State of the Industry Podcast: “What does unsustainable success look like?” – Audio Transcript

Scott: Welcome to Allworth “State of the Industry Podcast”. I’m Scott Hanson. Thanks for taking a little bit of time today. I think you’ll enjoy our guest, Joe Hanson Dave, as an advisor who built a great business, like a lot of advisors and was looking for some sort of continuity plan and ended up partnering with Allworth. And so, we’re gonna hear Dave’s journey and from his own words. So, Dave, thanks for taking some time to join us.

Dave: Thanks, Scott. Appreciate being here and sharing some thoughts.

Scott: Yeah. So, you partnered up with Allworth. When was that transaction signed?

Dave: Right at the end of January, I believe. January 31st…

Scott: Okay.

Dave: …or February 1st, something like that.

Scott: And so, the date of this recording was September of ’22. So, it’s roughly six months or so, right? Six, seven months.

Dave: Right.

Scott: And transitions are never easy or fun just throughout.

Dave: No.

Scott: So, maybe we’ll talk kind of beforehand about the firm that you built, kind of your background, then we can talk a bit about your journey and to finding a partner. So, yeah, tell us a little bit about your advisory business.

Dave: So, we’re… We consider ourselves very holistic in terms of, you know, financial planning, and we do tax work here. We do a lot of investment work on our own. So, we do take a look at a client’s life and try to do as much as we possibly could for them over the years. And we had grown really fast over the years, and I guess that’s kind of what led us to consider different options for us and ultimately talk with Allworth. But it had to do with just growing too fast, not being able to really maintain the same type of service that we had because we had so many clients and so many new clients. It was very difficult during COVID to hire people. There was just a multitude of different needs that we had, which, like all advisors, you think about succession planning, and you think about continuity planning. And I always considered myself somebody that wanted to do what’s best for clients and staff too. They were…had helped me so much over the years. I really wanted to make sure they were okay. So, that led me down the path of trying to merge with a larger firm. Yeah.

Scott: How long have you had your business?

Dave: I’ve had my own business since 1991, so…

Scott: Oh, a long time.

Dave: Long time.

Scott: Yeah, 30.

Dave: I don’t wanna count the years, so let’s forget that question.

Scott: So, we don’t need to ask your age. You’ve been running the business 30 years. We have some ballpark idea.

Dave: Yeah. Yeah.

Scott: And when did you start having real conversations with firms? When did that occur?

Dave: It was probably the last couple of years. You know, it kind of cooled off a little bit with COVID. We didn’t really have an opportunity to talk to that many or take the opportunity to talk to that many people once that started, but enough to give me a good feel of what was out there, I thought.

Scott: And had…did you hire a banker to help you through this or some sort of a broker or…?

Dave: Nope.

Scott: You just put your own list together and had conversations with a variety of firms until you found the one that seemed to match…

Dave: Correct.

Scott: …as closely as possible?

Dave: Yeah. A couple of years ago, I almost… I came very close to actually joining another firm down in southern California, and just kind of culturally didn’t think it was a good fit for us and backed away from that. So, I’ve had several opportunities, I think, but it just seemed like Allworth was the best cultural fit for what we were looking for.

Scott: So, you… We’d signed a deal…did a deal the end of January, which check up front with a combination of some equity role, right?

Dave: Right.

Scott: Even going through that process, like, what change in mindset did you have from, you know, maybe mid-January till, you know, mid-February or whatnot?

Dave: Well, I knew it would be hard not controlling everything myself and I felt, like, I could do it. And, frankly, it was harder than I thought, you know, just being able to control the shots and doing everything. Now, I’m not the main guy anymore. And that’s…so, that’s fine. I knew in a sense that that would be the case, but still, it takes a little bit of adjustment as far as how I perceive myself, and how clients perceive me versus Allworth. That’s always…that’s a continuing process that I think takes place for a while, but I think clients are getting more and more comfortable with that.

Scott: And are you planning on retiring anytime soon? Are you planning on sticking around for a couple of more chapters, or…?

Dave: I don’t know how long a chapter is exactly, but, yeah, I don’t have any…I don’t have any desire to…

Scott: Yeah.

Dave: …to retire necessarily. I love the clients that I have. They’re friends of mine now. I have a good self-sense of well-being by helping them, and I don’t necessarily wanna say I don’t wanna hang out with my friends anymore and I don’t wanna feel good about it. I mean, I still really, really enjoy those things. I do recognize the fact that at some point in time, myself, I got up to about a half a billion dollars in doing it all by myself. It was just…it was just too hard. So, I have too many clients, I think, and, I would like to allow younger advisors to help me in that regard, and maybe work not as hard as I was before. It was… It just got to be too much for me.

