Podcast: How to Grow Your Financial Advisory Business by Acquiring Another Advisor’s Practice

Scott Danner, CEO of Freedom Street Partners shares what he has learned by acquiring the businesses of several financial advisors over the years. Scott also explains how working with Aaron Hasler and the team at SkyView Partners has accelerated their ability to grow through acquisition. Access to financing and professional guidance has been crucial to Freedom Street Partner’s success.

To listen to the episode simply click play on the audio stream below or listen and subscribe on your favorite podcast platform. You can find The Advisor Financing Forum on Apple PodcastsSpotify, and Stitcher.

Transcript

Mike:

Hi, there. It's Mike Langford. Welcome to The Advisor Financing Forum, a podcast presented by SkyView Partners. In this episode, Aaron Hasler and I are kicking off a series that will feature RIAs and individual advisors who have completed mergers, acquisitions, and/or a partial business sale. Our first guest is Scott Danner, CEO of Freedom Street Partners. Scott has acquired several advisory businesses over the years, and he and his team have leaned on SkyView Partners not only for their financing to make these deals possible, but, as Scott will tell you, SkyView actually helped in many other ways as well. This is a fantastic conversation, so be prepared to take notes because Scott really opened up the playbook and shared a ton of insights and wisdom that he's been able to accumulate by going through the acquisition process multiple times.

            Before we jump into our conversation with Scott, please make sure you hit the subscribe button on Apple Podcasts, Spotify, Stitcher, or wherever you're listening, and do us a solid. Share the show with your network on LinkedIn, Twitter, or Facebook. It's super easy. Just click the share button in the podcast app, and then type in something like, "Great podcast for any RIA or independent financial advisor thinking about buying a practice or book a business. Give it a listen." Then click the post button and, voila, you've shared it with your network. Trust me, your network will appreciate it. And, hey, who knows, maybe another advisor in your network will see it and reach out to explore selling you his or her business.

            Okay. One last thing. If you have questions or suggestions for guests or topics for the show, please send them to podcast@skyview.com. And if you are feeling inspired to follow in Scott's footsteps, swing by skyview.com or call 866-567-6282, and the team will help you get the ball rolling right away. All right. Let's get to it with Aaron Hasler and Scott Danner.

            Well, Scott Danner, Aaron Hasler, great to see you gentlemen first thing in the morning here. How are you?

Scott:

I'm all set, man. I'm great. How about you, Aaron?

Aaron:

Mike, I'm great as well. Glad to be here, and we're looking forward to the conversation today.

Mike:

Awesome. Well, Aaron and I are kind of dressed as twins here. We both have our black polo shirts on. Aaron is in his basement bunker. I'm in the home office here. And Scott is making us look terrible because he's dapper as heck, looking handsome. If you want to see what Scott looks like, obviously, check him out on Freedom Street Partners website. You can also check him out on LinkedIn, and we'll make sure that everybody gets that contact information after the show. But looking great, thank you for joining us this morning, sir.

            So I thought we'd have a bit of a diving in here to kick things off because it was really interesting. Aaron mentioned that he wanted to have you on the show, and he told me a little bit about your background. One of the things that jumped out to me, because I've talked to so many financial advisors, so many people building fintech companies and so forth, and there's a different mental makeup, if you will, for people who decide to grow through acquisition, and you've now done multiple acquisitions. So I thought maybe it could be fun to kick things off with what was the mindset for your aha moment, where you're like, "You know what? I'm going to go through acquisition as part of my strategy for this business."

Scott:

Sure. I think it's interesting because there really is an aha moment. When you look at the organic growth and you're growing a pretty good practice and life is moving along at a good rate, you have this moment where you're like, "Wait a second." The average age of an advisor in our industry is 62. The average person that trained me was 20 years older than me, and I still have a couple of decades of experience. I'm a baby in an industry but with a bevy of experience and wisdom that I'm still learning as I go. But it kind of created this thought process where it happened over time but then the aha was looking at the industry and really evaluating where the industry was heading and how many advisors had zero planning for themselves. I was shocked and astonished, talked to so many advisors who had literally changed the lives of hundreds or thousands of their clients doing the very thing that we often dong do ourselves. In talking to these advisors and understanding what was out there, I just saw a really great opportunity.

            I also had spent a ton of time training advisors, both on the new side and on the veteran as the industry transitioned from this transaction-driven to a more service-based RIA style practice, fiduciary standards, regulations, all these things that were pointing us in a direction that I felt really gave us an edge. So the aha was, "Okay, I can build on one client at a time," and I still want to do that, but the other part to this practice that I'd like to expand upon is 80, 100, 200 million dollars at a time and how do we leverage our experience, the relationships with these advisors that we've been working with for a long time, and make it into something special? That was the thought process behind it.

