Shirl Penney on Building a $100 Billion RIA Platform (Podcast)

on its platform. His story is really, i want to say, pretty unique in in Wall Street, very very humble origins UH and and very much a self educated person who was fascinated with finance from when he was younger and use that fascination really a motivation to uh self educate autodidact is the term for that, and really become one of the most impressive CEOs in the financial industry space.

This is a little inside baseball. It talks about what happens when advisers and brokers at big firms like Morgan Stanley or Mari Lynch or Ubs decide they want to go independent and leave those big firms to set up their own shop. What Dynasty does is provides a pathway to do that, either so that the person can become independent or the person ends up on um Dynasty's platform. Uh,

this is a pretty fast growing space. We've seen major changes in the financial services industry over the past twenty years. Most of that acceleration took place after the financial crisis, where I think the once mighty brands no longer carry the same cash because of their involvement in in what took place with subprime and CDOs and all that not so much fun stuff. Anyway, if you're at all interested in financial services, registered investment advisories, anything along those lines,

I think you'll find this to be a fascinating conversation. So, with no further ado, here's my discussion with Dynasty Financials Ryl Penny. This is mesters in Business with very results on Bloomberg Radio. Ryl Penny, Welcome to Bloomberg and Barry's so great to be here. I am a huge fan of the show, so I'm thrilled to be a part of it. Thanks so much for the invite. Well, my pleasure. This is this is long overdue. We're gonna talk about

Dynasty in a little while. I want to start discussing your background because in the world of finance, your story is kind of unique. Would you mind sharing a little bit about your background with us? Sure, I'm happy to look. We're we're all living our own unique version of the American dream. But I'll tell you a little bit about mine. So I'm from a little fishing village the easternmost point in the United States in Maine called Eastport, Maine, population four.

I was raised there by my step grandfather. When I was eleven years old and my grandfather was in his early seventies, the house that we were living in was condemned, literally fell down around us, and for three years when I was eleven twelve thirteen, we were homeless, lived with various neighbors. Obviously very cold in winters in Maine, but a great motivator when you're cold and hungry at times.

And always had great love and support of my my step grandfather, but was fascinated by by numbers, was always good and math. Convinced my high school teachers to have the stock market game added at the school. And I used to tell people, you know, someday I'm going to go to college and U and head off to Wall Street, and people kind of chuckled because not only had no one in my family ever gone to college, no one from that part of the state had ever gone off

to New York to build a career in finance. I used to ask a lot of the tourists who would come visit to bring me copies of financial publications. And I was self taught, just always fascinated by finance and wealth management and was determined to somehow, some way find my way to building a career and in finance. And my grandfather always told me, look, you can do anything, even though he only had a fifth grade education. He always told me can do anything you want in life

if you work hard enough towards it. And and I believed him. And it's been quite a journey. So you go to not the usual Wall Street feeder schools. You end up at Bates College, which is a small liberal arts school. How did you find your way into the financial services industry from that education? We are blessed in the state of Maine with three great lebo art schools, Bates and Bowden and Colby. Many people would know those schools.

Part of going to Bates was I could stay in Maine and thankfully, very the day before I graduated from college. My step grandfather, who had raised me and meant so much to me, as you can imagine, he died in my arms, and I had the opportunity to give him

my diploma before he did pass. I bought a suit for thirteen dollars at the Salvation Army UH and I wrote a bus a couple of days past my graduation to New York City and I interviewed at Smith Barney, which, as many of your listeners will know, is now part of Morgan Stanley. And I had interned my junior year at Dates at the branch location in Portland, Maine at Smith Barney, so I got to know some people there. Basically traded a summer's worth of work for an interview

in New York. I rode the bus sixteen hours, and my biggest challenge that morning, Barry was making my way through a revolving door, which I had never seen at point in my life, getting up an escalator which I had also not seen again being from a very small town, you know, fishing village in Maine, making my way through multiple elevator banks, and arriving there at my interview, which I was a half hour early four uh, And I just said, look, you know, I'll here's my my main roots.

And I had a job since I was ten years old, had to and just said, look, you know, I may not be the smartest person in the room, but out work everyone. I'm self taught, and I had studied a lot about you know, Sandy Wile and City Group and Smith Barney. And they said, look, come back next week for a second round interview. And I said, you understand what I had to go through to get here. I gotta go all the way back to Maine and come back. And the first time that I ever flew on an airplane,

Barry was. They bought me a flight to come back the following week for the second round interview, which went well, and I was hired and and off I went to New York, not knowing anyone but to start my career in finance. So tell us a little bit about your experience at Smith Barty. What did you do, what roles did you hold, and and how long did you stay there. The punchline is I, before starting Dynasty Financial Partners, I spent a little over ten years at Smith Morning and

it was a great place to learn the business. I'm a huge believer in mentorship by committee. I had some great mentors when I was there. I moved around the country, which was fantastic. I went to l A, I went to San Francisco. I helped open some private wealth offices there. And I tell a lot of people that are looking to build careers and finances stay close to the field.

I think some of the challenges that some of the larger firms have right now is management has not ever really spent any significant time in the field to really understand where the rubbery hits the road in terms of, you know, the advisor client relationship. You know, I've had the good fortune very my whole career the lens through which I see the world as I work for advisors.