Scott: And do you see a path forward now of you being at a place where you’re not having to work as much?

Dave: Yeah, definitely do. Definitely do because I’m not doing everything anymore. You know, I have… Allworth has a tax department that I can piggyback off of and get help from them with clients. That’s taken a big strain off of me. You know, whether it’s a legal department or investment department, some of those things, it takes a little bit of time to integrate, but I do see that as my way forward, and especially allowing younger advisors to help me. Allworth does have an easier system going forward that I think will allow younger people in my office. For example, I have somebody in my office that does all the financial planning stuff right now and she’s great. She’s young. I think, with Allworth, it will allow Allworth to help her more than I can help somebody on my own. So, you know, sometimes it takes a village and that’s, I think, Allworth in this case.

Scott: And so, when you went to that [SP] process January, was there… From a financial standpoint, when… My guess is that your business was your largest asset you had, right? And you had a liquidity event, added [SP] some cash. Did you find you had much of a change in mindset just as far as your risk tolerance or security, that sort of thing?

Dave: I don’t know how to answer that because I’ve always felt like I could retire anytime without this and because I’ve always been pretty prudent in terms of what I do and such. So, I’ve always felt pretty comfortable in that regard. I do kind of wanna stay. One of the reasons I wanna stay with Allworth is to see, I think, this equity that I have in the company grow. I think it makes sense. You know, I think you and Pat and the team want to grow the firm, and I think that’s of value to me, aside from cash that I got.

Scott: Yeah. So, it’s interesting because we… So, we sold a majority stake to private equity roughly five years ago in exchange for having a capital partner to help us grow. And my personal risk tolerance changed dramatically from that day because it was kind of like not the house’s monies, but in some aspect, it’s like let’s really go for it here, right? There’s some degree of risk that things aren’t gonna work out, high probability they were…they would work out, and I think from… I found that when… You know, Pat McClain and I started the business in 1993. It was then called Hanson McClain Advisors. And we started when we were young and broke, and it was really about paying our mortgage payment, making sure we can feed the family and stuff.

And for whatever reason, that mindset never quite left. And we ran the organization very much focused on cash flow, very risk-averse as far as how we ran things. And then when we took some chips off the table, it just gave us a different view of things. It’s like why don’t we really run this to build enterprise value as opposed to cash flow? And obviously, cash flow is important, but now it’s really about how do we maximize our enterprise value? How do we find the best firms out there to integrate with great advisors to help us become a national firm? And so, just for me, personally, it was quite a change in how I viewed things.

Dave: Right.

Scott: And how about… And, oftentimes, the journey for the staff can be more challenging than the journey for the founder because the world changes typically, and they don’t have the same economic benefits, usually, as a founder might. So, how has this been for your staff?

Dave: It’s been a challenge at times. You know, when we get used to doing it a certain way, some of the systems were actually parallel with what we are doing. You know, we use eMoney, TD Ameritrade, Salesforce. A lot of the systems were really pretty similar. We find that there are things that we could get done a lot quicker than going through the Allworth system. You know, we understand the need for that, but we wish that we could get things done a little bit quicker for clients. Um, so, that can be frustrating for us a little bit.

Scott: Yeah. And so…

Dave: [inaudible 00:10:55] reeducate clients, things take a little bit more time.

Scott: Yeah. And it’s just sometimes… Well, hopefully, there’s other areas where things are quicker. And, as an organization, I think that’s where things are headed too, but…

Dave: Yeah.

Scott: …maybe time will tell on some of that.

Dave: Time will probably tell. Because we did so much tax work, we had kind of a late start. And in terms of integrating a lot of things, Allworth kind of left us alone in integrating a lot of things. They said, “Well, we’ll let you start after the tax time,” which essentially was May. So, we’ve really had May, July, and August, so not a long period of time to start integrating.

Scott: Yeah, it’s funny because we’ve done 20 somewhat transactions, and the first six months is never that much fun because you feel like you’re kind of rearranging things without making a lot of forward progress, and maybe even, like, you feel like you’re making backwards progress at time. Like, we’re doing… Like, we’re changing our system…

Dave: Everybody…

Scott: Huh?

Dave: Everybody says, give it one year. That’s what everybody says.

Scott: Well, you’ve talked to other partners, right?