Mike:

That's really interesting to me, the way you came about that, because it is really true. When you're in your 40s, you feel like you've been doing this forever, and then you realize, "Wow, there's still people that are in their 60s here," and they are the first wave, if you will, of financial advisors, right? Because prior to that, they were called stockbrokers, and many of them got their start in the business when they were called stockbrokers. Then something happened during their career and everybody changed to financial advisors and the business model and the service model changed a little bit, but they are now the first wave of advisors coming up towards retirement years, and retirement for them isn't looking like maybe they imagined it in the early days, right? Maybe they didn't even imagine it, and now they're here like, "Well, what's my exit plan or whatever? What's my glide path," as Aaron and the team at SkyView like to use that phrase a lot, and I really like that, so I'm stealing it unabashedly.

Scott:

You know, what's super interesting to me is that we're all around the same age, and we're of that generation that actually grew up in a timeline where we really weren't driven by the technology and the computers. I got to college and had intro to email, and then by the time I was leaving, we were tapped in everywhere. By the time that I was two years out, we were doing fantasy football drafts online. Life had changed forever. I kind of feel like it's the same transition we've seen in our industry. We're in that trapped generation where I started as an investment representative. I was a sales person learning the industry, and I quickly realized that that was not the trajectory of the business of the future. It was not the visions that clients had for how they wanted to be served, and I wasn't going to go down that path.

            But we also had a foot on both sides. We grew up with no technology, we grew up in the industry where it was, and, certainly, we were trained by people that were all of that generation but were also charting the path and understand the technological advances, the fintech, the unbelievable experience that we bring to the table by still being across the desk from somebody and being able to understand their needs and their goals and that face-to-face value. So I feel like it's almost that generational gap. It's almost like a lottery because we're in the mix, in the middle of something, between the stuff that was great of old and the really awesome stuff ahead.

Mike:

I read an article about this a few years ago, and it's really hit me that we are the last generation to become adults before the Internet was a thing, right? So I entered the workforce in 1994 as a professional out of college. Last generation of people to become an adult and the Internet really wasn't just yet, it was just getting started. We had a little bit of email in college there, and it was all on a DOS-based type computer.

Scott:

The DOS-based system, yeah. The blinking dot.

Mike:

Yeah, exactly. Exactly.

Scott:

You can send your mom an email, but she doesn't have a computer.

Mike:

And nobody used it. Nobody used it at that point in time. But we are the last generation to become adults and ... We still had maps in our cars. Remember that? You had maps in your cars and things like that. Bridging the gap with that ... Because I think you're 100% right, we had to learn how to use email. You actually had a formal training class. When I was at Pioneer Mutual Funds, we had formal training. Rolling out email to all employees? You had to train how to load a CC mail. You had to actually take a class to do it.

            Many of the advisors that you're talking about, where you're acquiring their business and you're helping them on their glide path towards retirement, got their start and they were in business for 20-plus years before the Internet and email and all those types of things. Many of them, I suspect, have carried over some of those old-school techniques, so, for instance, the lunch and learn type of thing, like come to a seminar in order to learn a little bit about financial planning retirement, whatever, college planning, what have you, and you hope that some clients come out of that. Many of them have a very personalized, across the desk type of experience, but COVID-19 obviously is accelerating the work from home and having conversations like we're doing remotely.

            Are you finding that not only is the feeling they should be getting closer to retirement a motivator but also, "I don't want to take on this next wave of technology?" Is that something that's starting to motivate sellers, that they're thinking, "I know there's a lot more technological stuff coming along that"-

Scott:

Aaron, you're probably hearing a ton of this, but I think regulation scares a lot of advisors. I think the way that the business has changed and the way that we've executed systems and processes and how we've built in the bandwidth to be able to just adapt when things adjust for the benefit of the client, we're not scared of that, and a lot of advisors that have been doing this a long time are petrified of what the future looks like and what the demands are, and that's a big thing in their mind. Quite frankly, some of the advisors that we've talked to and acquired, their note-taking and their service to their clients have been impeccable and some of the technologies, the basic technologies they have been using day in and day out, are very, very valuable even for us as we take over the practices. There is a major fear factor of change.

            Again, it's what gives us that special value add because we did it on both ends. We did it from one side where the technology and the regulation was different. We did it where it was more of a transactional business. Having now been on the other side, we're able to understand and empathize with what everybody's going through. If you've been in this business for a couple decades and you haven't felt overwhelmed by the changes at some point in time, you're lying to yourself because I know I have, and now as a leader of our company, it's even more daunting sometimes and you're like, "Okay, we're built for this, but let's also take a step back and evaluate what this looks like. What is the liabilities? What are the risks? How can we make sure we're always doing what's in the best interest for our clients?" I don't know, Aaron, I think you guys get to talk to a lot of advisors on both sides of the coin. What are you hearing?

