When making decisions, we lean towards the familiar. It’s in our nature as change often seems too uncomfortable. From ordering food to choosing apps, we want what’s familiar. But stagnation comes from maintaining the status quo. To thrive, you need to innovate. You need to expand your service offerings. You need to use new tools that help serve more people in a better way. To provide more value for more clients, innovation is key.
On this Elementality, Reese welcomes Matt Reiner, CEO of Wela Strategies. Matt explains why there’s always a need to evolve. What advisors do won’t change, helping people plan for happy futures, but how we do it will continue to change. Learn why Matt’s biggest fear for advisors is being stuck in the status quo.
Podcast Transcript
Matt Reiner:
If you find yourself, in my opinion, competing with Vanguard and these firms and clients are choosing them over you, there’s something missing in the sales pitch because there is… They are innovating, which is hopefully gonna cause… And I think that that’s the value of them doing this, is that they’re innovating and delivering more, which should push us as RIAs to do more faster and better. And we have the resources now. The technology landscape is better than it’s ever been. The integration capabilities is better than it’s ever been, the new opportunities is better than it’s ever been. So you have the ability if you just move and take action.
Jordan Haines:
Welcome to Elementality. Each episode we will explore the challenges and the opportunities faced by financial advisors and how advisors can use elements to grow their business and serve their clients better. We hope you enjoy this episode.
Reese Harper:
Welcome to another episode of Elementality everybody. I’m your host, Reese Harper here excited to speak with a very diverse work experience guest who’s been in Fintech B2B, B2C a little bit, and also professional… He’s an RIA professional, a CFP that has experience in both wealth management consulting, community building and just building a thriving practice. So he is got a lot of experience. I’d like to welcome Matt Reiner to the show. Matt, thank you so much for joining me.
Matt Reiner:
Thanks Reese for having me. And those kind words, it’s always nice to have introductions because they make you sound a lot better than you really are. So I appreciate that.
Reese Harper:
I’ve benefited from that in my career as well, and I’m really appreciative of that. [laughter] So Matt, how about you tell us just a little bit about what life is like? Like just give us the two minute background and then what life is like now, what function and kind of like what occupies your time now. Give us a little background of how you got to where you’re at now.
Matt Reiner:
Yeah, it’s a super fun story, man. I kind of came in, in the shadow of my dad who founded our firm 27 years ago. My brother, I have an older brother who joined the firm and came into the shadow of him and they all, they started to build a great firm and I had this journey of figuring out what my unique value was. And I dealt with a lot of imposter syndrome as everybody could well imagine, coming into that area. But everybody expected me just to be successful because my dad had a firm and I had somewhere to go and had to figure out where I kind of fit. And I landed on this technology innovation kind of area, and I started a technology business about eight years ago and that’s really what launched kind of me finding where I…
Matt Reiner:
Where my kind of center of genius was, the entrepreneurial spirit, the technology innovation, product management, leadership, all of it that was involved with starting the business. Like just got me going. And I learned a lot, had a ton of fun. We made an impact. We transitioned that company was called Wela it was just an application. And we transitioned into a B2B company called Benjamin about five years ago, which was a workflow automation company, integrating technologies across the advisor’s tech stack to automate the menial mundane. Within both companies we raised about $5 million. We established a new category of technology on the landscape maps for workflow automation. And then both of those failed. We closed Benjamin down recently, and that was probably the best thing.
Matt Reiner:
The biggest break was to be able to learn through those endeavors. And now I find myself back within our RIA company, Capital Investment Advisors, and also leading our other firm, Wela Strategies, which focuses on the mass affluent, but Capital Investment Advisors is about 4.5 billion, $5 billion RIA firm located in Atlanta. We got four offices across the country. Our core mission is to help families find happiness in retirement. And I’m now working on creating an innovation lab here within our firm to help continue to push the envelope. And we’re identifying some different growth channels that I’m looking to head up as well. So as working with my brother as managing partner, we got one other partner and just super fortunate to have 80 team members across the country helping us serve happy families.
Reese Harper:
So how old was your dad when he went into the industry? Like, was he like in his 40s, 50s, or was it his early career too?
Matt Reiner:
Yeah, so he you know, he’s gonna be celebrating his 71st birthday here this year. And so he started this company 27 years ago. And before that he was doing some 401 [k] business. But he was, he actually started his career in the banking side on the lending side.
Reese Harper:
Interesting.
