Mar 27, 2023

State of the Industry Podcast: “How a health emergency convinced me I needed a succession plan.” – Audio Transcript

Scott: Hey, welcome to Allworth’s State of the Industry podcast. We come periodically with some interesting guests. And today, we’re gonna be talking with someone who joined Allworth, a independent financial advisor, ran an RAA, and became part of Allworth. I’m here with Eric Chetwood. Eric, you joined Allworth when?

Eric: Yeah, we joined Allworth in June of 2022.

Scott: Okay. And so, the recording of this is January of ’23, so it’s been a little over six months. And a little bit background, you had some partners that you’d bought out in the past, is that right?

Eric: Yeah.

Scott: And then…

Eric: One partner. Yep. That’s right. And we had been in business together for about 15 years, and he retired in 2019.

Scott: Okay. He retired in 2019. You were a solo owner and operator. You made the decision to become part of another organization. And why did you choose Allworth and our integrated model versus another model?

Eric: Yeah. Well, it’s probably helpful to share just a little bit of my story in terms of answering that question, if that’s okay, Scott.

Scott: Yeah, please. Yes. That’s why we’re doing this conversation, so.

Eric: Yeah. So, the timeline for me, it had everything to do with continuity planning. So, I’m in my early 40s. I worked with my business partner. He was about 20 years ahead of me. We had a great partnership for about 15 years. He decided to retire in 2019, and I was the succession plan. And then in 2021, I was diagnosed with cancer and had to go through chemo. And so, for us, through the help of some professional relationships and things like that, I mean, they really pointed out that we didn’t have a continuity plan or a succession plan. And I didn’t really think I needed one because I was still young in my career, really hungry for the business, loved the business, was planning to do it for another 20 years. So, our decision to come to Allworth and have conversations with firms like Allworth had everything to do with, I would never let even a client who was in their early 40s, I would never let them not have a will, or not have an estate plan.

And the same was true for our business. We did not have a continuity plan. And the interest of our clients, and the interest of our staff, and the interest of my family, we started to have those conversations and landed on Allworth because, you know, we had a checklist of things that we wanted to see in terms of similar cultures and investment philosophy, planning philosophy, that fiduciary standard, you know, leading with education, alignment with client interest, all that good stuff. Those are really important to me. It was really important that any kind of partnership or merger or acquisition be a win, an upgrade for clients, an upgrade for our staff. I knew that it would be a win for my family in some regards. But as we went through those interview processes, there was always a point as we were talking with other firms where we would get to a point in the conversation, and I would humbly think to myself, “Mm-hmm, that’s not an upgrade.”

“We actually do that better than you guys.” And of course, I wouldn’t say that because that would be, you know, really arrogant and things like that. But as I was having the conversations with Allworth, every single box that was important to us, I could see, “Ooh, that’s an upgrade. Ooh, y’all do that better than we do. Ooh, you know, that’s a good thing.” The way that Allworth invests in marketing, in data analytics, and how they wanna make sure that everything is measurable and repeatable, and scalable, that was my love language. And so, it really kind of became a natural fit when it came time to select who we wanted to go with.

Scott: So, you had a lot of conversations with people, ended up getting deep with Allworth, going through the due diligence, getting together a contract. That’s never an easy process either, right? And all those little things. Get the things signed, closed June of last year. And the first couple of months are always a little bit of chaos, right? As you’re transitioning everything. What’s life like for you today versus what it was like a year or two ago from a work standpoint? Yeah.

Eric: Yeah. I mean, I think a colleague of mine at Allworth actually said, “Once you go through getting all of your clients telling them about the partnership and, you know, casting vision for that, and, you know, determining whether or not they want to join you when you hit your retention goals, and all the clients have said, yes, Eric, we’re bought in, we’re gonna do that. You’re gonna think that you’re at the finish line, but you’re actually at the starting line of another marathon of the integration process.” And I thought that that was a really helpful analogy. So, we’re six months in, and I would say that we are beyond the crazy, we’re beyond the chaos. And a lot of times our clients or friends will ask me, “Hey, how’s the acquisition going?”

“How’s the partnership with Allworth going? What do you like? What do you not like?” And I always say the same thing. I always say, “You know, the best part about this partnership with Allworth is that I don’t have to make all the decisions anymore. The worst part about this partnership with Allworth…”

Scott: You don’t get to make the decisions anymore.