And I've been fortunate enough that advisors have entrusted me over the course of my career to be their partner in their life's work, to help them get new clients, take care of their best clients, grow their business. Uh. And that mentality I've brought you to to this new

business here. I was pushed a lot at Smith Warney and given a lot of responsibility again understanding, you know, I was homeless kid from from Maine who you know, was on welfare and food stamps and trying to work odd jobs and my granddad worked odd jobs to make

ends meet. And now, at the age of twenty seven, I think five years into my career, I was actually put in charge of private management, which big responsibility of introducing the firm's top clients and prospects to Sandy while and the senior executives in the firm and showcasing, you know, all of the capability of the organization. Sitting there with these billionaires and advising them on what to do with

their money. When you know, seven or eight years prior, I'm standing in line and the sticks of main berry waiting for a block of government cheese. So pretty profound, uh, in terms of you know, uh, you know where my life went in a short period of time. I was working very hard, you know, seventeen eighteen nineteen hour days sometimes because I'm reading all night, trying to come up

the learning curve with all these various concepts. And what I realized early on is that we had remarkable experts in all the different disciplines of wealth management, whether it was a state planning, capital markets, investment, banking, asset management, traditional alternatives, cetera. But we didn't have a lot of people who understood how they all fit together in the support of an advisor and in the support of a

large sophisticated client. And that was, you know, over twenty years ago, the early formation of these wealth management divisions and then private Wealth Management, and I said, I want to be the person who is more than conversationally competent and all of the disciplines and helped tie it together and that really helped me, you know, grow my career pretty quickly. So ran Private Wealth, ran the Executive Financial Services division, which focused on all the firm's top corporate

executive clients. Uh, this is you know in the early nineties and early two thousands where executive compensation was really taking off with stock options and that was a big business for us. So had an opportunity to run that. And then what I realized is all the firm's top clients who sat across the table for me and and all these V I P meetings that we did with them, for the most part, they were entrepreneurs. And I began thinking about, how do I go from this side of

the table to that side of the table? How do I take all of this knowledge and skill set that had built up around building platforms for leading advisors, UH, and do it in a way that allows me uh to be not an employee but an entrepreneur and start my own business. UH. And that was the realization of of Dynasty. And when I decided to launch, it was April of O eight, which in hindsight was both a

very good and bad time UH to launch. We're headed into obviously, the financial crisis later that year, so it's very difficult to raise capital. But there was a lot of challenges that the large Wall Street brands would face over the next several years. So from a timing perspective, it worked out really well for this new business model that we created in launch, which was to provide an

integrated platform service model for high end independent advisors. The timing was right to bring that on sept to market. Really interesting. So let's talk a little bit about what Dynasty does. UM. What are your core services? What's the short version of of the UM product solution that you offer? Okay, thanks, Barry. The short version of what Dynasty does. We're in four businesses. One is a consulting business that advises advisories based upon

where they are in their life cycle. If they want to launch a business, we help them do that, you know, breaking away from a wire house, etcetera. If they are thinking about succession planning, if they're thinking about selling their business, will help them with those types of things as well. So that's our consulting business. Our second business is our core services running all of the middle and back office

for an advisory practice. So technology, compliance, billing, reporting, all the things that most advisors don't like to do that freese up their time UH to take care of their clients and get new ones. They're outsourcing that middle and back office to us in what we call our core service package. Third business is our investment platform. Many people

refer to that as you mentioned earlier, the TAMP turnkey. Yes, that management platform, separate managed account access u M as advisor as portfolio manager, trading tools, access to alternative managers, feeder funds, structure products, access and investment banking network that advisors can refer business to for the business owner, clients, etcetera. That is an ala carte business. UH. The advisors can choose to use it or not on behalf of their clients.

And as you reference, we have about twenty seven billion UH now making us a top six UH tamp uh in the in the independent space. UH. And then the last business is our capital business, Dynasty UH Capital Services, which is both a debt and inequity UH offering to advisors and oftentimes that capital gets used by advisors looking

to launch a business to fund succession. A lot of the capital gets deployed if somebody wants to do a recap kind of practice what they preach, take a few chips off the table, or if they want to grow inorganically UH and drive their business by acquiring other advisors. We have a whole m and a team in house that will go out source a deal, help get the deal done, do the transition, the onboarding, and finance that transactions.

What will probably do twenty m and a deals across the fifty firms or so over the course of this year. And the last thing I think that's unique that that people UH sometimes don't understand about our business where that little intel sticker buries. So the advisors own the vast majority of the equity in their business, if not all

of it, and Dynasty works for them. We are an integrated service provider that provides all the infash structure and capital consulting in support, but all of the enterprise value and growth of that which the advisors can monetize and a tax efficient way down the road is owned by the adviser themselves. Very interesting. So, so let's talk about when you launched, how did you find the first team

that joined the platform. Tell us a little bit about what that process was like in the early days when when you're when you're taking that leap of faith and launching a brand new business. Who who comes along at the very beginning. Yes, so obviously when you're starting a business, you know, signing up those first few clients is a bit more difficult than it is today with you know, sixty billion and a longstanding track record that that we

have our first r I a outside client. UH is a firm called Pact the Lists there in the DC market run by a gentleman name Alan Harder. I had known Alan because he was at Smith Barney, so we had had a previous relationship, you know, working together there UH, and he launched his firm a little over ten years ago. He's had remarkable success growing the business organically and adding new clients and and and new services. But it was a tremendous leap of faith. And it's not lost on us.

We we love all our clients obviously, but in particular those those early clients when we were you know, an idea of like this new concept and we said, you know, trust us, we understand it's your life's work. Uh, and we're going to execute on your behalf. But we're going to jump out this window together and that handshoots gonna go up, and it's gonna work, and you're gonna have

that safe and stoff landing. Uh. You know, it was you know, obviously very stressful times with the first five, six, seven transitions, but you know, knock on wood, those aul went well and they continue to go well since. But you know, our original you know, first handful of clients will always have a special place in my heart because all we were was a business plan, a new concept, and they trusted us that we'd make it work for him, and thankfully we did. So it's now twelve years later.