Dave: I know…

Scott: Though it was a couple of years ago.

Dave: …and that’s what they all say.

Scott: I know.

Dave: They all say, “You gotta give it one year. You gotta give it one year…”

Scott: And the reason…

Dave: “…it’ll be a lot easier. You’ll see, you’ll see.”

Scott: The reason I wanted to have a conversation with… And I think before we turned the recording button on, I told Dave, I said, “Be as transparent as possible because…” And the reason I wanted to have this conversation early on it’s… I think it’s important for people to have their eyes wide open, whether they do a deal with Allworth or some other firm, it’s just it’s quite a bit of a change. And so, back to your point when you talked about you used to be in control, I kind of joke that, you know, I used to be the man, now I work for the man, how have you balanced that, and how have you gotten comfortable with that?

Dave: Well, I’m not sure that I’m totally comfortable with it, but it’s just something that you kind of get used to little by little, you know. I mean, I love part of it. I love not having to write newsletters every month. Although clients miss that a little bit, they seem like they’re more and more comfortable. I get more comments as time goes on that they like the educational process of, you know, the podcasts and they like the… People have comment on educational pieces, whether it’s college planning. And so, I like hearing that. I like hearing that clients are listening and reading and being educated on parts [SP]. And I think Allworth can do that better than I can, certainly. The only difference is after I’ve been doing this for 30 years, people are used to Dave Joe Hanson as the forefront and that changes a little bit in this.

Scott: So, Dave, if you were to give some advice to a colleague of yours, maybe at kind of the same stage in their career at this point, what you know now, what would you recommend to them?

Dave: I think the way that things are trending in our industry, I think it does make sense to partner with somebody, a different company, that I think can help you. Very difficult being a solo practitioner in a business. And we had a great… I had a great staff, as good as any financial advisor in the country. I think we were very good, but some point in time, you know, something happened to me, then everything just falls apart. And that’s not fair for staff, that’s not fair for clients. So, I mean, as a fiduciary, I think we owe it to clients and staff to make sure that we become bigger than our own selves and our own egos. I think that that’s critically important to all of us, so…

Scott: And if you were to do it again, would you hire a…or at least in today’s market, would you hire a banker, do you think? Or you think you’d do the same process that you went through before?

Dave: I think I’d go through the same process.

Scott: Yeah. You just make a list of the…

Dave: You’re talking about going through somebody that would shop our firms…

Scott: Yeah, I’m just curious. Yeah.

Dave: I don’t really know. I looked at it at one time with…

Scott: I mean, I’ve seen bankers screw it up, and I’ve seen ’em add value. I’ve seen both sides of things, so it’s not always a good problem.

Dave: I interviewed… What’s that company? It’s a big company…

Scott: Well, that’s all right. We don’t need to name a name.

Dave: Yeah. That doesn’t matter, but the idea was is that I just didn’t think that they were that sharp in terms of asking questions and finding out about me. And for the fee that they wanted to charge, I didn’t see a good reason to do it, to tell you the truth.

Scott: All right. Well, here we’re…

Dave: And it wasn’t… The most important thing to do was to get a cultural fit with somebody, and the only way for me to do that would be to talk to somebody one-on-one and get a feel of who they were and what mattered to them most.

Scott: Get to know ’em a little bit, right?

Dave: Yeah.

Scott: Yeah. Well, hopefully, you still feel that’s a good cultural fit and I think, you know, most of the folks…

Dave: You know, everybody at Allworth, the one thing that I will say is everybody is very, very nice, and very professional, and very kind to us in terms of integrating things. I haven’t met anybody that is a bad person. So, ultimately, you guys have done a really good job, I think, hiring.

Scott: Well, I appreciate that, and I’m looking forward to Dave getting past our integration period. And when it’s just where you get up every day, and you’re like there’s nothing…we don’t have to worry about any of that garbage anymore, now we can just worry about focusing on the things that we enjoy doing.

Dave: Yeah, yeah. Perfect. Yeah, I look forward to that too, Scott. I appreciate all you guys do for me, for sure, and everybody in my office.

Scott: All right. Thank you so much. Appreciate the time, Dave.

Dave: Thank you, Scott. Talk to you later.

Scott: All right. Bye-bye.

Dave: Bye-bye.

Scott: Thanks so much for being part of our podcast today. If you wanna learn more about Allworth, we’ve got a webpage that’s designed specifically for advisors, allworthpartners.com. It gives you a little more information about who we are and the different paths we’ve got for people to be part of our organization. Thanks again.

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