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EP 36 | Brad Wales on Transitioning to the RIA Model

03.10.21 | 0 Transform

Brad Wales is the Founder of Transition To RIA, a consulting firm focused exclusively on helping financial advisors transition and adopt the RIA model. He helps advisors understand the intricacies of RIA – from understanding the “how” and “why” to transitioning their practice successfully. With nearly two decades of industry experience, including direct RIA-related roles in compliance, finance, and business development, Brad has amassed a wealth of knowledge and expertise to help financial advisors learn how to benefit from and implement the RIA model. He holds a Master’s degree in Business Administration from the University of West Florida and has served well-known financial advisory firms throughout the Tampa and St. Petersburg, Florida regions.

Brad joins me today to share why he decided to transition his career from working in the corporate world to launching his own consulting firm. We discuss the advantages and disadvantages of transitioning to the RIA model, how his company helps advisors smoothly transition, and why the RIA model may not be suitable for all financial advisors. We discuss the importance of leaning into your strengths and understanding your weaknesses before deciding which RIA path you want to take. We discuss the legal challenges many advisors face when trying to transition their clients to an RIA model and why some of your current clients may not make the transition with you. We also highlight the importance of shifting your mindset from working as a financial advisor to becoming a media company that happens to offer financial advisory services and how it can impact your success as an independent Registered Investment Advisor.

“You have the flexibility to choose, on your own, who you want to work with.” – Brad Wales

 

This week on The Model FA Podcast:

  • What inspired Brad to pivot his career to become an entrepreneur 
  • Why many financial advisors decide to transition to the RIA model
  • How Brad’s company helps advisors make the transition to RIA
  • Why the RIA model may not be suitable for everyone
  • The three primary paths many advisors take when transitioning into the RIA model
  • Understanding your strengths and weaknesses before deciding to transition your practice
  • Fee-only vs. fee-based models and determining which model is right for you
  • Setting realistic expectations regarding the number of clients that will be willing to move to the RIA model with you
  • Legal challenges often involved in transitioning clients to the RIA model and the process for working through most of these challenges
  • Identifying the vendors your RIA practice should partner with
  • Shifting your mindset to be successful
  • Brad’s favorite business-related books and how they impacted his life
  • Common mistakes many advisors make when transitioning to the RIA model

 

Resources Mentioned:

 

Connect with Brad Wales:

 

About the Model FA Podcast

The Model FA podcast is a show for fiduciary financial advisors. In each episode, our host David DeCelle sits down with industry experts, strategic thinkers, and advisors to explore what it takes  to build a successful practice — and have an abundant life in the process. We believe in continuous learning, tactical advice, and strategies that work — no “gotchas” or BS. Join us to hear stories from successful financial advisors, get actionable ideas from experts, and re-discover your drive to build the practice of your dreams. 

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FULL TRANSCRIPT

David DeCelle:
Welcome Model FAs. I am very excited for our guest today, Brad Wales. Before I introduce Brad, the folks who are probably going to get the most out of this episode, our advisors who either recently joined or started their own RIA or are considering moving over to the RIA channel and experiencing true independence, wherever your setup is currently, and Brad is an expert in helping folks like you go through that transition, answer some of the questions that you may have. And what I really like about Brad, from my experience in knowing him so far, is he provides a lot of value and a lot of content for advisors to explore. So we're going to try and compile some of that content today, but make sure to go and check out his website, which we'll highlight that towards the end of the show. It'll be in the show notes as well. There's a lot of content on there, connect with him on social. But to introduce Brad properly, Brad Wales is the founder of Transition To RIA, which is a consulting firm, uniquely focused on helping establish financial advisors understand everything there is to know about why and how to transition their practice to the RIA model, and what I’ll say, having been an advisor at Northwestern myself for seven years, and starting to consult for the industry and exploring the RIA model, there's a lot of differences and a lot of different things that I just wasn't aware of. So the content that Brad provides is awesome. Brad utilizes his nearly 20 years of industry experience, including direct RIA related roles in compliance, finance and business development to provide independent advice regarding how advisors can benefit from the advantages of the RIA model. And Brad, you're a super cool dude from our intro call, watched a bunch of your videos, getting a sense of your personality, love what you're doing. Welcome to the show.

