With the first wave of the pandemic in the rearview mirror and a desire to become a household name for the “middle-class millionaire” set, Allworth Financial announced Tuesday its partnership with an investor group led by middle-market financial services PE firm Lightyear Capital and its wealth guru, managing partner Mark F. Vassallo.
Allworth, a West Coast, marketing-intensive RIA, was founded in 1993 and originally focused on serving telecom industry retirees. The firm was known as Hanson McClain Advisors until it hit the $2.5 billion AUM mark in 2017, when co-CEOs Scott Hanson and Pat McClain found an investor in Parthenon Capital Partners. Through a stream of acquisitions, it now has almost $10 billion in AUM, a smattering of outposts in major metropolitan areas but only 80 advisors—not yet enough, Hanson admits, to have the kind of name that gets immediately recognized in mass affluent households.
Hanson spoke with WealthManagement.com about the investment and his team's plans.
WealthManagement.com: You now have the capital for M&A, and Lightyear has helped Cetera, Advisor Group, Wealth Enhancement Group and now Cerity. What specifically does the partnership bring?
Scott Hanson: They’ll make some investments in the organization. We’ll be hiring a couple folks to double the size of our business development team, as well as more folks internally to assist in making sure that we find the right firms to join us, and that they become fully integrated. We want to have all of our advisors sing from the same song sheet as we advance across the nation. In addition, we need more traders and more people on our financial planning team. We’ll continue to add resources as needed. One of the benefits of our M&A strategy is we found great talent through firms that have joined us. Our EVP who leads our advisory team, Jeffrey Baumert, came from our merger with Dallas-based RAA, and our chief investment officer, Andy Stout, came from Simply Money Advisors, which joined us in January of 2018. One of the great things about growing through M&A is you tend to find some really good people who share the same vision of creating a national firm. We don’t need to go out and get talent per se. We still need to add a chief legal counsel, but that won’t be difficult.
WM.com: Can you elaborate on the marketing focus and what you do to differentiate yourself from a crowded field of players looking to become a household name?
SH: We’ve got more than 20 people on our marketing team, but we also have dedicated resources that do nothing but B2B marketing. We do webinars, white papers, emails and podcasts for the entire advisory industry, essentially providing a learning platform for advisors and what's happening on the M&A side of things. It helps in recruiting, and that team is doing an excellent job. We don’t rely on custodians to feed us business. We generate clients for our advisors. Also, a lot of these other businesses are really not into consistency. Their advisors are still building their own portfolios. They are still doing their financial plans the way they feel like doing it. It’s not a consistent process. Regardless of what city a client resides in, or what advisor they meet up with on Zoom, everyone has a very consistent experience here.
WM.com: Can you talk about what your ultimate objective is and how this is going to happen?
SH: Our end goal is, say you've got an aunt who lives in Sarasota. She has five years to retire. She’s sitting with relatives or friends at the dining room table and wants to know, ‘What firm should I use’? I want someone to say Allworth Financial, whether she's in Sarasota, Sacramento or Cincinnati. Right now, that firm doesn't exist. There's the national firms who have some great advisors but they have some that I wouldn't trust my kids’ piggybank to because they're all very independent operators. We want clients to have a very consistent experience regardless of where they reside. I could see a time about somewhere between 10 and 20 years from now when we have 800 advisors, but right now we have 80 advisors and we are going to proceed cautiously. We’ve done deals up to $3 billion in AUM, but our target going forward is to pick up shops with $100 million to $500 million in AUM. We’ve had great success with some hybrid advisors joining us, so we have no intention of going to the larger firms. There are great opportunities with the smaller ones. If the founder has two or three employees, she is wearing so many different hats. These folks find themselves spending the majority of time doing payroll, taking care of office leases, figuring out the technology, not the stuff they love doing. We acquired 12 firms over the past few years, five of them in 2020. We’ll be able to do one a month at some point and then two a month a few years out.
WM.com: Sounds like you’re looking for a specific type of advisor, not the wirehouse variety?
Yes. We’re not looking for the high-net-worth advisor. We’re looking for somebody who enjoys working with the mass affluent. We are not a substitution for the wirehouse model. The reason people are still at the wirehouses is they don’t know what life could be like outside. If I were at a wirehouse right now, particularly an aging one, I would leave, set up my own shop, take as many clients as I could with me and go the independent route. Then I would probably look at buying some other similar shops.
WM: What have you learned from the COVID-19 experience in terms of better reaching your clients?
SH: Things change over time and have changed even during the pandemic. We’re data focused. We have a data scientist on staff who's got a team of people as well. In marketing these days, you learn pretty quickly what's working and what's not. You can run an ad test on a digital ad and monitor in real time to see what's pulling and what is not. Clients have a lot on their plate right now. They are concerned about their health, about their loved ones, about their finances, the election. They're concerned about when life's going to return back to some normalcy. We have what we call the Personalized Learning Platform. The beta went live May 26, and the final was rolled out August 19. It's a highly automated tool using AI where one can input some of their specific information that leads them down a very customized path for information and education on what they really care about and what they want answers to.
WM.com: What have you learned recently about converting leads to clients digitally?
SH: During the pandemic, we learned it takes longer in the digital space than it did beforehand to bring on clients. It’s about nurturing that client lead. When they first come into our stratosphere, they're not necessarily ready to set up an appointment with an advisor. They still want to learn more about us. There's a level of trust that still needs to be developed. We’ve gotten pretty good at our digital tools. Firms like Amazon do a fantastic job with matching customers with their needs, but most people have no idea who Allworth is. We serve up some sort of advertisement or something that is of interest to them. It might be regarding Social Security, it might be regarding Medicare, or required minimum distributions or tax changes that might pique their interest and get them to enter our system. From that point on, it's our job to nurture that prospective client to the point when they say, ‘I like Allworth. I trust Allworth. I'd like to take the next step and talk with an Allworth advisor. It could take months or longer to nurture that. Most firms look at leads as somebody who needs to be converted immediately. That's not our view. Our marketing engine and our digital platforms don’t just generate the lead. They take the customer to the point where she is comfortable enough to want to talk with an advisor.