Matt Reiner:
He started on the lending side. He liked investing, he was doing 401 [k] stuff. He had an opportunity. My mom kind of nudged him into like, “Hey, you love doing this, why don’t you go do it for others?” And you know, he did that. He’s an amazing biz dev person. We got lucky in a lot of different ways. And we’re just extremely fortunate for the ability to serve 4000 plus families these days. That’s it.
Reese Harper:
Let’s go to another topic that I’m interested in, which is more like tapping into your vision, kind of where the industry’s going. The question for me is really what have you seen start to change recently or in the last couple years that you’re concerned about as a business owner trying to preserve shareholder value, right? You’re trying to preserve enterprise value. What keeps you up and what are you working on right now that you worry about a little bit?
Matt Reiner:
Yeah, my biggest fear is the status quo. And I think that my biggest fear is letting you know ourselves sit that we think we’ve nailed it all and that we’ve got it all figured it out and an inability to evolve and change. I think that that’s always been my biggest fear. I think that that’s kind of just like my perspective from, I have a different perspective than a lot of people inside of our firm in the sense that running a technology company, I interact with a lot of technology people, I ingrained myself into the tech community and it’s a different world there and you see different things and you get different experiences. And now bringing it back to wealth management, you know what, and I see it in the world that we’re in today with M&A and everything of that nature on wealth management is that, there’s always a pendulum that’s moving and there’s always evolution of how we do our jobs based off of that pendulum swinging.
Matt Reiner:
And what I mean by that is I think that how I see the world is I think that the, what we do will not change of helping families plan for their financial success in the future and get to that point and then live in that point. I don’t think that that changes, but I think that the how we do it will change. And I think that the fear that I have is that people stay stuck in the how, and they don’t allow for an innovative mindset into serving more clients, providing more value for clients. And I think that right now we’re at this point where I’ve always felt that there’s a lot of people talking about being comfortable, being uncomfortable and trying to innovate in the space.
Matt Reiner:
But what I’ve also realized as I’ve stepped out is that there’s a huge swath of people still on the other side. They’re like, I’m good. It’s status quo as usual. And I think that there’s this point that’s gonna come that there’s just a deciding factor. I think that the status quo people aren’t wrong. I don’t think that they’re like, it’s bad. I just think that for us to be able to serve more families, my mission has always been how do we get the ability to have every single person in the country be served by a human financial advisor? Because I believe in the value of the human advisor. I think that in order for us to do that, we’ve got to be thinking a little bit differently. And I hope that we can kind of bridge that gap and move more of those status quo people over to innovating and make it easier for them and let them see the light of the value it’s delivering to more people.
Reese Harper:
Matt, I’m gonna, I just wanna unpack a couple of things there. So the first thing I’m curious about is when you say the biggest fear I’ve got is like, getting stuck in status quo, like what is status quo? Like the status quo people, what are they? What service are the status quo professionals rendering?
Matt Reiner:
Yeah, I think that the status quo continues to hinge their value on investment management solely. I think that the status quo says I’ve got a great investment philosophy and my investment philosophy, that’s the core of what I do and of who I am. And that’s the service I provide. I think that that’s the status quo. I think that’s also it’s an inability to expand your service offerings of what you’re providing to your clients and how you provide it to them. Meaning using financial planning tools, using content creation as a tool, using all of these new innovations that are coming to help serve more families in a better way. And so I would say that they’re stuck in the way that when dad started the firm, that’s one thing dad has allowed for and that our team has done a really great job on, is that we haven’t yet got stuck in the status quo.
Matt Reiner:
And dad used to have to call into Schwab to get the, what the market did and how their client portfolios have done. We’re now using Slick performance reports, we’re using financial planning tools. We’re talking about how to innovate and utilize AI. We’re pushing the ball forward and dad would be the first one to tell you he never imagined the firm looking the way that it did. But he had an open mind to changing and he had a low ego that allowed for him to be the way that he was doing it. He was allowing for it to be evolved upon and the status quo or the people that are… Or who my dad was, without that ability to see a new way of progressing a firm.
Reese Harper:
I’m hearing like concentration around the delivery of investments. I’m hearing that the status quo believes that the value is in investment management and that they’re maybe not as progressive or as open as your dad was to sort of say like, what, how should the service evolve? What needs to evolve? Like what needs to change? What do you see? Well, let me get… Let me ask you a follow up question into this, is Forrester’s research on consumer segmentation is something I’m interested in. And they talk about the difference between a validator consumer and a delegator consumer. Those are the two that traditionally are looking for some kind of human centered advice. The validator is different than the delegator in that they want a little… They like doing their own research a little bit, but they still are like, it’s almost like they could… I met with a validator this morning actually, and it was really interesting to just watch the way he’s thinking and watch the way his portfolio’s designed and realized that how I was approaching this validator.