How has the process changed? What have you learned over those dozen plus years? How different does that onboarding new advisor relationship look today versus when you were first starting out? Yeah, look, I'm biased when I say this very obviously, but if you talk to a lot of third party players, custodians, et cetera in our space, I think they would say that Dynasty, uh, you know, has the best transition process really of of anyone in the space. We've done it

more than anyone. You know, We've onboard it and broke broken away. If you talk about Breakaway advisors over the past you know, just under a dozen years, over a hundred and fifty you know, significant teams, some of which we help them launch their own firm, some of which we helped tuck in or join or sub aggregate other firms that we that we had on our platform. We do an extensive debrief fund every single one, you know,

thinking about how we can get better. And I would say, like a lot of businesses that are you know, north of ten years in uh. You know, there's a huge focus on the professionalization of the business. In the early days, you're in startup mode, everyone's kind of doing everything to get clients in and to actually get to a point where you have a business. Uh. And then once you have a business, then it's how do you make that

business better? How do you professionalize it? How do you scale it UH, and we've really focused on the last five years, in particular the technology enabling of all aspects of our business. So if you know to your question, you know what's different today a an advisor who's joining up with us to do a transition. Today there's a lot more uh digital support, technology support, UH, a lot

of practice management around a transition. We have our own proprietary app where we have the hundred and fifty steps that you'll go through in the transition, all laid out in detail, uh, in a password protected app that an advisor would have on his or her phone. And when everything goes from red to green across I mean and

we were were the staples easy button. We find your real estate, negotiate the lead, design, your name, your logo, your branding, your marketing, your PR strategy, your launch strategy, helping you on the legal strategy around the move, setting up your client documentation, helping you select your custodian, doing all the paperwork in transition, training your staff on the new TEP like you name it, we do it, uh,

and we've done a lot of it. So, like a lot of things in life, UH, there's no substitute, you know, for experience. We have at this point a lot of experience. UH. And we've tech enabled, We've invested, given the success of our business and people UH in the professional development of those people who support the advisors. UH. And perhaps our biggest competitive advantage UH is something that I mentioned earlier is that everyone who works at Dynasty, they're all an

equity owner. UH. They either bought equity in the firm or we have a UH and options and equity program. Every single person an owner, So they act like an owner and they wake up every morning and understand that we have one fundamental job, which is to work for and support our advisors. UH. And if a transition doesn't go well, that will set that advisory firm way back, sets us back. We'll get fired, right. The philosophical alignment is the advice. You know, we work for the advisor

and the advisor works for the end client. We're comfortable standing and deliver delivering on behalf of our client advisor, just like they have to do for for their client. And I think a lot of ways and this really started, you know, for years ago with some of the old partnerships you know Bury on Wall Street starting to go public. That alignment got misaligned right with shareholders and management and

advisors and clients. But we've brought a lot of that purity of the alignment back, which I think, uh culturally is a huge competitive advantage for us. So so last year Investment took a minority share with you, guys. I assume that capital is going to give you some serious firepower to do some things with. What are the plans to to use that that capital um to fund your

future growth? Yeah, thanks for that question. I am a very loyal person and maybe it's in part my my background, but you know a lot of the firms that backed us when I was in my garage with the business plan that says a lot. It means a lot to me. And one of those firms was Investment, UH. And you know Judd Bergman, who you know we we all lost too soon, was a very close personal friend of mine,

as well as Ed Swinson. You know some of the other co founders here H and Bill Craigor uh longstanding you know, very close personal friend and you know we had talked over the years about finding more ways that we could work together. You know, we utilized some of their technology on on our camp and what we decided to do was to launch something that we're calling the Advisor Services Exchange, which is a joint venture. It's run by Ed Swinson, who's the president of that entity, is

also the chief operating officer of Dynasty. Where we're bringing value ad business service is to r as that our current clients of investment, so helping them run more efficient businesses, more tech enabled businesses, helping them outsource things that are not core strategic to their firm, helping them manage their expenses to build more profitable p n l s, which ultimately result in more valuable businesses, etcetera. And we're off. You know, we've launched that about six months ago. We're

off to a great start. There's been We built the whole technology interface around data, so the advisors can use the data around their business to make better decisions on how they want to run their business, to do business planning. They can leverage our capital programs, compliance marketing, UH, they can outsource aspects of their investments to us. Again, all

designed to create scale and efficiency in the business. The other things that yeah, and and and it's great and it's a fast growing l of of our business because a lot of advisors are looking to outsource the non core things. I mean, the biggest difference very If we were to look at a billion our average r A

is about a billion two. If you were to look at a billion to advisor, let's say that we've launched as a breakaway versus the average billion to r i A that's already independent coming to us to outsource on average, which I find fascinating. The advisors that we broke away and stood up on average over five hundred basis points

more profitable, and they tend to grow faster. The biggest reason for that, when you really peel back the numbers and do the analysis, is because on average the billion two firm that we set up has three less people. The legacy are a because the custodians are really good in the back office, but don't really do you know, the work in the middle office have had to higher up. When you can get synthetic scale and outsource to a firm like Dynasty, you don't have to hire as many people.

