State of the Industry Podcast: “Partnering with Allworth gave me back my life.” – Audio Transcript

Scott: Welcome to Allworth Partners, “State of the Industry Podcast.” I’m Scott Hanson. We do these podcasts periodically, talk about things that are going on in the industry. We’re chatting with one of our advisors who joined us through our M&A, and we’ve got a great guest today, Kathleen Carpenter, in Chico, California, Northern California is joining us. And Kathleen and her partners became part of Allworth earlier this year through a transaction. And Kathleen’s gonna be sharing a bit of her story and the journey that she went through. So, Kathleen, thank you for taking some time to join us.

Kathleen: Oh, absolutely. Thank you for having me.

Scott: Yeah. And so, Kathleen, you’ve been in the industry how many years?

Kathleen: Thirty-five.

Scott: Thirty-five years. Okay. So, and you joined all… So, your firm that you joined, give it… Why don’t you give us a little bit of background about the size of your firm, who you served, that sort of thing?

Kathleen: We are a financial planning firm, foremost, and have been in Chico for the last 35 years. We brought in about just under 300 million in assets. And most of our clients are local here in the North State. So our firm comprised of myself, my other co-founder, Diane Knight, and her other business partner, Ben. And, yeah.

Scott: And you joined Allworth, what, the end of 2022?

Kathleen: Yeah, December 21st of 2022, which was very interesting, hoping that most of our accounts transferred over, thinking it would take time. Most of them transferred in 30 days, some of them as soon as a week. So, it was very interesting having 1099s and different statements coming in from both companies.

Scott: And so, give us a little background about your story of, like, what brought you to the point of saying maybe we should find a partner, and kind of how’d you go through that process?

Kathleen: You know, Allworth reached out to us in 2018, and it actually happened to be, we were supposed to go down to a meeting on the day that the campfire started up here in Paradise. And obviously, we declined, and you guys were very persistent, which was great. And it seemed like we talked to you like every six or seven months. And what really drove our decision is we just bought out one of our other associates in 2018 and had finished that transition and were working on our next transition, which was Diane’s transition, she wanted to retire at 65. And Ben and I kept looking at the number of clients we had, how fast our company was growing.

We were not able to attract another advisor to come into Northern California to work with us. So, we were really… You know, we hadn’t really thought about merging with another company or being bought out, but when Allworth kept talking to us, the more we talked to ’em, the more it made sense for us.

Scott: And so, I didn’t… I remember we met a long time ago, I didn’t realize it was that long ago, when we first started…

Kathleen: It took you a while.

Scott: Yeah. And I know that sometimes in an external… So, my guess is, and originally, you were thinking about just an internal succession, right? Because you bought out another partner five years ago.

Kathleen: Yeah. So, we always prided ourself. We had advisors in every age group. You know, at the time, Ben was in his 30s…excuse me, yeah, 30s, and then I was in my early 50s, Diane was in her 60s, and our associate, Barbara was in her 70s. So, we really liked that continuity and told our clients, “This is our succession plan,” and we would bring on another advisor that would be in their early 30s. And just, again, with the lack of us not being able to do that, we really started to think about if something happened to myself or something happened to Ben, what would our clients do, and who would take care of them?

Scott: Yeah. And both internal successions and external sessions have their own challenges. Right? And I think one of the biggest aspects, and maybe it’s not talked about as much, it’s just kind of the emotional toll that a transition can have on owners. What was that like for you?

Kathleen: You know, it was… It first…

Scott: Because you and Diane… You founded this firm from scratch?

Kathleen: Yeah. So, I had another firm, Carpenter Financial, for several years. And then when Diane and I joined, we started Red Rock together. And even though I brought over some clients, it really was built from scratch from the two of us. And you know, so, it’s our baby. And then we bring Ben, Ben had been a partner for 17 years at that time. He, you know, entered the business at his early 20s, and helped us build it. So, now it was his baby. And it was really tough because I think we always envisioned that, you know, Diane would go, Ben and I would manage it for another 5 to 10 years, and then, you know, Ben would have a partner or two at that time that would step up and manage it.