Reese Harper:
He is a very successful, like mid 50s consultant. And I thought that the delegator would be the one that would pay AUM fees and that the validator would sometimes just be like feeling tensioned. And I for the most part, I think that’s true if you’re like closing a validator or working with a validator that isn’t really ready to like delegate everything, they don’t want you to like quote an asset minimum and be like, it’s a million dollars to work with me, or else, they’re just gonna walk away. So I’ve been starting to close people in a retainer plus AUM model that are validators, but with like a lower AUM fee. And it for some reason it was like, I thought the validator was against the AUM fee. I just felt like the validator is like frustrated that an AUM fee at one and a half percent is a thing when they could go online and get it for 0.5.
Reese Harper:
But I found if I say, well, there’s a retainer for the meetings and all the work that I do, but then there’s this AUM fee that is for all the asset management and it’s about the same as what you pay online, then I’m getting like more revenue than I had before and it’s coming from the validator and I didn’t think I could work with this consumer. Like I thought this consumer was not going to engage. Do you have any experience working with validators versus delegators? Is that term familiar with you, number one? And what have you learned about how to work with these two types of people?
Matt Reiner:
Yeah I’ve heard of the terms. I haven’t done as much research on it as it sounds you have. So I wanna be really transparent on that, but we do segment individuals in terms of how they look and as I’ve met with clients over the past 15 plus years there’re those, like, it’s basically, it’s like you’re… It’s just do-it-yourselfers and they want just like, it’s like do it yourself plus and do it yourself base and do it yourself plus wants just like someone just to give them a little bit of advice like, Hey, am I doing like to your point of validator, am I doing it okay? And then the delegator’s like I just…
Reese Harper:
And I have customers like that, you have people like that.
Matt Reiner:
Yeah but…
Reese Harper:
Do you not… Do you work with them any differently?
Matt Reiner:
Well, so the challenge is like this… So I think that this is also one of the root challenges in our industry is that there’s an industry perspective, there’s a perception that’s seen by our industry that we are just investment people. We haven’t done a great job of sharing what our value is. And that it goes beyond investments. But because the do it yourself or the validator is like they just are focused on investment management and that’s it. They just want investment management. Give me… Am I using the right stocks? Am I… At least from my perspective, am I using the right stocks? Am I using the right funds, et cetera. That value to me is not as meaningful or as impactful on my side. And so that is the one that is going to get challenged in the fee market. The delegator sees the entire picture. But I think that we’re… With how we approach it, our whole emphasis is on delivering happiness. And so we talk about that the whole time, which kind of pushes out those kind of do-it-yourselfers because it’s like, they’re like, oh, you’re doing, like, I don’t need any of that stuff, but that’s not our ideal client then. And so we’re okay with that because we advice them.
Reese Harper:
So it sounds like you like, you’re kind of almost like, do you weed… Are you trying to weed out, like, let me just define for the sake of our conversation the differences between these groups. So I would see self-directed as someone who doesn’t call you. Like if they’re truly self-directed, they don’t value a professional. In fact, they kind of view a professional as an enemy a little bit like that the dumb people work with that the people that are suckered work with like, oh, you got suckered, you’re working with a financial advisor. That’s the guy that’s the self-directed investor. Now the validator and these aren’t like my definitions, this is like what I’m trying to like extract from Forrester. The validator is a step towards wanting a human. Like they wanna talk to Matt. The question is, they still seem to kind of like being involved in the research process.
Reese Harper:
That seems to be what, that’s all that Forrester has said is that the difference between a delegator and a validator, both wanna talk to humans, but the validator is more likely to go online and read and go look at Apple’s stock and decide if they want to own Tesla. The funny thing I’ve found about that customer is I used to be scared of that customer because I only had one fee model and it was like AUM or nothing. And like that customer was uncomfortable with AUM like all the time. They’re like, what the heck? I gotta give you $2 million and pay 1%. Like, what are you gonna do for me? And then the delegator is like, sure, whatever. I don’t care what your fees are. Like, I’m just ready to get going. And I feel like there’s a fee model innovation or some kind of like service model innovation where we don’t force the validator to become a delegator in order to work with our service model, but we just say, oh yeah, it seems like you’re more comfortable with this service package.