And yes, you know with the vendors and the resource partners with sixty billion, we get them a little bit cheaper. But the real delta comes from personnel savings. UH, and then not having to manage those people, which free up more time. And if you assume a multiple of seven or eight times and sometimes higher UH in terms of valuation times five basis points, you can extract late that out to say, the firms on our platform are almost the third more valuable because of the enhanced earnings that

we're able to help to help to help drive. So that was a big part, yeah, and that was a big part very why they did the investment. The other piece, real quick is because a lot of the and this gets into our enterprise group, which is servicing institutional clients, a lot of the larger independent broker dealers that investment

is servicing. UH. One of the biggest challenges they're facing is their largest advisors are starting to graduate off of their platform and go fully independent and a little bit back to the future here. What you know, I did fifteen years ago helping to build the private wealth division at Smith Barney for that same reason, the top advisors were looking to leave. We had to build a client segmentation strategy, a dedicated firm within a firm for the

elite advisors covering the firm's top clients. That's what a private wealth division is You're going to start to see these high end private client or private wealth divisions popping up at the independent broker deal and some of those I believe will decide to outsource that to invest Net and Dynasty because we already have that integrated platform. We you know, we understand and have the DNA around how

to develop a private wealth division. So I think you'll see some of that work coming into the market, which is great for us because it's groups of advisors and billions of assets at a time coming on our platform. It will be good for those firms to create a division that an advisor can graduate into as opposed to

off of their firm. And it would be great for Investment because you know twenty rule to talk of the advisors at the ibd s have the bulk of the assets and create the revenue, which then obviously flows back to Investment as a technology and asset management partner to those independent broker dealers as well. So it was really

those two reasons why they made the investment. We added Bill Cregor to the board, remarkable perspective that he brings from the industry, and it's just been a great partnership. So a number of firms have relocated out of the tri state region towards greener pastures. You moved from New York City to UH St. Petersburg, Florida. Tell us about the motivation for the move. What why exit New York?

So we officially moved to St. Petersburg two years ago, but we started the journey on deciding if we were going to move and king at various cities about three years ago. So we spent a full year. I personally made very thirty five trips UH to various cities, primarily up and down the East Coast because it was and Marianne, my wife, went with me, other senior executives. Because when you're asking we have a very diverse leadership team by

financial service standards. When you're asking people to make a move out of Manhattan UH and to dislocate, you know, their their family. You want to make sure that you have extreme conviction that it's the right thing for the business and the right thing for the for the team. So you can imagine we took that took that very very serious. UH and ultimately for us, you know, we're middle middle office, back office company. The closer you are to the impliant. Uh, the less large im pressure you have.

I mean, advisors are feeling it a little bit, but we feel it more in the middle office. Obviously custodians in the back office feel it even more. But for us, you know, I find that the businesses that do the hard things when things are really good, uh, to put them in a position to win disproportionately when things are more challenging are the ones that win, you know, more disproportionately over the long term. So for us, things are great.

This was several years ago. We obviously ended up you know, being a bit lucky in terms of being here when the pandemic hit. But the result is, you know, for us being here very uh seventy percent cheaper real estate, personnel costs or cheaper, which allows us you know, to take those savings build a more profitable business, also make

more investments and technology and people uh to service our clients. Uh. The infrastructure that's here is fantastic, uh in terms of the ability to get anywhere with the St. Pede Airport, the Tampa Airport, the quality of life. We found a lot of our employees, you know, retired of commuting an hour and a half and having the ability to walk to work and in St. Pete most walkable city in America.

Has great culture here, entertainment, arts, the pro sports team, they seem to win everything in a last a couple of years. I'll take a little credit because that wasn't the case when we first moved here. But it's happened that it's happened since. But I was gonna say it's funny you picked Yeah, I was gonna say it's funny you picked St. Petersburg. Um. I've been spending a week or two each winter down there, and but for the pandemic, we would have been down there for a month or

so this year. Um. And and you know, everybody kind of got stuck in place. We weren't going to uh try and do it in the middle of the pandemic. But I find that whole area on the Gulf Coast to be absolutely charming. It's it's a very different headspace than the East coast of Florida, places like Miami or any of the other big cities along Fort Laradale, anything else that's along uh the Atlantic coast. We looked at some of those locations, and you're right, it is. It

is charming. We found that the delta in terms of some of the cost savings could be a little bit higher here. But really what cinched it for us is every time I came here, Barry, it felt like I was getting a community bear hug every everyone from you know, the mayor Rick Christman and the economic development team that was here, to multiple ceo s to the owners of the sports teams that are here. Everyone really wanted to

partner with us. And you know, Raymond James UH is here and I'm friendly with Paul Riley who runs Raymond James UH. They were very supportive. Uh. Even though we're in finance, we're not obviously directly in their space, which

is primarily an employee wealth management business. But the last couple of years, what's interest thing, Raymond James has been one of the top asset gathers in the employee channel and we've been the top asset gather on the independent side in Both of those firms are located in headquartered in St. Petersburg, So that to me really highlights the you know where we are now as an industry with technology, availability of talent, product access, you know, you can really

build a large scale, successful business in finance anywhere in the country. And I would say the last plug for St. Pete to your earlier point, I think over the next ten years, one of the hottest cities, fastest growing, where you're going to see remarkable uh, you know, economic development in technology, finance, UH, in other key industries is right

here in St. Pete. So I would encouraging any business owner that is looking at this part of the country to look at St. Pete because there's some pretty remarkable things happening here. So so you're kind of pointing at at something that I think is the one of the takeaway lessons from the pandemic. But let me ask it to you this way. What what lessons have the pandemic taught you about running a firm remotely? And does this give wirehouse advisors an even greater incentive to depart? Well,

great questions. So I would say, you know, to the first piece, UH, you know, we support advisors, and I think what our advisors learned is that being a proximate and over communicating uh and proactive. I mean, this was the over the past year, Barry, it's been the advisor super Bowl, UH. And and those that that have done

those things are growing fast. I mean it's you know, one of the one of the rare times when literally everyone wants to talk to a financial advisor, UH, and those that took advantage of that opportunity, and we have just seen remarkable organic growth of the firms that we support in terms of our business and the home office that's supporting the the advisors means similarly, you know, the importance of over communication, being proximate with our clients has

been critical. Some of the challenges that we've seen, UH is around hiring new people. Training. The onboarding is challenging in this environment. I mean, we have some employees that have gone six months that are new team members that haven't had the chance to meet you know, the broader team members. UH. Culture, which is so important within a business, is very difficult to to to drive I find remotely