Aaron:

I would echo some similarities to that. I consulted with my own father as he was leading up to his own retirement, and it was a completely different industry. But his comment was, "I'm having a hard time keeping up with the continuing education and the mental involvement that it requires to run a good practice." I think we're seeing that sellers are in that same position. Like Scott talked about, it's the increased regulation. It's the continual change. It's the adaptations to technology.

            Mike, you talked about it as far as technology and are these advisors keeping up. I think some do a really good job, but others just don't even know what they're missing, right? They have no idea that there's a whole realm of services out there. But I think it's just more of that energy level. We see all the time where advisors will start to, as they approach their mid-60s or just past 65, their energy level starts to wane a little bit, and so some of these extra things that we're doing on an adaptation basis become harder and harder. That's where it's an interesting pivot and you start to see their wheels turning. "Maybe I should sell my practice. Maybe I should find a succession plan."

Mike:

Glad you brought that up, the energy level thing, because this is observational just through meeting thousands of advisors over the years and it's not a knock, but it is a reality that for many advisors this becomes a lifestyle business, right? They build their business, they get the book up to a point where they're making 200, 300, maybe $400,000 a year, they're living a really good life, they're playing a crap-ton of golf and just enjoying life, and they might be working 40 hrs a week or maybe even less. By the way, good on you if that is the jam that you have created. It's a really good situation. But one side effect of that can be you get really comfortable, and when pressure to innovate or adopt the new thing comes your way, it can be a little bit like, "Well, why would I do that? I'm going to make 400 grand next year anyway, even if I don't change."

            But then there's an inflection point, right? You get toward a certain point where you realize, "Oh, the business could start to decline. My clients are getting a little older or whatever. In order to attract and bring up new clients, there's going to be an expectation that I offer these other things, these other experiences. I'm not 100% sure if I'm up for that." Is that the type of things that you guys, you're coming in contact with, or am I just anecdotalizing and projecting something to the masses?

Scott:

I think we're seeing it. I think we're seeing exactly that. The only thing that I would say is slightly different, logically, it makes complete sense that one would come to the conclusion that maybe the time has come that I might want to transition out, but most people don't. Most people actually still fight it to some extent. One of the things that we've spent a lot of time on and I've actually spent ... Aaron and I have talked a ton about this, is what I call the preamble to getting to that point, the preemptive moments that somebody has to get to before they're ready to sell their business, right?

            Because even when they're selling it, sometimes they're not even fully engaged or aware of the level of what that means. It's so challenging because their business is their life, their business is their legacy and their impact, and their business is where they spend all their time away from home. And, yes, the golf course and some of these other things may be a part of that lifestyle practice, but you take away even the place to go and do your bills on a Monday morning and it changes someone's life.

            I've been working on a book the last year and a half, and it should come out either at the end of this year or just ... COVID set us back a little bit. But we should have it, if not by the end of this year, January of 2021. But it's built off of creating a rich life for financial advisors, living your legacy now so that you can really figure out your legacy beyond your business. Your impact has to go beyond your business for you to really separate it at any point in time. Then owning your future is identifying the steps that you would take, but by the time you get to owning your future, you're mentally prepared. You're psychologically and emotionally ready for what's ahead.

            To your point, Mike, they are definitely challenged with the changes and challenged with the way that things are moving, and the lifestyle business makes it very difficult. So it is hard to give up the guaranteed income in their brains every year. I know I would be challenged with that, so when I say they, I mean us. But at the same time, I've found it to be ... There's almost a preemptive step that is the most challenging that we're spending a lot of time working through to get advisors more prepared.

Aaron:

No, sorry, Mike, I was going to say ... I mean, this is super interesting and this is what I think is fascinating to have Scott on the call, because at SkyView we're reactive, right? We have said, "Okay, these advisors are making good income. They don't necessarily want to retire. So let's come up with a solution to give the buyers of the world 100% financing." That way, we can entice from a monetary standpoint these sellers and replace some of that income immediately, securitize that ongoing revenue stream with a bank loan, and the buyer can really maximize what they're going to pay out that advisor.

            But what goes into the emotional conversation, and how much time do you spend on the emotional hand-holding of that seller? Because we hammer the message of financing is here, it's available, it's practical, it makes sense, so why not apply it? But I know we're missing that whole emotional side of the conversation, which you're more integrated into because you're practicing with them every day. So tell us a little bit about that. How do you manage those emotions? How do you work with them, and how do you get them to a point where they're interested in selling you a practice?