Reese Harper:
We’d love to work with you. And then just be patient with that person until they raise their hand and say, look I kind of would rather have this other service package. If they don’t pick the other delegator service package, leave them in the other service package and let ’em just be happy with what they wanted. Is any of that resonating with you? That’s my current thinking. Do you have more than one fee model, is my question. And does this discussion even seem relevant for you in building your firm? Or is it like, dude, I just wanna eliminate those people and focus on the delegators? ‘Cause they still exist.
Matt Reiner:
Yeah, so I think we don’t have… We have one fee schedule at least right now. And our focus is on, we’re gonna help them as much as we can, but if they see… If they don’t see our full value, the likelihood that they’re gonna be a lifelong client is low because the ebbs and the flows of the market. Like I tell every client, like, you know, the easy part for me is investment management, but I don’t know, like you probably know just as well as where it’s gonna go, it’s more about the behavioral coaching, the psychology aspect and the planning aspect that we’re really good at. And that’s stuff that we can control. And so if they think they’re… If they’re coming to us thinking that we can help them control a better outcome on financial investing, we’re pretty good, but like, can we control that? No, it’s out of our control. It’s aversion to the mean, I will say this though, is that what has been successful for us is our marketing and content strategy. We keep those validators in our funnel to where they’re getting information and they’re hearing enough of us both from our radio show and from our content strategy that they stay there. And when they are ready to raise their hand, they’re there. But it doesn’t make our team lose focus on it.
Matt Reiner:
Now the one thing I’ll say is our other RIA Wela strategies, we do have a… We’re focusing on a, that is more focused on the Henry’s, the hiring’s not rich yet, which there is a different, they’re not necessarily validators, they just have different needs at this point where they’re more planning centric and they don’t have the AUM to make it affordable for all the work that’s going into them. And at that point, we are now exploring what is a model to then allow them to pay like a recurring, like Netflix fee, a SaaS fee for that to where until they get to the AUM level, but they get different planning level tiers on that side. So that, I think there’s innovation there.
Reese Harper:
How many customer have you, I mean, dude, you’re one of very few firms that has built this. I mean, there’s not a lot of firms who are trying to create a membership program or some kind of validator model for Henry’s. Like, it’s, it’s a long play. It’s like an insurance policy in my mind of like, if you don’t be, if you’re not doing this, like you’re probably gonna suffer organic growth rates at some point down the road, you’re probably gonna have like, not the best valuation on your enterprise. ’cause the, what happens that people don’t realize is that lifetime value of a customer gets smaller and smaller and smaller. The older and older they get, and the risk that their kids don’t work with you goes up. I mean, over time, like more people are becoming validators, fewer people, Gen Y and Z are, according to Forrester becoming delegators. There’s still a good delegator chunk, but they’re… I kind of feel like it’s either a glide path where they’re, they need more time to acclimate or they’re truly gonna be in a more validator self, like support, I would call like advisor supported model. And I think firms need to build both to protect themselves against the future. And I can see you doing that.
Matt Reiner:
Yeah. Oh, twofold on that. I think that that’s such an opportunity for us as advisors, right? That is up to us because we are creating more validators and less delegators because we continue to promote a service offering that the country is moving further and further away from because there is more and more options. We have to do a better job of communicating what our true value is and talking about those things because it, they, there are those validators are delegators in some instance but they’re validators when it comes to just investment management because they’re technology, tech savvy from that standpoint. So you have to get them to be a delegator in another aspect of what our value add is. And there is so much there that we can do. And so that’s on us, that is on us as an industry.
Matt Reiner:
And that’s what I’m trying to help us as an industry, as other advisors by creating community and et cetera, to help be better at so we can change that perception together. Because those, what those validators are missing is that the value of advisor is so, so valuable, but they’re looking at it in a microcosm of what we do. And the second point is that we saw this early on and that’s why we created Wela Strategies, which is one of our other RIAs to focus on the mass affluent. So that is a firm that has been focusing on the mass affluent for 15 years now, 13 years. And it allows for us to create a profitable entity that serves people that may not have the, at the beginning, at the start of their journey, enough for the minimum fees of other advisory firms.
Matt Reiner:
And we’re able to leverage the resources of both firms to make that a profitable venture to serve them. And it’s now allowing us to have like this little incubation hub or innovation hub where we can try different things, like can try this planning initiative with a SaaS fee and see how it works because we have a thousand plus clients over there and we can see how it works, what’s the acceptance, and learn and iterate on that. And when it does work, we then can evolve that up to our larger firm as a new model. And we’re at and we have that feasibility now.
