as time passes forward.

Scott Hanson: Well I'd say on a positive note, the need for what we do has never been greater. I mean if you look at the number [unintelligible] every year, I mean we all know the studies. And the number of advisors has not grown. If you look over the last 10 years, there's actually less advisors today than there were 10 years ago. In part I think we're more efficient with our technology. But I think that's a tremendous opportunity.

I think some of the challenges is 10 years ago being an RIA was quite a differentiator. It's like well here's how the big firms work, but we are independent, and here's what that means to you, Mr. and Mrs. potential client. Now there's a lot of firms like ours out. So I think now we're competing much more for new clients, not really against maybe the [unintelligible] but it's against other RIAs. And so we need to make sure that we're up on our game.

Cleves Delp: If you look at your practice and you come to the conclusion the most important thing you do is provide investment advisory services, I would say, yikes, watch out, it's only a matter of time. And so it's either expand your services or team up with somebody who provides other services. Because that is no longer valuable, although that's how many of us get paid.

The second is this merger and acquisition activity that's both a great thing and I think it's a threat. It's bringing characters into our industry who think maybe differently than the traditional fiduciary, fee only, independent, client focused, advisor may have had in the past. So I think there's opportunities there. And I think there's threats there. And it's sort of seller beware.

Patrick Feigley: Gentlemen, this was a great conversation. We can't thank you enough. Cleves, Michael, Scott, really useful discussion. And quite frankly it was fun. The time definitely flew by. So thank you. For the [unintelligible] there's a survey at the end which will help inform us of the cadence and future topics to cover on this disruption series. Also your account manager at PIMCO connective there can help us as well.

And as we said from the beginning, we'll close where we began, which is thank you. Thank you for your participation on the call today. And we wish everybody an enjoyable weekend. Thank you.

 

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Unlocking Alternatives: Marco Opportunities in Mid-Cycle Markets
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Unlocking Alternatives: Macro Opportunities in Mid-Cycle Markets(video)

Unlocking Alternatives: Macro Opportunities in Mid-Cycle Markets

In the mid-cycle environment, we are taking advantage of the relatively low volatility to build positions that provide exposure to higher interest rates. Learn more about where Qi Wang, portfolio manager, global macro hedge fund strategies, sees opportunities in today’s markets.

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