Scott:

I think you've got to build the rapport. Advisors are really good at building trust with their clients. You can't just be good at what you do. You've got to be honest and authentic and you have to really look out for someone's best interest, and people will feel and see that. The same thing applies in this business. There's a lot of sharks and there's a lot of dolphins. The sharks don't give a darn about your business. They just want to own it and aggregate and do everything they can to build. Truthfully, what we're trying to do is create a connection with businesses that are in markets we want to be in with people that have something bigger than themselves. The community input is large, they have family attributes that we're interested in. I find some connection point to the people that we're working with.

            One of our advisors in the Charlotte market, everybody knew this guy. He was just a fixture in the community, and working with him to purchase the practice, it was a learning experience and a growth experience for us just learning from his experience in general. He had an entire career before the 30-plus year career in finance, and he was 79 years old. I know you understand, but the individual that goes through this, you don't know how many hours I spent on the phone just talking through the next steps or reminding people throughout the process that it is our business when we take it over, it's no longer your business, and how that feels, and then finding the right personality in our office to help with the transitioning.

            You asked a specific question, and I want to answer that, and that is how many hours goes in. I honestly would say it depends on the relationship. It's one of those things where ... The most recent acquisition we purchased, I would go for a walk from ... We started talking a year ago, and we closed in June. From January to March, at least a couple times a week, I would go for a three-mile walk, call this individual on the phone, and talk for 60 to 90 minutes. When I say talk, I would listen for about 30 to 60, talk for about 15, get the points out, but I was listening to what was important to them.

            I go back to the book real briefly, but the recipe is you have to define what rich means to them. What is the button that makes them feel like they're missing something? What are the things that they want to do more of that they can't do while they work? What defines a rich life? Not wealth, but rich, rich in family, in time, and when you find that, that's what we're working for. That's our why, right? That's the big factor. The next thing is that legacy. What are they doing outside of work? I've got to understand that. If there's nothing else, oh, man, that is going to be a challenge. Those are the worst because now we have to help them find that and we have to help give them back some of the time that they didn't know they had.

            Owning their future is what you guys at SkyView and our team at Freedom Street and the industry does so well, is we give them the recipe for success, but they have to be preemptively prepared. I would say most of them are logically prepared. Most of them logically know what they need to earn, logically know what the steps are, and emotionally absolutely as unprepared as anyone can be.

Mike:

You know, I've never acquired another small business. I was on the teams that worked on deals to acquire large businesses when I worked in a corporate job, but I've never had to navigate the intricacies of buying a small business like an RIA firm. And as Scott Danner relates, it's not always easy. That's why the team at SkyView has experts like Aaron Hasler, Kara Miller, Jayne Christian, and many others on their team to work hand in hand with you and the seller every step of the way. An RIA loan through SkyView isn't a point in time transaction. It's part of a long-term partnership. If you would like to explore how SkyView can help you in your RIA acquisition process, reach out on skyview.com or call 866-567-6282. Or if you prefer email, simply shoot a note to info@skyview.com, and someone will get right with you. Now, let's get back to our conversation with Scott and Eric.

            That's really interesting, and I love that you brought that up, that most of them have logically prepared because we've all experienced that type of stuff. I made the really simple example a week or so ago about my in-laws sold their family house and moved to a condo in downtown Boston and they bought a vacation place up in New Hampshire. They walked away from the house that they raised their family in. Well, then, one time they drove by the house and the new owners had re-landscaped the front, yanked this big bush out, all this other type of stuff. My mother-in-law lost her mind. Logically, she knows it's not her house anymore, right? They made this decision. They got value out of it. They get to live in downtown Boston and the culture and they get to have this New Hampshire lake house and all that type of stuff. Yeah, squirrelly up in the head all of a sudden because the emotions, right? It's like, "I planted those bushes. My kids played out in that front yard and that stuff."

            So if it's that easy to get emotionally involved with bushes, imagine with all the relationships that these advisors have developed with their clients and their clients' children and sometimes their grandchildren. As you mentioned, this is my baby, I built this type of thing. It's really exciting to hear that you work so hard to do that and there's a lot of conversations happening. That's, I think, good advice for anybody who's considering buying or selling your businesses. Start tackling that as soon as possible.

Scott:

Everyone wants to buy a practice, okay? So what is there, 50 to 60 interested buyers, actually closer to 80 or 90. But only 50 or so are probably qualified in some capacity, not 100% capacity, and then most of them have ever done it and they're within 10 years of the actual person's age that they're buying it in. So they're also going to be planning for the same thing in a very short amount of time. It's the transitioning that we see that can be challenging.