Reese Harper:
Was that like intentional? What came first in developing? Well, was it we need to like create a different business to serve different needs? Or is it we need to create a new business to help make sure that we protect the value of the big one?
Matt Reiner:
It was because we had these clients that we needed to serve that we weren’t able to serve appropriately at the big business at that point. And this was pre.
Reese Harper:
Kids of clients and Henry’s and just low AUM.
Matt Reiner:
Low. At that point it was just low AUM. Right? And so it was just harder to serve them at the larger firm. And we were hitting capacity issues and but we couldn’t differentiate that.
Reese Harper:
Yeah, because Like you probably have a baked process that really accomplishes what the high net worth client needs, but it’s like, how do we take the cost of that and then just like cut the revenue by a half or a 10th?
Matt Reiner:
Yeah.
Reese Harper:
Like you can’t just give the same service to someone who’s paying a 10th of the revenue. Right.
Matt Reiner:
And this was before like the emergence really of robot-advisors, right? So we’re sending these people to Vanguard and Schwab, and it was like, these people want to work with us. They want, they believe in our philosophy. How do we build that.
Reese Harper:
They’re calling you for a Reason? Yeah. Like they’re clearly either they’ve already made a choice that they want professional support.
Matt Reiner:
Yep. Yep.
Reese Harper:
Just they can only afford what they can afford. I was in a similar boat. I probably did my first SaaS fee in, oh, I don’t know, maybe it was ’08 or ’09. It was kind of the first time I started experimenting with like retainer, monthly retainers that people could afford. Or even annual retainers were scary. And so it was like, how do I kind of like it’s almost like what came first, like the chicken or the egg. Did the business model innovation? Does the business model innovation need to go first so that we can then serve? Or do you just like, try stuff with people with lower revenue and then like, figure out how to work, make it work? And I think most firms who’ve tried have just said, just pick a number [laughter] that we could charge for like something and then we will try to figure it out. Did it take a while to get profitable in that business?
Matt Reiner:
Yeah. I mean, well, that business was profitable because we were from fairly pretty early on because we were just using resources from the other business.
Reese Harper:
Subsidizing.
Matt Reiner:
So they’re subsidizing.
Reese Harper:
Operating overhead. Yeah.
Matt Reiner:
Exactly. But you know, the thing is that, it is a, you know, you build it and you test it and you iterate it and you perfect it over time. I don’t think everybody’s trying to make the perfect situation right out the gate. And I would say that, you know the other challenge is like, how do you do it without cannibalizing your core business? I think that that’s the biggest challenge, right? How do you do a SaaS fee model without cannibalizing it to where everybody wants to go to that, where you’re then revenue’s being cut by 15% and you basically just lowered fees in a… That’s up Way.
Reese Harper:
That’s why I was asking earlier about service model. ’cause I’m like, I think there has to be a fundamental difference in service model and a fundamental difference in pricing. And you’re experimenting with both of those things in different businesses. You’re like, we got one fee structure, but I just heard you don’t have one fee structure. You got Wela and you have capital asset. I forget the name of the RIA.
Matt Reiner:
Capital Investment Advisors. Yeah. We have two different fee. We have, well, the fee model is the same, but the break points are different, right? So you.
Reese Harper:
So do you have a High AUM fee in Wela?
Matt Reiner:
No, the AUM well, the high, the AUM fee, so basically it’s just tiers, right? So it’s 0-250, 250-500. But as opposed to going on the regular side at CIA, it’s 500 to a million is at the same level as the 0-250. Now the difference is the investment strategy, right? In order to make that profitable, you have to go with a sleeve based approach or a model-based approach at one and a more custom approach at the other. So that goes into the investment. But then that’s how it started, right? That was 15 years ago, but it’s had to evolve, right? So now it’s all about the planning service and how in depth it goes and everything of that nature at each firm. Because that’s really where the value is. It’s not necessarily on the, so.
Reese Harper:
So you’re at a point of sale when you say you can go with Wela or you can, what’s the acronym? Is it CIA?
Matt Reiner:
CIA Yep.
Reese Harper:
CIA.
Matt Reiner:
Yep.
Reese Harper:
Okay. So you got CIA you can go with Wela. Do you do a demographic just analysis and say, I’m only gonna pitch Wela? Or does sometimes you pitch both and one just is bigger?
Matt Reiner:
Well, so no, at the beginning it was all up to the advisor that was in the conversation to determine which avenue to pitch. They knew both. Now, I mean, we have more structure. I mean, we have 80 people. We have a more, you know, a structured firm than we’ve ever had.