UH efficiency sometimes. I mean there's no substitute to walking around the corner and tapping a colleague, you know, on the shoulder and saying, hey, how do I do this? Or what do you think here? You know, now it's an email or you know, a zoom call and maybe

the person is not immediately available. So some of those things are a little bit more challenging, but I think they'll get worked out as businesses get back into you know, maybe a hybrid or what I call sometimes the styborg ing of the business, which is leveraging technology with the with the human element. I think we'll end in a place where it's one plus one equin three. Uh to the question about advisors breaking away, without question, our business

is springloaded right now. Uh, we're going to have uh, just a fantastic U two thousand twenty one, in large part because the breakaway advisor movement is accelerating, a lot of advisors historically in wire houses have thought that a big part of what they give up for the of the revenue that they give to the wirehouse, a big part of that value is real estate, which they're now not getting, and they've now realized that they don't need that real estate as part of the servicing infrastructure to

their clients. Uh. They also have more free time because they're not in the office. They can explore independence, or explore move and get educated. So the combination of those things, having more time to stick their head up and look around and explore, and realizing that they don't need to give up their revenue, advisors that we support give up fifteen one five not five zero, and you know they've got something. If they want to have a small office,

they can. But the average advisor on our platform is doing you know, mid sixties the high sixties in terms of gross income, which is almost more from an income standpoint on what they were receiving at a wirehouse. Uh. And you know, the path to independence has become more well warrant at this point. Uh. They want to look peer to peer and have those conversations. Success breeds more success. So what we're finding, you know, very in light of

this environment, it's only accelerating the movement towards independence. Quite interesting. Let's talk a little bit about the growth of the industry. You're now over sixty billion dollars on your platform between Tampa and enterprise and advisor assets. How do you grow that to a hundred billion dollars in a u M.

It's organic growth helping our advisors get new clients. Uh. And you know, maybe you've seen, uh, you know, in the past multiple months, over the past year, we've started to sponsor, in particular a lot of local trying to support some of the local athletes. UH in golf and IndyCar racing and tennis h to help get you know, the brand awareness out there more. We have a lot

more of of of that activity become. That has led to referrals that we can make out to our advisors, and I think about us really becoming over the next five years in part the Good Housekeeper Seal of approval for independent advices. So if you're looking for an independent advisor, look for one that's word by Dynasty right, because here's all the buying power and support and technology that they have, and I think Dynasty can can become a much bigger

part helping our advisors grow organically. Second part of our growth will come inorganically, meaning helping our advisors grow via M and A, whether it's retiring our A A principles that are looking to monetize their business, whether it's breakaway advisors who want all the benefits of independence, but maybe don't want to run their own business and they want to join an independent firm. UH. That will continue to become an even larger part of our business and our growth.

Because of our fifty firms, I would say more than half of them now are M and A ready, and we've invested heavily in investment banking team in house. We've reserved a lot of our capital and balance sheet to help finance those transactions. So I think a lot of that, as I said, we'll accelerate. And then, obviously the third

is new store sales. In thinking about adding a dozen or so new brands that are powered by Dynasty, whether they were already independent firms that are looking to outsource to us, or they're coming from you know, captivity or an employee model and looking you know, to to own and operate their own firm. Our flows are very strong in that regard, so those will be the primary drivers.

And then the new business, as we've mentioned that's coming on is the enterprise business, and I think selectively, you know,

you'll see a few firms. An example of that would would be a Mariner, which is a thirty five billion dollar r A run by Marty Bicknell, who I think is a great CEO in the r A A space, decided he wanted to have a platform affiliate model where advisors that didn't want to sell the Mariner could get all the benefits of the investment acumen and practice management UH coaching support of Mariner UH and then Dynasty's turnkey platform supports that. Uh. You know, we're getting hundreds of

referrals on our website a month. A lot of these advisors are you know, fifty undred million. Uh. Many of them don't want to sell. So we have now a channel partnership with Mariner where the advisor can go get the benefit of our platform, get the benefit of the support of Mariner, and not have to sell their business today.

So you'll see us selectively enter into those types of partnerships, maybe support some of the larger independent broker dealers, standing up a private wealth division, so selectively onboarding some of these institutional clients, and you add all that together. UM, I'll stick my neck out here a little bit, you know, bury here on the show to say I'd like to see us inside of twenty four months cross over the hundred billion dollar mark. Well, that's that's a big number.

So so let me flip the question on you, Um, what are wire houses doing to try and retain their top talent? They have to be aware of it's not just you, it's places like Hi Tower and LPL that are attracting, um, a whole lot of talent from them. What can they do to staunch the bleeding. Well, look, our biggest competitor, frankly is inertia and complacency. And as you know in lots of walks of life, good is the enemy of great uh. And a lot of the advisors,

you know, they've worked hard to build their book of business. UH, and they don't want, you know, to to go through the noth hole of a transition, you know, which is ninety days of of of of work uh to then get on you know, the other side and and have their business. So you know, for us, typically a loss would be that we spent six months educating somebody and

they just made a decision not to move. It's rare that we would dig in with somebody and they would move and not do it with us in the R A A space because you know, most of the advisors want a supported independent model. They don't want to have to hire all the people, and they don't want to juggle sixty five different vendor balls. Uh. You know, so

they decided to partner with us. What the wirehouses are trying to do, UH is you know, to put these retiring place programs in place, which takes advantage of inertia. Reality is if an advisor goes independent, Uh, they would make a lot more money both in terms of income, they could decide when they want to retire if they sell their business as long term capital gains tax and a higher valuation. But many advisors just you know, take

the easier path, which is to stay. I'll stay here as a three month or now it's all W two income. But it's easier. Uh So why our houses again understand Uh, you know, the inertia and complacency is on their side, so they're putting those programs in place. I think what they're also doing smartly, and advisors are allowing it to happen, is to push forward their brand more directly to the client. You see this at you know, merrow with merrow Ledge.