            I've used that exact analogy, Mike, multiple times. After we've completed the deal, I've had to say, "Listen, this is like selling your home and you raised your family in this home and you've done all these things. You built it, you custom-built this home. But now I bought it and I own it. The only difference is I want you to rent from me and stay in the home with me for an extended period of time so that we can make it an easy transition both for you and the clients." That analogy, sometimes it's as easy and beautiful as I just sounded, and then other times it's, "Dude, we own the house now. You got to understand. You can't change the bushes when you want to change the bushes anymore. The bushes are ours, and we're liable for the bushes. We got to make sure that we do this the right way." That is a challenge at times. That is a challenge.

Mike:

When advisors are selling the business, it's not a pull the ripcord, they're out as soon as the business is sold, right? Unlike many other businesses, oftentimes there's a period where you sell a business and the other executive stays on for a while, former owner stays on for a little bit, but it's usually relatively short. But in an advisory practice, it can be years at times because it's so important. You basically bought relationships and this stream of cashflow that are generated from those relationships and the accounts that are associated with them. So it's really important that there's that really good transition period, and it can be relatively short, but oftentimes it is years, so I think it's really important that you made that point that they get on board because if you want to keep getting paid in this full price that we talked about to happen, it's got to be smooth.

Aaron:

Yeah, you talk about all the things that you're doing to prepare these sellers in the timeline and the emotional conversations and whatnot. You work hard, you put a lot of hours into the business, you do a lot of marketing. I've seen your work on LinkedIn, and it seems like a lot of those videos that you do are presented towards client. You guys have built up a big organization and I think you have pretty good, successful, organic growth, although you and I have never talked about this. So how do you calculate up what's the difference between the organic growth and the success that you could be having with organic growth compared to going and speaking to a seller for 60 to 90 minutes on a deal that might not actually go through? How do you balance that desire for practice acquisitions, or what did you find worked well for you? Is a practice acquisition worth it, compared to just focusing on that organic growth, and how do you balance those two?

Scott:

Man, that's an awesome question. I had a young man in here this past week, and he's taking over his dad's business. It's not in our industry, and I've known him for a long time, and he wanted to ask me some questions. He came in and he asked me several questions, and one of the things he talked about was growing his dad's business. I asked him the question, I said, "Well, why do you want to grow the business?" He was talking about growing it outside of the area that it's in. He said, "My dad's really focused locally, and I feel like he's done an amazing job, but we can make it bigger. I really believe it could be bigger." I said, "Well, what do you think making it bigger will do for you?" He goes, "Well, it'll make us more money. It'll make the business more successful." I said, "You know, if we just use a simple analogy, like $100 a month, right? If I want to save $100 a month and invest it, eventually, long term, that really pays off. In the short term, I have 100 less dollars in my pocket to spend, and there is a trade-off."

            So we have to really evaluate the trade-off between what I call positive growth and forced growth. Forced growth is different. That's growing just to grow. That's looking at, "Hey, I want to be bigger, I want to make Freedom Street huge, and I want to do this." It's about size. It's quality over quantity, in my opinion. I think the true value is ... The specific answer to your question, Aaron, is we have infrastructure in our business and our model, and we've built systems and processes that allow our team to highly focus on the infrastructure and the organic growth, all while a couple of us are developing and working strategically from an operations standpoint on the vision of growth and what that looks like.

            So I spend a significant amount of time doing videos on clients, but that's also catered towards the advisors. The advisors that choose us, one of the things that keeps advisors from actually selling their practice is not knowing what you're actually going to be doing. So by catering and staying in the client positions that we're in and organically growing and doing the things that we do, the advisor in Charlotte that we purchased, we were one of 35 companies that he was interviewing.

Mike:

Wow.

Scott:

Of the 35 companies he interviewed, he narrowed it down to three, and he did face-to-face visits with those three. When he chose us, he told us that there were three things that stood out significantly. Number one, we were not within 10 years of his age. This person was 78, 79 years old, so we were not 68 to 70. That's the first thing. The second thing was we were not just a business model with one or two people, that there was actually infrastructure with something beyond me as the lead advisor, per se, okay? That was very nerve-wracking to him, that if he was going to be investing in passing on his clients to be served, there had to be another step, there had to be an infrastructure behind that.

            And third was we were the only one of the multiple companies that actually showed him what and how we would do it. So by showing what the relationship with the client was like, by showing him how our investment management models work together, how we leverage systems like Riskalyze to understand the client's perspective and their risk and we identify an IPS and we go through this process, this provided both the advisor and the future client a pathway to success. Most of them answered the question, when he said, "How will you do this," "Oh, me and Suzy have been running a great practice for 27 years, and we know clients, and we understand." And those practices are awesome. I'm not criticizing that in any capacity. Those are the meat and potatoes of our industry. But that's not a process, that's not a system, and that's not something that I can feel comfortable with if I'm turning my practice over to you.