So, at first, it was kind of tough talking with Allworth, we felt that we could continue to grow and manage everything. But once we made the decision and moved forward, for myself, at least, I didn’t worry about it anymore. You know, we had built it, we were successful, I was proud of that, and now it was time to take it to the next step. So, the emotional toll on me, I didn’t feel that way. I was just pretty excited that…

Scott: Yeah, is that part of your nature, Kathleen?

Kathleen: I think so. I think, you know, you build a business to eventually sell it, right? We’re not gonna hold onto it. And I feel really good that we were successful in, I keep saying selling, but selling, merging with another company, and taking it to the next level. So, yeah, I’m really, really good with that.

Scott: Oh, and… Well, we did some research alongside with David DeVeaux [SP]. We produced some research with DeVeaux & Associates that highlighted some of the concerns advisor have with either merging or selling the firm, things like giving up control, or change in leadership, caring for the clients. What are some of the things that maybe you didn’t have that emotional toll, but what were still some of the concerns you had going forward?

Kathleen: Well, I think the biggest thing… There was two things. Would our client… Would we be able to provide the same service to our clients? We’re a full financial service firm. Very, very hands-on. And then our second concern was how were our team members, our current, you know, employees that we had, how would they be taken care of in the future? Those were our two big concerns going forward. I think as advisors, we knew that we would be… I think, you know, we knew that we would make it, we’re very good at growing businesses. We weren’t concerned about that at all, but it was really about our employees and our clients.

Scott: And so, let’s start with the employees. How did they react initially? And then what’s transpired in the last several months since you’ve been part of Allworth?

Kathleen: They were shocked. One of ’em was very concerned because she had worked for three companies before that had been acquired or had been merged, and she had lost her position in all three companies.

Scott: Oh, gosh, that’s just bad luck. Particularly a small town, Chico, how many people are in Chico? 100,000 or so?

Kathleen: Yeah. Yeah. Just at 100,000. So, you know, it’s just one of those things. She was extremely concerned. Who was gonna be their supervisors, were they still gonna be able to come to us with concerns? So, you know, that was the big thing. Now that we’ve transitioned… And it was a bumpy road. I mean, any transition is any time you go through change. But now I think they’re looking at themselves and they’re, first of all, realizing their value, how much talent they have. And I think they’re looking at Allworth and, you know, into the internal workings of where they might fit in a leadership position. Which, before, when we were just Red Rock, if they were a customer service rep, that’s probably what they were gonna do for the rest of their career. So, now they’re seeing opportunities that I don’t think they ever, you know, dreamed of or believed that would be out there.

Scott: Yeah. And we hear that from quite a few others. Matter of fact, if you look at our leadership folks, there’s a number of ’em came from firms like yours that merged in with us, and there’s great talent. And sometimes, as you were saying, maybe it’s someone in client service where there would… There’s no other jobs at Red Rock other than client service, right? And then suddenly, they’re part of a large organization, they can see some other career paths, that sort of thing.

Kathleen: Absolutely.

Scott: And then how about from the level of service with your clients? Because, obviously, Allworth does things a little bit differently than Red Rock did originally, and…how’s that?

Kathleen: The level of service is good because, you know, the majority of the calls come directly to our office. And the ones that don’t, you know, they’re transferred to us, and the clients have been very pleased. The internal workings of, we were a pretty smooth operating machine, so to be able to turn around clients’ applications, you meet with them, you tell ’em you’re gonna take over the money, you know, and within two days, their applications were signed and in process. So, that’s been a huge change for us. But it also gives us an opportunity to give Allworth input on, you know, as they’re putting together processes, and things like that. The client service is good, just the internal operations we’re adjusting to, but it’s okay. Again, it’s change and there’s always gonna be adjustments with that.

Scott: Yeah. And, of course, Allworth, as any growing organization, has its areas that we’re…improvements that are happening as we’re still moving forward, that sort of thing. And how did your clients react to all this when you first told your clients?