Eric: “…is that I don’t get to make the decisions anymore.” Yep. So I mean, I think we’ve gotten beyond the crazy, and we’re settling into a regular cadence, but, you know, that transition of going from entrepreneur to a little bit more of an employee, I would say that that’s been the biggest challenge. And, you know, and that’s totally okay. And Allworth does some things to kind of give us autonomy and, you know, scratch that entrepreneurial itch, which I really appreciate. But some of the other things, you know, post-cancer, I wanna be really intentional with my family, particularly while my kids are young. And the Allworth partnership has freed me up to do what I do best, which is meet with clients, meet with prospective clients, study the markets, and then lead our team, invest in our team.

I don’t have to worry about benefits and payroll and, you know, what health insurance company are we gonna use this year? I mean, all that stuff is kind of taken off my plate, so that I can do the parts of the business that I enjoy the most, which has been really rewarding.

Scott: And your clients, did you lose any clients during this transition?

Eric: Yeah, I mean, that’s a 100% grace. Ninety-nine percent of our clients came with us, which was, we were shooting for 92%, but 99% of our clients came with us. And I don’t know if you remember that movie Jerry McGuire, where they have come up with this better way of doing business and they say, “Hey, who’s with me?” And nobody goes with him. We were terrified of having that kind of moment, but, you know, clients very much resonated with this idea of, “We wanna strengthen our continuity plan. We wanna strengthen our succession plan. We wanna partner with somebody who has the size and scale for us to be able to deliver a boutique feel, but just with a lot of resources behind us that we didn’t have the size and scale to deliver.” So, clients saw it as enough upgrade, staff saw it as an upgrade. It really was a win-win-win-win.

Scott: And do you have any clients that came up with some new cash after the deal and like, “Oh, well you’re part of a bigger group. I wanna invest more with you?”

Eric: Yeah, I mean, one of the…

Scott: I mean, I’ve heard…I’ve seen some of those numbers, not particularly from you, but specifically from [inaudible 00:08:09] but I’ve seen those.

Eric: Yeah. I mean, I think some of the resources that Allworth provides that we did not have the size and scale to provide, have really resonated with clients. And they have. They’ve taken that as an opportunity to maybe bring over another 401k or had some cash over here. And I see how y’all are deploying this in a really tax-savvy manner. We’ve got the tax mark trading platform that I’m sure you’ve talked about with other advisors on this podcast. But that’s been a real selling point with clients that we now have some resources that we didn’t have access to before. And yeah, it has turned into some really great conversations, and some really great asset flows.

Scott: And as far as your staff because they’re staff, it’s a pretty big change, right? Going from a small kind of family organization to being part of a larger team, is there a staff person or two that is enjoying some additional responsibilities, or grown in their career? Is there any changes on positive on that end?

Eric: Yeah, I mean, I think one of the things that…So, our team we’re really big on transparency. And I probably told my team prematurely of, you know, this decision that I had made that, “Hey, we’re gonna make this change.” Because change is hard in any area of life, change is hard. And I wanted to be real transparent. If I had it to do again, and if I were giving advice to some of your listeners, I would still tell them early, but I would come equipped with maybe some preemptive answers to questions that, you know, I knew that they would ask, or maybe I didn’t know, but the Allworth integration team or transition team would know that they would ask because change is just hard. And that’s okay. But as a result, I wanted to share this maybe before I had all the answers.

And so, I got peppered with questions that I was like, “That’s a great question. I have no clue what the answer is.” But it’s been great. You know, the integration team has been really good in terms of once that cat was out of the bag, equipping me with some of the answers to diffuse some of those fears. And so yeah, I mean, I would just for listeners, I would prepare yourself that change is hard for anyone, but helping your team navigate that change, and allowing them to focus on the long-term vision, because it will get harder before it gets easier anytime you’re making a transition, and anytime you’re integrating two organizations.

Scott: Yeah. I mean, it’s like, and everything in life, it’s gonna take work. Anything good in life takes work. And navigating change, it takes work as well. So, you’d mentioned earlier that kind of the best thing is you don’t have to make decisions and the worst thing is you don’t get to make decisions. What have you done on personally to kind of emotionally deal with this kind of change that…Because, I mean like I joked with somebody because we sold a majority stake of what was then called Hanson McClain, now Allworth to private equity about five and a half years ago. And I joked that I used to be the man, now I work for the man, right? So, there’s a bit of that where, like, I used to be able to make all the decisions. Now I don’t get to make all the decisions anymore, which is fine sometimes, but how have you navigated this change on a personal standpoint and from an emotional level?