You see you know a lot of the smaller accounts solutions being rolled out at these firms, which is the institutionalizing of the client relationship, so the client has more relationship with the brand as opposed to the advisor. And I think grap accounts, checking accounts, loans, all those things. So you cross sell them with multiple products and then you put them into models that the firm is running,

not the advisor. Uh. And then it becomes a deterrent for the advisors to leave because a lot of their clients. You see it at firms like Goldman and others where you have typically a lower uh acentage of client assets that follow when the advisor leaves, because the client tends to have more of a relationship with the brand as opposed to some of the firms where it's just the

relationship with the advisor. I think the wire houses are are strategically trying to do more of that, whether it's tying them in with loan products, structure products, things that are proprietary to the firm. It's about driving the brand

and creating stickiness. And I think ultimately, you know, over the next five years or so, you'll see the wire houses looking and feeling more like a private bank where the advisor is more of a clear employee uh and you know, they're helping to cross sell the relationship across the organization and it would become more difficult in that environment for an advisor to to to make a move. So I think I think that's really the strategy that

you're seeing be be deployed. Longer term, perhaps you could see some of these firms open up product access us, maybe even eventually custody to independent advisors. But that business is such a scale business, and you have firms like Schwab that have you know, North the three trillion already clearly a big lead Fidelity, you know, you know, well north of a trillion. Pershing's a scale player in that space.

It's very difficult to have an employee model supporting advisors and an independent model supporting advisors when your subscale in the ladder. So I think it will be a slow migration and probably more about product distribution to arias than it will be turn key custody for most of those platforms. Very interesting that there's a quote of yours I really enjoy and I want to have you put some color

on it. Quote the amount of innovation in the last five years is greater than the fifty that proceeded that unquote give us a little more explanation, you know, are you talking generally technology, financial innovation. I don't disagree with any of that. I'm curious as to to your thoughts on it. Yeah, Look, the reality is the whole independent space, the independent movement. At this point, it's been discovered and

you see it. If you're an r A you decided to sell, there's twenty potential buyers that show up on the other side. I mean, it's just a wonderful business that's anwitized essential to our country. It's not going away. Um So, so all roads are starting to lead towards the r A space. And what that means is the capital investment that's coming in, the attention that's being paid,

is you're seeing tremendous innovation across the board. So yes, in technology, in reporting technology, in o CFO technology, in O c I O technology, and compliance technology basically all aspects of an advisory practice. And when you're in the independent space, Barry and you don't have to worry about uh, you know, having fifty years of legacy technology that you

can only incrementally move the needle with. But when we launch an r A, we're building from scratch custom technology to specifically fit the need of the way they want to service the clients. That's a huge advantage for them.

On the product side, you know, whether it's you know, partners now like I capital and the access to alternatives that really started in the independent space, or halo on the structured product front, or you know, what investment has done to bring scale, you know, into the into the tamp and reporting and financial planning space. So many of those firms started on the independent side, and now you have wirehouses and banks trying to leverage that technology that

started here, right. So the space has kind of turned earned upside down and then you pour on top of it, you know, kind of the gas on the fire, which is tremendous capital investment. Uh. And the entrepreneurship. I mean, one of our biggest advantages is we are entrepreneurs servicing other entrepreneurs, right, so we're getting up every day and thinking about innovation and how do we make the advisor's life better. And the whole ecosystem that's evolved over the

last ten years. Right, it's driven by entrepreneurs who have great access to technology and capital that are fundamentally changing the way that what wealth managements being delivered in this country. And I think, frankly, you know, it's just going to continue to accelerate. Really interesting you mentioned scale, uh I.

It reminds me of the issue of market share. It's been pointed out a handful of the largest r I A s are hundred billion plus when the industry is measure in tens of trillions of dollars, meaning even the biggest firms barely have any sort of market share. Does that mean anything? Is there any significance to how widely diversified and distributed the industry itself is? Well, Look, I do think that there will be brands that evolved on the national level, regional level within the r A A

space that will have real brand value. In Dynasty hopes to be again that intel sticker powering a number of those national scaled winners and helping to provide a lot of the scale and access that uh, that that supports them. But the reality is when you look at, you know, the economics of the wealth management business, A lot of people talk about, you know, the margin and margin pressure

that's happened in the industry. But when you look at the last ten years, uh, that has occurred, but but in a different way than what most people describe it. What I mean by that is, we looked at the average and client on our platform is let's say about five million dollars. The average client is being advised by

one of the advisors. Ten years ago, the r o A on average on our platform for that five million dollar client was around seventy eight basis points today, Uh, it's seventy So you've had three or four basis points of erosion in terms of margin pressure. But the big change is the cost the service. Ten years ago, the client expectation might have been very simplistic financial plan uh, and it's really an asset management relationship. Today it's more

holistic wealth management. It's it's integrated financial planning. Uh. It's looking at the liability side of the balance sheet alongside of the asset side. Uh. You know, it's looking at overall risk management. It's incorporation of alternative investments, you know, alongside of traditional etcetera, etcetera. So the team investment, the technology investment, you know, what it costs to service that

client has gone up. So the margin pressure actually is coming faster on the cost side than it is on the revenue side. And that's where scale matters. That's where these large, multibillion dollar independent firms have higher profitability because they're able to spread the cost infrastructure over more client. That's why outsourcing to firms like Dynasty is accelerating because

you can get synthetic scale. And then the last part of the competitive advantage is marketing and dollars that you're able to spend on sales, whether it's adding a new client or adding a new advisor. The larger and more scale you have, the more free cash flow you have to make those investment and that's why the biggest firms are the ones that you tend to see growing the fastest. Right now. So so let's talk about some of the biggest firms. People have compared Dynasty to firms like High