Kathleen: You know, the first question was, because they knew that Diane was gonna be retiring, we had kind of had talked about that in our meetings, our succession plan. So, the first question was, was I going to retire? And as soon as I said no, and Ben said, “Hey, I’m gonna be around too,” the clients had no concerns at all. As long as we were happy and we felt confident in what we were doing, the clients just followed suit.

Scott: And did you lose any clients in the transition?

Kathleen: We lost no clients in the transition.

Scott: Not a one?

Kathleen: Not a one.

Scott: Wow. That says something about you. I mean, it seems like, oftentimes, there’s someone about ready to fire you and just gives ’em an excuse, right?

Kathleen: You know, there might have been one or two, but I would say we were in the high 99% range that everybody came over.

Scott: And were you pure fee-only or were you affiliated with a broker-dealer? I don’t recall.

Kathleen: We were affiliated with a broker-dealer. We had some hybrid direct mutual funds and annuities on the books.

Scott: And so, everything needed… Did everything need to be repapered? I guess we call it paper. It wasn’t necessarily paper, but it’s still…

Kathleen: Everything needed to be repapered.

Scott: But yet the majority of the accounts were over within 30 days, you said?

Kathleen: Well, I think all of the accounts were over within 30 days. Which, again, I think we were surprised, I think your integration team was surprised. But we went about it a very different way. When we knew that we were going to integrate some… We got advice from different people in the industry. “Hey, call 20% of your top clients, 30%.” We called every single one of our clients, whether they had $10 with us, or $5 million with us. And I think that was the big difference.

Scott: It is not a surprise to anybody.

Kathleen: It was not a surprise. They knew it was coming, you know, we had already explained why. So, it was great.

Scott: Is there anything that you would do differently if you were to do it over again?

Kathleen: I would not come over on December 21st.

Scott: Was that your closing date, the 21st of December?

Kathleen: That was our closing date. And again, it wasn’t from our standpoint, we were fine with it. But, again, trying to track down 1099s at a broker-dealer that you’re no longer at, it caused a huge headache for our team.

Scott: And then the clients had 1099s…two different 1099s on that calendar. That’s typically…

Kathleen: Exactly, exactly.

Scott: … Typically happens. And that’s gonna happen at some point in time. But yeah, that’s a…

Kathleen: Yeah, I would’ve just done a clean break on January 1st. I think it would’ve gone a little smoother for our clients and for our team. But, again, it all worked out.

Scott: And what advice would you give to someone in a similar situation to you if they were considering some sort of succession plan?

Kathleen: You know, we build a business and everybody wants to be self-employed and own their own business and have all this control. And there’s some really good things about that, but there’s a huge responsibility to that. And there is a point where you get so far away from what you really…what your passion was, what you really wanted to start with, which was to work with clients and take care of ’em, that you find yourself pretty soon that you’re working, you know, on your business two, two and a half days a week doing stuff that you don’t like to do. Compliance, and team trainings, and managing your team, and all of that.

Once we transferred over, and I have to tell you, it’s really just been in the last month where we’ve kind of lifted our heads up because we’re kind of particular and we like our database to be, you know, exact, etc. It’s just nice not to have those day-to-day responsibilities anymore. And I’ve actually been able to meet with more clients now, give more time back to my family. So, it’s great owning your own business, but it’s really nice being part of a larger team right now.

Scott: And how do you hope to… So, the next five years, like, what’s an ideal work week look like for you? Like, what do you wanna focus on more now that you’re not managing the business? Which areas would you like to focus more on?

Kathleen: Well, I would like to focus…

Scott: Goofing off? Traveling?

Kathleen: Goofing off. You know, first of all, I’d like…

Scott: More clients?

Kathleen: … To give some of that time back to my family. Working as many of us did, and some people say they didn’t, but we all worked 50, 60, 70, 80 hours a week building our business. So, to give, you know, some of that time back to my family, to give some of the back to myself. But I also wanna give it back to some of our newer advisors. We have an associate advisor, Stephanie, in our office, and I’d like to spend some time actually mentoring her because she will be the next person in this office when I decide to retire to take on some of those clients. So, I’d really like to just focus on that. And again, I’m spending more time with clients, meeting new clients. Not that I wanna service ’em all, but I really like the idea of meeting, building the relationship, bringing ’em on to the company, and then being able to hand them off to an advisor that is maybe building their book of business or whatever it may be.