            So the organic growth argument versus the inorganic growth is really about, I think, leveraging both. You have to continue to grow as a practice, and when you purchase the practice, the other objective is to now organically grow that practice in that market. So we execute upon those things, but a lot of those videos catered towards clients are also catered towards the advisors to see how we do business, why we still put the client first, because a lot of the business that are aggregating may not be able to show you how they put the client first as well as I think we spend the time to do.

Mike:

I think that's really smart. The videos, as you say, they seem to be designed for one audience, but they are broadcasting to anyone who wants to see it, "This is the culture. This is how we do business." I'm a huge fan of online video and audio, obviously. The thing that I've often said is, "Look, there's that old saying that people do business with those they know, like, and trust." But there's two things missing there, right? There is familiarity, number one. I can know you like I trust you, but if I haven't seen you in 10 years, I'm not that familiar with you. Do I really know you anymore? I kind of know you and stuff might've changed, but seeing you frequently in my stream, hearing your voice, seeing your face, it makes me comfortable. That familiarity just breeds comfort. It's how we make friends. It's how we build relationships.

            And then the last one is competence. I got to know you're good at what you do, right? Show me you know your stuff. So, again, I can know you, like you, trust you, I can see you all the time, but if I have no idea how good of a driver you are, you're not getting the keys to my car to take it for a rip. So I have to feel that you know what you're doing, and that's one of the things that I notice in the videos. I went and previewed a few of your videos. It really comes through. You know how to do this, you know how to treat clients, you know how to talk to clients. You have a good bedside manner, if you will. You make me feel comfortable when you see you in the screen. Those things are really, really important.

Scott:

But if you know how to talk to clients, Mike, you know how to talk to advisors. Advisors just often don't put ourselves in the side of being the client. It's obvious, right? We go home and the last thing we want to do is talk about money, the last thing you want to do is deal with something you deal with all day long. But we're also in a pretty male-dominated industry, and so the other interesting thing is when you do a ton of videos, what you learn is I have so many guys that I know on major boards, big executives, they'll never like, share, or acknowledge a single thing they've ever seen, like it's a weakness for men to actually say I like something another guy is doing, right?

Mike:

That's funny.

Scott:

And yet they will come up to me on the golf course or in a family dinner or something and say, "Oh, man, I love that video you did on financial mistakes and sometimes you win, sometimes you learn. I showed that to my kids." They'll give it to you one-on-one, but they won't do it on social media.

Mike:

Interesting.

Scott:

So, to your point, that familiarity, it's actually being built without any acknowledgement, but those things are something in our industry that, yeah, our industry is expanding, we are obviously creating more diversity. Hopefully, practices are also focusing on the diversity of the marketplace, the people, the people that are investing today. Not everybody is the same. But the familiarity that you're talking about is something that that's exactly why we do the videos. It's exactly why we do podcasts like this, is because we need people to know, like, and trust us, but they need to get a feel for us prior because that's how people do business today.

Mike:

Love it, love it. That little thing you just mentioned about how some people don't like or engage or comment with things but you will hear from them at some point in time, those people are called lurkers, right? There's lots of people on social media and they're just kind of lurking there, and that's one of the things we try to encourage people a lot, is, "Hey, look, just because you don't see all this interaction doesn't mean people aren't paying attention and listening and consuming your product." By the way, sometimes we'll post a video of a little summary of a podcast, right, and that video will get hundreds and hundreds of views and the podcast might've only got 300 listens or something like that. People are getting it also through the summary. They're consuming the content. So don't read into all the numbers that they have to be massive. Sometimes, you're hitting exactly who you need to hit at the right time. So really, really cool stuff.

            While we're on this relationship stuff and how important it is, how do you go about discovering and vetting a potential partner for fit? I think that fit, as you mentioned, obviously, they're evaluating you. You mentioned the advisor who was interviewing 35, got down to three, and chose you. So they're obviously evaluating for fit. But I would imagine you're not just sending out, "Hey, we're interested," to every practice that's for sale, right? You must have some lens and some filter that you go through as well before you even decide, "Yeah, this is worth pursuing." How do you go about that?

Scott:

So that's a great question. We absolutely do, and we have turned down several opportunities that it didn't feel right. Some of the things that feel right to us, so what are the things we're looking for? Some of the things that we're looking for are, when we started Freedom Street, I really wanted to have a culture and a company that believed in something bigger than themselves, that had a better together mentality, that understood teamwork. It's very difficult to go into a succession or an acquisition where the other individual has never played on a team or doesn't understand any level of infrastructure and other people picking up where you left off. There's a song by Jack Johnson we reference all the time called Better Together that I love because we're really better off together when we're leveraging the strengths.