Reese Harper:
You don’t let someone, someone can’t pay up to get CIA.
Matt Reiner:
Right? Right.
Reese Harper:
They qualify.
Matt Reiner:
They can move up once they’ve reached the threshold. But otherwise they’re being, they’re kind of going through our lead area that is determining which business model they go to.
Reese Harper:
Are you, I’m sensing like some curiosity you still have about that?
Matt Reiner:
There’s a ton. There’s a ton. I mean, there’s, it’s never solved. We haven’t solved it.
Reese Harper:
I’m still trying to figure this out right now.
Matt Reiner:
We haven’t solved it yet. Because you think about it, like, you know, one of this areas is why do we have two separate companies, right? Like, we started two separate companies and now it’s like, should they just be one? And they’re just like different divisions in the company and you know, you just like kind of, and then you can leverage resources. And you, I think that that’s the fun of all this. Like I, you know, our man, our leadership team and our kind of the me and the other managing partners, like, we are just constantly curious and I’m constantly curious to continue to find like, what is the right way that gets… That’s the reason to your question earlier, like the status quo, we could, we could literally just be okay as is. And we would, you know, what.
Reese Harper:
Like a 90 plus percent retention rate and no [0:28:57.4] ____.
Matt Reiner:
Everything would work. Everything would work. But there’s some other avenues that I think that we could be better at. And so let’s be curious and find it.
Reese Harper:
What I think to your earlier point, I think it’s important for our audience to like, understand this. Your biggest fear was what I heard at least was like maybe falling behind in terms of your relevance to the, to the market to, and do the consumer moves way faster than the firm. I mean the consumer’s preferences are changing like very fast. And the firms are like, maybe next year we’ll switch planning software. [laughter], I Mean it’s…
Reese Harper:
It’s, our industry will always be behind the direct to consumer businesses. And so I think there’s a lot to learn from, like what wealth front’s doing, what Betterment’s doing, what Vanguard Direct is doing. Like what are, what is the consumer demanding, like in order to engage. And I’m like, dude, they’re getting like for 30 bucks a month at Vanguard, they’re getting a reasonable service offering. And it, I don’t know, 25 bips. I mean, I don’t know how at scale.
Matt Reiner:
Yeah.
Reese Harper:
I mean There’s not a lot of revenue coming in per client and it’s pretty incredible to see what they’re doing. And the majority of consumers seem to still want custom and boutique and local and differentiated and nichey and like, who are you? They don’t want a big brand, like the modern consumer isn’t looking for like a big institutional brand so they can be safe and secure. I think that was like 25 years ago, I think that 25 years ago is like AG Edwards and you know, it’s the brand name.
Reese Harper:
I mean, I met guys breaking away going on their own and it was, it was like the brand they went with, like to be at Raymond James or be it, you know, AG Edwards, like it meant I’ll probably close a deal [laughter], I’ll probably get some deals out of it. I actually think it’s actually, I mean, I like hide the fact that I’m custodying at Schwab because I don’t know, I’m at like the best custodian and I’m still scared that consumer’s gonna have some negative experience that I’m gonna have to overcome in the sales process over the custodian I’m picking. I mean, I can’t even like associate with a big brand anymore when it comes to like someone in their 30s. What’s your experience?
Matt Reiner:
I mean, it used to be that you could sell by just saying you’re an RIA, right?
Reese Harper:
Yes.
Matt Reiner:
Like, hey. I’m an RIA.
Reese Harper:
Like I’m an independent RIA.
Matt Reiner:
I’m independent. Oh, I’m Independent. Yeah. Like that used to sell a lot. Like now it’s all about it. It truly is more about the relationship. But to your point of like competing, if we’re, if you find yourself, in my opinion, competing with Vanguard and these firms and for, and clients are not, are choosing them over you, there, there’s something missing in the sales pitch because there is.
Matt Reiner:
They are innovating, which is hopefully gonna cause. And I think that that’s the value of them doing this, is that they’re innovating and delivering more, which should push us as RIAs to do more, faster and better. And we have the resources now. The technology landscape is better than it’s ever been. The integration capabilities is better than it’s ever been. The new opportunities is better than it’s ever been. So you have the ability, if you just move and take action and if you’re getting beat by those, then it means that you’re slow and you haven’t done that yet and you’re still hinging on something that is far past us by.