Scott: Yeah. And I really think that’s where our industry is heading because, Kathleen, like when we both started in the industry, I’ve been in it 33 years, you’ve been in 35 somewhere, right? It was, you gotta go find your own clients, right? So, it was all about…

Kathleen: Right.

Scott: And if you couldn’t find clients, you didn’t have a job. So, pretty much how it was, and it’s still, a lot of the industry’s that way. And I think we’re going through a bit of a change where there’s a handful of larger firms that are… And they generate clients for the firm. And then there’s some… Some advisors are really good at connecting with somebody and bringing ’em on board. I guess, closing ’em, if you wanna use sales type term, but it’s getting that client comfortable and getting them on board. And then some advisors are just really great at servicing, and they’re maybe not quite so good about on convincing someone to join the firm.

So, I think it’s good when you can partner, and enables you to do the things that you wanna do, which sounds like you really enjoy that process of when someone is kind of skeptical, and their finances are a mess, and you can help point ’em in the right direction where they feel confident, and they feel comfortable, and they trust you. And then you get ’em on board and someone else can help service them.

Kathleen: Yeah. And, you know, I think what’s different is just, and you just said it, when you and I started, I mean, it was knocking on doors, and cold calling, and doing anything we could to get a client.

Scott: That’s right.

Kathleen: Now to sit across from a client and just… And it’s not an arrogant attitude, but I don’t have to take you on, I want to take you on. And here are all the reasons that you want to come on with us and, you know, our firm and what we can do for you. It’s just a more mature perspective. And it’s…

Scott: Well, when you think about when you’re young, at least my position’s, like, I benefited more from that client relationship early. I needed that client, right? Really badly.

Kathleen: Yeah. Right.

Scott: And then when you have some success, it’s like, my life’s not gonna change one iota, whether you become a client or not, but yours certainly will. And this is…

Kathleen: Right. Absolutely. And I still have the passion to help you. Right? So, I’m offering it. And if you want it, great, but if you’re gonna put up a bunch of roadblocks, I’m okay with that. You know, there’s a lot of other advisors out there that can serve you. So, it’s nice to be in this position.

Scott: Yeah. Good. Well, any other kind of parting words you’d wanna say?

Kathleen: No. I would just say if someone is out there, you know, considering succession planning, it’s okay to look externally as long as you can find a company that aligns with their value. And you know, I think we have a great company, and I think we’ve made…we’ve really made a huge change in our clients’ lives. But I think we can make significant changes moving forward, especially with the help of, you know, Allworth and what they’re able to provide for us, so…

Scott: It’ll be interesting, won’t it?, in the next 10 years or so, just the evolution of some larger firms like Allworth. And there’s some other good firms out there, right? Some other larger firms that continue to offer more services to the clients. Maybe some faster service on some things, but clients are just kind of demanding more than they used to.

Kathleen: You know, and that’s okay. They like the one-stop. And once they trust and they’ve built a relationship, they don’t wanna have to go out and form three or four more relationships, especially when they have told you everything about their life. They don’t wanna have to repeat that story three or four times, so.

Scott: That’s right. And they tell you very…

Kathleen: You know, for you to be the quarterback and to step out and coordinate all that, it’s just…it’s a huge benefit to the clients.

Scott: Yeah. Well, Kathleen, we really appreciate taking some time and mostly appreciate you being a partner here at Allworth and the time. We haven’t spent a ton of time together, but the time we’ve spent together, I’ve always enjoyed.

Kathleen: Well, thank you. I appreciate it, and I appreciate the time, Scott.

Scott: Thanks, Kathleen. And thanks so much for listening to this week’s edition of “State of the Industry Podcast.” If you’d like to learn more about Allworth, go to allworthpartners.com, we have a special webpage just for partners to explore who we are, and there’s lots of different stories and material that can help you. See you next time.

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