Tower or LPL. Who are do you think of as as your competitors, um and and what are the similarities and differences between them? Sure? Look you know this. Uh, it's lonely at the top sometimes. Uh. And the result is, you know, the space tends to be pretty small. So I know the CEO is the most all of these firms in the space, and we get together from time to time and we we share a laugh, whether it's about a certain reporter or you know where the industry

is going. Uh. The reality is, you know, the people at the tops of the organization, you know, from a peer to peer practice management perspectives, spent some time together, and in particular, Barry, I have a lot of respect for the other entrepreneurs that have gone out there. Uh and you know, bet on themselves and you know, trying to execute a new model. Uh. In terms of competition, uh, there's a lot. I'm only forty four years old. I was thirty two when I decided to start the business.

I'm gonna be doing this for a while. And it's a lot of fun for me to be a mentor to. Frankly, a lot of these players coming in space. You know, these are firms being started by people that are still older than me. Even though I'm seen as one of the original, you know, visionaries, and in the space, I'm still only forty four. So it's nice for me to

be able to mentor so many people coming in. I don't see anyone today as a scaled integrated platform, Uh, competitor to the high end r a A. We invented that. We created that space sixty billion, as I said, a hundred billion here in the in the near term. Uh. When not complacent, only the paranoid survive. Uh. So we're constantly watching what others are doing. But in the space where we sit today, I think we sit alone. Now.

You mentioned firms, Uh, you know some of these roll ups, some of them have come in and out of the platform business. But as I mentioned earlier, UM, I tell entrepreneurs you've got to be laser focused. It's very difficult to do one thing incredibly well. It's impossible to do several things well. So if you want to be a roll up in an acquire of businesses, do that. Don't try to be a platform service company as well, right,

especially if you only have sub a hundred billions. I mean there are players out there with with with half a trillion that can't do it, that are trying to build different types of models and there's still subscale. So for us, we've been laser focused on just supporting advisors, being a platform company and staying in in that in that swim lane. Uh. And there's really no one else that's doing that inertia if tisor is not leaving big competitor. Uh.

You mentioned LPL. There's a lot of independent broker dealers that are trying to figure out how they reinvent themselves as an advisory firm. How do they become an r A custodian, how do they attract more advisor assets, how do they build tamp capabilities? So a lot of if you think about where you know, we're in twenty different

businesses that we just integrated into a platform. A lot of our individual businesses may have competition, but we're still the only fully integrated offering at the high end of the model. And the last thing I think that I would mention that they haven't mentioned yet that the competitive advantage is our community. And I would say, look, you know,

winners want to surround themselves with other winners. Uh. There really isn't a community where the average CEO and principle is a billion dollar plus are a A Uh, they're geographical, disperse all of the countries, they don't really compete with each other where they can get together several times a year at our event and share a peer peer on what's working, best practices, what isn't working on various growth strategies,

on brand development, on staffing. Uh. So, you know, our community, I think is a is a very powerful differentiator because I think you're defined not just by who you service, but also who you don't. And for Dynasty, you know, thinking about our clients, we're not trying to be something

to everyone. We're trying to be everything to someone and that's the someone that really plays behind the market that wants a partner, is focused on building a great business, not just a great practice, really wants to drive enterprise value and wants to have a sustained business over time. That's our core focused client. Huh sounds sounds quite intriguing.

I know we only have you for a couple of more minutes, So let me jump to my favorite questions that we ask all of our guests, starting with what's keeping you entertained during this work from home period? Tell us what your favorite Netflix or Amazon Prime shows are

or what podcasts you're listening to. Yeah, so in terms of uh, the little bit of of time I have away from away from work as far as shows and podcasts, Um, you know, Barry, I've never been one to watch a lot of television, to be honest with you, Um, I do watch sports, uh you know, from from time to time and and follow my favorite teams. But I do listen to podcasts. I'll give you a nice compliment and plug Masters of Business is definitely one of my one

of my favorite podcasts. I do listen to Jocko will It's uh podcast. My wife and I are big supporters of military. Jocko obviously is the former Navy skill. But some of his uh you know, shows around leadership and overcoming adversity. Uh. You know, I've really enjoyed those. I am a fellow at the Aspen Institute in their Finance Fellowship program. I really like, uh the Aspen Ideas to Go podcast. Uh. You know, there are some quick hits

on various uh interesting ideas leadership, entrepreneurship, etcetera. Uh. And you know Ted talks uh from time to time or are things that I'll take in when I'm taking a long walk, you know here in St. Pete. But I'm more of a podcast person, honestly than somebody who is watching Netflix or Amazon Prime. Gotcha. So let's talk about some of your early mentors who helped to shape your career. In terms of my most early mentor without questions, my

step grandfather who raised me. His name was Clarence Townsend. Both of my daughters are named after him. My older daughter, her name is Townsend, and our younger one is a Claire. The Claire is from Clarence. As they say, we're named after one of our angels. Uh. He taught me the importance of doing what you say, integrity, being honest. He never borrowed a dollar in his life, so disappointed around

not spending more than you can afford. A lot of that obviously was very helpful to me, as I said, when I was starting a business and remembering a lot of those life lessons that I've learned from him. On the entrepreneur side, one of my best friends is a guy named Mike Rappoli. Uh. Your listeners will probably know the name. Mike was one of the founders of Vitamin Water. Uh. He helped build other brands like kind Bar and Pirate's Booty, which he didn't found, and then he went on to