            I learned a ton from the advisor in Charlotte, as I think he learned from us. We'd get in appointments together, and it was just awesome. When we did appointments together, he might be arguing or frustrated outside before we went in because we were presenting something different than he was comfortable with at times, but at the same time, we went in and he was aligned, and he walked out of that, we were never more aligned than those moments. That's really identifying all those things we talked a little bit about earlier. What is their life like? What is their family life like? What is their background? Do they have something that they're putting more energy into than the business in places? Are they active? Are they healthy? Are they interested in something? Do they really appreciate our practice? Or are we just a dollar figure for them?

            I'm not in this to just do money transactions. That is not what we're looking to do, and so if someone's too caught up in the finer details of just the dollars and cents and it's not about the other stuff, the actual transition, which is pretty empowering and important, what does that look like, how likely are we to retain together where we win together. These are all things that we're looking for. And some of the things that turn us off are the very things that the business is all they talk about, there is nothing else, the family life is dead, there's no real legacy beyond the impact of the business. We either want to coach them and help them find some of that because I think there's an opportunity for that and that's something we enjoy doing, or we want to identify it's not a good fit.

            But most people are coachable, and they need it. It's just advisors have this mentality because we've been doing it so long that the clients really need me, and getting someone to shift the mindset from me to us is something that has to happen. That is what will make it successful. Me is no longer me when you sell the practice, it's us, and how can we get there quicker. That's the challenge and something that will create a high level of success if done properly.

Mike:

I love that. Aaron actually teed up this question yesterday when we were having a prep call for this podcast. He mentioned navigating from the solo advisor mindset to the business owner mindset as something that you've done incredibly successful. It's the reason why you're building a business, you talk about process, you talk about your team a lot. That's a big leap that not every advisor makes, and it sounds like you guys are relatively successful at helping the advisors you acquire make that leap, like, okay, you've sold your business, and I'm not sure what the structure looks like afterwards, if they're able to maintain a small ownership position or if it's just a full transition out or something of that nature. But getting them to make that transition, we're in a business now. As you said, it's not me, it's us. That's really interesting. How did you personally make that mental shift because not every advisor gets there?

Scott:

The solo practitioner to the business mentality, right?

Mike:

Yeah, yeah.

Scott:

Yeah. There's a lot of answers to this, and I'll start with one of the most important, and that is your life experiences and your previous training and the company I worked for prior, I spent a lot of time in leadership roles at Edward Jones where I was prior. I had the pleasure of working with new advisors and to be a performance leader in charge of 50, 60 advisors at all levels, the top producers to the smaller producers. I led recruiting efforts in certain capacities. These were all mostly volunteer level jobs that will engage more partnership down the line, but it's unbelievable training that I received by being able to work with advisors from the business perspective.

            The second thing I can say is it was about four to five years in and I said, "I have got to figure out a way to run my business like a business. I cannot be running this just like the advisor that I've grown into. I got to know more." So I spent all my time and energy studying, learning business, and what you learned really quickly is the next big benefit, and that's infrastructure and teamwork. It's not me. I'm just blessed to surround myself with people that are smarter, stronger, better than me in almost every level. By being able to, what I tell my team all the time, play chess and not checkers ... When you play checkers, you're always looking at the next move. Most people live in this world making the next move and not thinking through the next 10.

            I've always been thinking through 10, and it's been a positive and a negative in my life. When you're 10 rounds in front, you have to focus a lot on presence. You've got to come back sometimes and say, "Wow, what a great day today is. What a great moment I'm in right now," not, "Oh my gosh, if we could do this, then we could definitely do that." So thinking in the mindset of what I call chess, surrounding myself and continuing to hire people that are better, stronger, smarter, have more experience, and then being open-minded enough to learn from every single practice that we've taken on. Every affiliate, every acquisition, any succession deals we've done, we learned from all of them. To me, that's the difference, is that I don't have all the best ideas. I've got a pathway that I think will help us grow, and it's everybody surrounding us and walking with me that's making this actually work. We're growing and learning and pivoting every single day.

Mike:

I really appreciate you spending the time with us today. I know we only have a few more minutes with you, and I want to be conscious of the time. But one thing we did skip over is that you have worked with SkyView on several of your acquisitions. I'm not sure if you had previous acquisitions in which you didn't work with SkyView or didn't use financing, but I wanted to just spend at least 60 seconds or two minutes there on how financing has helped you with these deals. How do you think it's changing the landscape for acquisitions in this space?