Reese Harper:
That’s great advice. It’s great insight. I just think it’s cool to see how you’ve been pushing and it seems like you’ve held onto growth as a real key value in some ways growth in terms of number of households, growth in terms of impact growth in terms of how many families I think that’s the right unit of sale to sort of drive. Like we shouldn’t be driving off AUM moving forward because AUM’s not really a great proxy anymore for value creation. I just don’t think it’s like, as effective as like household count or organic growth rate. Like organic growth rate to me is like the thing that I would hope advisors take away from this interview is like Matt and company at CIA and Wela have really tried to protect their organic growth rate by launching Wela and getting it off the ground and moving the needle.
Reese Harper:
If you’re not going after Henry’s, if you’re not going after the next generation, if you’re not bringing in new household counts, your organic growth rate is going to decline. It just will. And if you try to get M&E you try to go through an M&E transaction, you try to sell your firm, you wanna build enterprise value and you have an organic growth rate that’s like 2% or negative, negative five. And people listening may not know today and I’m not trying to bad mouth anybody, but you should know how to calculate your organic growth rate and you should be looking at it. It’s important. You know, my, I was blown away four years ago when I was offered to, when someone came and offered me to be a part of a big transaction, I declined after six months of due diligence and a lot of work, I was like, man, I just think I’m gonna stick with what I’m doing and keep cranking in my RIA.
Reese Harper:
There are days I still wish I would’ve taken the money. It would’ve been nice [laughter] I would love to be able to take some more vacations and not be like, what worrying about buying this cool solar panel I want to get, but you pick liquidity now or you pick asset growth. I picked asset growth and I’ve been happy with my decision, but what I found was when I was shopping, organic growth rate was the only thing I was really being shopped for. Even though they wouldn’t tell me that when I dug down to the valuation, I could tell they were really, really, all the buyers were really, really concerned. And I had at the time a higher organic growth rate than I do today. It was like pushing 20% annually organic. And it was like multiples were insane for.
Reese Harper:
My business, but also with my organic growth rate that high, it was really hard for me to justify selling. ’cause I had worked so hard on this organic growth rate and I’m like, dude, every year this happens, it’s just like pretty accretive and I’m young and I don’t need to sell. Yeah. My point is, like your organic growth rate, if it’s at two or three, like you’re kind of at industry average. And if you can get it up to five, six, seven, where next year’s revenue just because you’re alive is gonna go up five to seven to 8% or 9% with no new clients coming in. Just all existing clients with new deposits or new clients coming in that are new households. The multiples are like high teens, like high teens on EBITDA versus like six, seven, eight. And I just don’t think most, when you say status quo, I wanted to hit that one more time.
Reese Harper:
That like, the value of your enterprise is really driven by what Matt is highlighting, which is new. Just new, new, new, new, new. I mean it, I know you gotta manage the existing, but the existings in 92% are more retention rate. They’re not going anywhere. So these buyers are looking for, could you crack the code of getting new households and new deposits and new flows from, you know, your existing book and new clients. And I think that most people quit doing that ’cause they look at the Wela business and they’re like, dude, it’s so hard and like’s not really, like, we’re not getting a lot of AUM like, it’s a fraction of what our other business is, but that fraction of the size is what will drive the valuation on the other business. And if you don’t build that, I think there’s a challenge. What’s your thought on that before we wrap? I, I know I took a little more time kind of.
Matt Reiner:
Yeah I.
Reese Harper:
My opinion What’s your current thinking on It?
Matt Reiner:
I think that, you know, you have to know what your perspective is, right? I’ve known a lot of friends that have had the conversation about an acquisition. Some turned it down, some took it and it is based on organic growth. I think it just comes down to what is your end game? And if your end game is to impact more people and also impact your family in a more, in an even greater positive way, you have to have a growth mindset. I’m not saying that a fixed mindset doesn’t work in this business, but a fixed mindset just means that you’ve gotta accept what you’re, you’re, you gotta accept that you’re going to be passed likely because growth mindset individuals is not just organic growth of, of families, which is important, but it’s growth in terms of your value that you’re providing to your clients.
Matt Reiner:
It’s growth in the matter of how you’re serving and how you’re maintaining and how you’re retaining and how you’re serving your team members. All of that. It’s a growth mindset. But you know what, to those that are in a fixed mindset, that’s like perfectly fine because this is a, an amazing business that for right now. And I think for the foreseeable future you can see a revenue double every 10 years by just maintaining. And that’s okay. And I think that that’s kind of the, that’s the rub that’s happening right now. That’s super interesting. And I do believe that there’s.