Eric: Yeah, I mean, I think truth be told, Scott, that’s something that I’m still kind of in process on. What I have kind of landed on is at the end of the day I may not necessarily be in charge of this policy or that policy, but I am in charge of shepherding these 200 families that have entrusted me with their life savings. And by focusing on, “Hey, I don’t…” I have more bandwidth in my schedule to really pour into them, and to really be very intentional with them about different conversations that I just didn’t have time to do because I was spending probably a quarter to a third of my time running the business. And that has been being able to deepen those relationships and to be able to bring on some new clients. I mean, I’m kind of pivoting here and going on a tangent, but one of the other things that we were really attracted to was how Allworth’s just the marketing machine that they have. And I’ll give you an example. At our previous firm, we did pretty well in terms of bringing in new money.

Scott: Yeah, you were growing

Eric: We were growing pretty significantly, but I mean, this past week I have had four new client meetings that Allworth’s marketing team and future client development team have set up for me. Last week I had three. The previous week I had two, previous week I had four. So, we were pretty good at growing the business, but we never saw numbers like that. And it’s been fun to be able to meet new people, hear their story, figure out for some we’re a really great fit, and we can add a lot of value. And for some, you know, maybe there’s another solution that is more appropriate for them. But to be able to have that kind of time to go deeper with existing clients, and to grow the business and meet new families, and get to hear their story, and be able to walk with them through different chapters of life has been really rewarding.

Scott: And do you find yourself control over your schedule? I mean, the kids have programs, whatever they got going on, and you still have autonomy there?

Eric: Yeah. I mean, I would say that that has changed in how it looks, but I appreciate and really love. I mean, part of this industry is that there is some flexibility in terms of we are meeting with clients, and as long as we’re meeting with clients, then if I need to go, you know, leave a little bit early to go to a soccer game or something like that, then I can definitely do that.

Scott: And you feel like you have more flexibility now or less flexibility?

Eric: So, that’s a tough one to answer. Again, we’re still kind of on the tail end of the chaos. So, if like this day and time, I’m probably about the same. I think once all of the dust settles, I’m optimistic that I’ll have a little bit more flexibility.

Scott: Yeah. And I think it’s just blocking the stuff out in your calendar, right?

Eric: That’s right.

Scott: So, Eric’s not available, and then Eric’s not available.

Eric: That’s exactly right.

Scott: Yeah. And anything else you want to just say of how this has been helpful?

Eric: Yeah, I think the main thing that I would encourage your listeners to think about is just what that continuity plan looks like in terms of how it might impact their clients, how it might impact their staff, how it might impact their families. I mean, I wasn’t planning on being diagnosed with cancer, but I was and had that cancer, you know, ended my life then the value, probably 85% of my net worth was wrapped up in this closely held business. And if that cancer had taken my life, then the value of that business would’ve shrunk dramatically. And so, we always joke with young clients when we’re talking about term insurance, you don’t need it until you need it. And I would say the same is true for a continuity plan, making sure that you’re going through those exercises.

In our case, there were some really great resources through some objective kind of third-party partners. I mean, for us, if I can say their name on the air Dimensional Fund advisors was really helpful in putting together conferences and giving us some tools to think about this because, you know, I’m probably only gonna do this once in my life. And making sure that I had resources and information, so that I could do that really well on behalf of clients, staff, and family I think is really important. And I think that’s why podcasts like this are really helpful. I think leveraging some of the mutual fund wholesalers that can speak to this very authoritatively, I think is really, really helpful. So, that would be my two encouragements is really dive into the continuity plan before you need to, because by the time that you need to do some continuity planning, it’ll be too late, and the value of your business will reflect that, and leverage objective third parties that can help equip you with information and trends and things like that.

Scott: And I like the phrase continuity planning as opposed to succession planning, right? Because you’re talking about how do we continue…It’s not so much passing the torch, it’s like how do you make sure that your business is set up in such a manner that it’s gonna continue, that the services that you’ve promised your clients will continue into the future.

Eric: That’s right.

Scott: Yeah, it’s a [SP] good…

Eric: That’s exactly right. I mean, whether or not we are here or not, our clients are still here, they’re still dealing with life, and their fears and anxieties and struggles, and so, making sure that the legacy of the business is taking care of them really, really well, whether I’m sitting in the pilot seat or somebody else is.

Scott: Yeah. Well, Eric, hey, thanks so much for taking some time today. Really appreciate it.

Eric: That sounds great, Scott. Thanks so much.

Scott: All right, thanks. And if you’d like to learn more about Allworth, we’ve got a page, And on that page, it’ll give you all kinds of information about who we are at Allworth. And if you’re thinking about your own continuity planning, we’d love to have a conversation with you. So thanks so much.

Man: This podcast has been brought to you by Allworth Financial, a registered investment advisory firm with the Securities and Exchange Commission.