Scott:

Yeah. I love the question, and we probably should've started with it because SkyView has been so amazing to us. But it's no different than what we've been talking about the whole time. This business is all about relationships, finding people you trust, and then creating this group of advisory board members, almost, that are helping you do and execute upon your vision, right? SkyView not only does the part that they're supposed to do. They not only do the financial benefit and bring it to the table, but they, a., make it easier by allowing it to be process-driven, b., they talk through the pros and cons with you and actually serve as an advisor and a trusted contact, somebody that we can actually vet different ideas with. They connect us to other industry leaders, so as we grow ... I'm still a baby in this business, man, whether I've been doing it a couple decades or not. On this side of the table, I'm a baby. I'm growing. I'm learning. It's groups like SkyView that are helping us to grow, and we really value and appreciate that relationship. It goes beyond the financing.

            We have worked with other groups, and some of them have been really good, but not to the level that we get in service, the relationship-driven mentality, and really just the partnership. When we founded Freedom Street Partners, freedom was all about the freedom of being able ... Whether it's financial freedom, it's life's freedom, it's the freedom we have in this country that not every place in the world has, it's amazing to us. The street was bringing Wall Street to main street and simplifying the things that everybody makes complex. And there was a partnership attribute, the partnership between us and our clients, us and our partners, and us and the partners we work with, like SkyView, in the industry. To me, that's what Aaron and the team really symbolize to us, is really a partnership.

Mike:

I love it. I love it. Fantastic answer. Aaron, anything to add? What's it like working with Scott Danner and the Freedom Street Partners team?

Aaron:

Well, we've obviously worked with Scott on a few deals, and Scott kind of hit it on the head. It's always hard to convey when you're working with clients, but I feel like we genuinely believe this, which is that this is a relationship business. SkyView's out and we are working with our clients to help them further their business. So we really appreciate these clients like Scott who collaborate, who are open to our ideas, who open up to trust, let us do our work. We've enjoyed working with these guys because they are respectful, they're prompt, they're thorough, and they run a really good business. What we've been able to do is collaborate, help them learn how to be commercial borrowers and continue to grow upon that, and it's just like advisors working with clients that they really like.

            When someone has a fun personality and they appreciate the work you're doing and vice versa, that mutual respect is really fun. I talk about mutual respect all the time when we're working with buyers and sellers and having that mutual respect together. It's the same we have it in our business. I think mutual respect and that kindness and that gratitude really makes it fun and it makes it a super enjoyable business at the end of the week to wrap up and have these fun client relationships.

Scott:

Yeah, Aaron, one thing I'll add, Mike, just to wrap it up on top of that, a little cherry on top, is that I think what SkyView is doing is similar to what we're doing, and that is we want to genuinely help advisors find their next chapter. It doesn't always end with us. It's not always us. But it doesn't mean that we're not putting good information out there, guiding people that don't end up utilizing us. Our objective is for the industry to be stronger, for us to really make waves in an industry that sometimes gets caught up in the bad stuff, and we're not. We're trying to help people find the best path forward, and groups like us and SkyView, I think, stand out amongst people that really we want to do what's in the best interest of our clients, whether that's the advisors we're serving or the very clients we serve every day as investment advisors and financial planners and everything that our team does.

Mike:

Fantastic. That is a great cherry on top to wrap us up. Well, Aaron, of course, Scott, real pleasure having you both on the show. I really enjoyed it, and I learned a ton, which is always the little side benefit for me, right? I get to do this, and I learn a ton over the process. Apparently, for people who weren't aware at the beginning of our little intro there, before we started recording, I've got to get a Peloton because I'm the only man in existence apparently that doesn't have one. So I've got to join you guys out on the virtual road. Thanks, guys.

Scott:

You do. Yes.

Aaron:

We'll see you on the bike, Mike.

Mike:

See you, guys.

Scott:

All right. We'll look forward to seeing you. Thanks for having us.

Aaron:

Thanks.

Mike:

Thank you very much for listening to this episode of The Advisor Financing Forum podcast. It's always so great to have you with us every week. As I mentioned earlier, if you have a suggestion for a topic or a guest for a future episode, please send it to podcast@skyview.com. And, by the way, if you are in the process of selling your business to another advisor, Aaron Hasler and I would love to chat with you and see if you'd be willing to join us in a future episode in this series. Your experience and your perspective would be so informative and helpful to others who may be embarking on a similar journey in their future.

            Speaking of sharing tales from the journey, huge thanks to Scott Danner of Freedom Street Partners for being so generous with his time and wisdom. We're so grateful for his willingness to join us and share his story. Next week on the show, Nick Arellano of Your Legacy Partners, a boutique M&A advisory firm based in Hermosa Beach, California, is joining us for a deep dive on best practices for selling an RIA business. You aren't going to want to miss that episode, so make sure you click that subscribe button on Apple, Spotify, Stitcher, wherever you like to get your podcast jam on. Okay, that's about it for today. Please make sure you stay safe, wear your mask, keep your distance, and be nice to each other, okay? We will see you next time on The Advisor Financing Forum. See you. Bye.

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