Reese Harper:
It’s interesting, isn’t it? It is. It’s amazing how it does. Some people are just like, dude, I, that’s too much work. Like I, I’ll just wait for the referrals. And if they come in, they come in, if they don’t come in, like, I’m not gonna get into marketing. I’m not gonna like start trying to go out and do stuff. I mean, it’s.
Matt Reiner:
But just be okay. Just be okay though in that sense that there is no silver bullet to get you more. The only silver bullet is work.
Reese Harper:
Yeah. Well, isn’t it, okay. Isn’t it also appropriate to say, Matt, like, accept the fact that your evaluation is in decline?
Matt Reiner:
Yeah. Yeah. I mean, well if, if that’s what your exit strategy is, right? Some people are like, you know what, I’ll just live off of this and I’ll kind of just let it go. And that’s a tough thing that kind of gets into a lot of psychological aspects of, you know, you’re really hurting your future self because you can’t see past your present self. And there’s a lot, there’s a lot of challenges there. And I would, I would encourage people to go read the book your future self if you’re in that mentality because you can learn a lot there. But yeah, your evaluation is in decline. And some people say, I don’t care about that. I’m just gonna live off of this and as my clients die, then my income will go down. But it’s a tough way. It’s a tough Battle.
Reese Harper:
Psychologically. That’s tough. It’s tough. I think psychologically that can be difficult to, it’s easy to say that. And then when you address your income going down by 8% a year or you know, 5% a year and it just becomes a little more difficult to sort of like take that vacation or enjoy that time with the grandkids. Like, it there’s a different pain that starts showing up when the income declines. And then I feel like I keep meeting advisors who’re like, dude, I gotta like kick up my organic growth rate. ’cause I can feel it. I’m like, we should have been doing it 10 years ago. But I that’s okay. I’m not trying to shame anybody.
Matt Reiner:
Isn’t it funny? Isn’t it funny that we run into the same issues that we tell our clients not to run into when it comes to retirement savings [laughter], but when it comes to firm savings, right? We say start early, do it often, do it early, and that it pays dividends in the future. But yet we can’t do the same thing.
Reese Harper:
Matt. You’re a fun guy to chat with. You’ve got a lot of good energy and I can see why you’ve been so successful and why I’m sure your clients love you and I’m sure your dad and bro and all the 80 team members there are incredible as well. And thanks for caring about humans and human advisors and kind of the role we play. For me, it’s just a real blessing to be a financial advisor and I get to have a lot of really meaningful conversations that sometimes only happen in, you know, private rooms with a therapist. And by having a pragmatic reason to bring people together with their money, we get to have a lot of really beautiful, meaningful conversations that a lot of professionals would be jealous of. ’cause they’re so rewarding. They’re just so rewarding. And I can tell you enjoy that and just wanted to say thanks and give your last word.
Matt Reiner:
Yeah, man. Well, Reese, thanks for everything you’re doing, man. And you know, I just encourage advisors to keep focusing on the meaning of what we’re doing and we’re making an impact. And there’s people out there that are speaking for us to, to keep the fees and that your value is warranted and you are needed. And I’m super excited about the future of this. We talked about a lot of challenging things, but the future of this industry is extremely bright. And I’m excited for what you’re doing Reese and excited to be a part of it, man.
Reese Harper:
Thanks, Matt. I’m gonna, I’m gonna have to have another conversation with you ’cause I, they, you just don’t get enough time on a podcast to unpack enough. Just left me with another 10 questions. You’ve got a lot of great insights. Thanks so much and we’ll look forward to having you back on as soon as as soon as it makes sense.
Matt Reiner:
I appreciate Reese. Thanks man.
Reese Harper:
Yep. We’ll See you.
Abby Morton:
Next time on Elementality.
Jeff Morgan:
Organic Social requires you to build your own audience. And so there’s a lot of like in the weeds relationship building and trying to leverage other influencers, other people with audiences to try to build your own audience so that when you post something, someone actually sees it.
Abby Morton:
Right.
Jeff Morgan:
You know, that’s the, the real chore of organic social where paid social you are paying for that audience so you can skip the hard long, you know, build your own audience, kind of like slow burn kind of activity and just jump straight to the results. But it comes obviously at a cost, you know? You have to pay for that and you pay handsomely for it. [laughter]
Abby Morton:
To find out more about elements, go to getelements.com/demo. Elementality’s Executive producers are Reese Harper and Carl Richards. Elementality is produced by Tad Henderson and directed by Abby Morton. Have a good one.