found now body Armor. Very few entrepreneurs have ever founded a billion dollar brand from the ground up, even fewer number have done it more than once, and Body Armor certainly a multibillion dollar brand at this point, as was Viamin Water. So early on when I was to launch this business, Mike was a remarkable sounding board. He and I actually named Dynasty together, which we thought about it. We both sports guys, so we thought about it meaning

winning consistently over time. Multi Generational financial obviously describes the industry and partners in terms of how we work with our clients and our resource partners and relate to each other internally. So if you were to look at Barry the Dynasty logo, you will see some similarities to the Vitamin Water logo. Uh. And that's because when you have a brand building genius who's helping you early on, you want to listen. So I would. I would say Mike was was a great mentor to me early on and

starting Dynasty. So let's talk about books. Tell us what some of your favorite reads are and what are you reading right now? Well, I just read uh and this is this is going to be a shameless plug for someone who's a friend of both of us. I actually just had the opportunity to finish reading uh, Josh Brown's book on How I Invest My Money. Joshua, Josh and Ivan personal friends for for quite some time. And what you know, you have remarkable talent and partner there who

thinks the world of of you. Um. And let me let me just jump let me just jump in here and say, I remember when the two of you, I want to say it was we're both named to the forty under forty list? Is am I getting the dates right? Yeah? He's much older than me, but that's right. Yes, I think you guys are about the same age we are. We are all kidding us side we are, and we're

kindred spirits and he's the best. So he invited. Isn't that a great idea for a book, by the way, the to to speak to a bunch of people in finance and say, don't tell us what you say on TV, tell us how you invest your own money. I love that idea. I do too. When he sent it to me, what the first thing I said to him is this is brilliant and I'm shocked that no one else has thought about it. I said, did you do your research? Has anyone else done this? And he said, I'm telling

you they haven't. And I get people reaching out to me all over the world. I mean, it's it's it's it's it's pretty special saying hey, I just read your chapter of of of How I Invest My Money? Uh. And I love how you said, you know how you think about the family capital or I have a fun bucket, which for me is houses and my horses. We have a horse racing stable. Uh. And people from all walks of life have reached out. So it's been great and I'm glad that that Josh invited me to be a

part of it. The other book I'll Mention, which I just started to read, I'm a big proponent. I talked about mentorship, both being a mentor and being mentored by a committee of people. I've just started reading in Professional Development in Yourself and Your Team a book called Tribe of Mentors, which was written by a guy named Tim Ferris, And it's a book that get introduced to me through the ASP Institute. Uh and uh again it's early you ask what I'm reading right now, But I love the

concept of group mentoring. What sort of advice would you give to a recent college grad who was interested in a career either as an advisor or in the professional finance services industry. Yeah, Barry, I love that question. First

and foremost, I would say, do it. We need you. Uh. You know, the financial health and wellness of our country is not where it should be, whether it's on a national or state level, whether it's the fact that over sevent Americans can't put their hand on a thousand dollars in an emergency. Um. You know, given my background and how I grew up, uh, financial literacy is something that's near and dear to me. It's fundamentally changed the life that I've been able to live. So we need more

people to come into the industry. Please do it. It's critical, Uh, you know, to to to our country. In terms of specific advice to someone starting out, Uh, it's it's it's not about what you learn, it's about what you learn in the first let's call it three years. So finding a great mentor finding an organization, finding a team that cares about your development will push you, will let you fail,

will let you learn from those mistakes. Uh. If you can find that environment and you're gonna get paid five to ten tho dollars less uh than an environment that you're not going to have that take the lower pay. It's all about you know, what you learn the tuition. Uh, you know, think about it that way early on, if it's a lower price job, and put yourself in that environment because it will pay massive dividends for you over

the course of your career. And our final question, what do you know about the world of financial services and vesting advising today that you wish you knew years ago when you were first getting started. Yeah, well that's a good one, because again I'm forty four now, so you can subtract off twenty five. That was a nineteen year old kid. But look at what I like to tell a lot of young people, and certainly would would tell my nineteen year old self, is to have the discipline

to pay yourself first from an investment perspective. And as we all know, it's not always about getting right whatever that means. Uh, you know, the the asset allocation because that will change over time, or security selection, et cetera. It's about actually being discipplinted to save and whether you're saving you know, five early on. Uh. And even if that number appears to you know, I hear a lot of people saying I can only save fifty dollars a month,

Well that's great, that's a wonderful place to start. Save the fifty dollars, start to invested and let the miracle of compound interest start to work for you as early as possible in your life. Uh. And I love getting that message out to young investors, just to get them started and being disciplined. We all have a lot of priorities, but if we can say, look five percent early on of our check without exception, regardless of what seems to be you know a big priority in our life. We're

gonna pay ourselves first and start investing it. Get a simple financial plan in place. You look back, you know, to your question twenty five years later, you'll be very glad that you did it. Great stuff. We've been speaking with Sheryl Penny. He is the founder and CEO of Dynasty Financial Partners. If you enjoy this conversation, we'll be sure and check out any of the previous four hundred

such interviews we've conducted over the past seven years. You can find that at iTunes, Spotify, wherever you feed your podcast fixed. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Sign up for my daily reads at rid Halts dot com. Check out my weekly column on Bloomberg dot com slash Opinion. Follow me on Twitter at Rid Halts. I would be remiss if I did not thank the crack staff that

helps put these conversations together each week. Reggie Brazil is my audio engineer, Michael Boyle is my producer atka. Val Brand is our project manager. Michael Batnick is my head of research. I'm Barry Ridholts. You've been listening to Master's in Business on Bloomberg Radio. You're listening to Master's in Business with Barry Ridholts on Bloomberg Radio.