 

Brad Wales:
Yeah, thanks, David. I appreciate it and look forward to the conversation. I think we'll have some fun here going over a lot of good content.

 

David DeCelle:
Awesome. And for those of you who are listening, there's a saying that I try my best to abide by which is you have not because you ask not. And I find that a lot of people may be in certain positions and feeling stuck or not getting referrals, and you ask them, well, have you asked for help, or, have you asked for referrals, and a lot of times the answer is no. And what I will say is we've done a lot of outreach for this podcast, getting some great guests on here, but Brad actually reached out to us to be a potential guest, and here we are. So if you don't have what you're looking for, ask yourself, are you looking for help, are you asking for help, are you surrounding yourselves with the right people. So Brad good work on being proactive on your end.

 

Brad Wales:
Sure. No, I think that you drive the message home, if you don't ask you don't know where it might lead to, and I think it's a great fit, I’m sure we'll get into it. But just a lot of what you help advisors with, the reality is being able to do a lot of those things, they either, a lot of folks either can't or it's just prohibitive where they're currently at, and so it is just kind of a good mix for folks that say, hey, maybe I’d be better off under the RIA model and talking to someone like me to help them with that. So I think a lot of synergies here.

 

David DeCelle:
Love it. So as your bio had alluded to, you've been in the industry for about 20 years in various roles, what was the point in time, and what was the reason why you transitioned from those specific roles over to your consulting business now, what had triggered that?

 

Brad Wales:
Great question. So yeah, almost 20 years in the industry, and I’ll tell you, I’ve had the entrepreneurial itch most of my adult life, you can ask my wife, all the time she's known me, I was always, hey, this would be a great idea, this would be a great idea. And so, I've always wanted to do my own thing, but a couple of main things that eventually drove me to go start my own firm is the most recent role I was in was with a custodian, and, as they call them, business development officers. And so, I was out there, explaining a lot of the same stuff, you know, how do you transition to that RIA model, how does it work, the logistics, the economics, the flexibility, all this. But the challenge was, at the end of the day, by nature of my job, by nature of, I had an employer that my job was to sell a particular solution that custodians offered. And while it's a great solution for some advisors, just naturally, you can't be everything to everyone, and so there's a big chunk of advisors that it wasn't a good fit for, and I just didn't – I struggled with that. It's the proverbial round peg square hole and I wanted to be able to help advisors down whatever path was best for them, not just the solution that I was tasked with selling. And so, that's how I envisioned what I’m doing. now is just to be completely agnostic of any one solution, don't represent one path, and you can just independently help advisors down that road.

 

And then the other thing was some hypocrisy on my part, to be honest. So there I was, working in a corporate environment as a W2 employee, and I had my health benefits provided for me and I got paid every two weeks and those sorts of things. And there I was, talking to advisors that are often in that same kind of capacity, at least to the W2 degree, and they have health insurance and things, and there I was, telling them, hey, yeah, you should go off and be independent, and it's way better, and you could figure all that stuff out; and there I was, not even willing to, and obviously in a different capacity, but not even willing to make that jump myself. So it was, to be honest, quite hypocritical of me in that situation to be preaching that. And so, I'm happy to say, I practice what I preach now, and I've been through those challenges of figuring all that stuff out.

 

David DeCelle:
Love it. So if I'm an advisor listening right now, and I'm at a broker dealer, I'm at a captive company, I'm at a wirehouse, or, maybe I'm working for another advisor who could be in the independent space already, whether – and I'm progressing through my career, I'm trying to figure out what's going to be my forever home – is it going to be at this larger institution? Is it going to be more entrepreneurial on my own? I guess, when people come to you and when people start thinking through, what does the RIA channel look like, and what does going out on my own look like, what causes those thoughts, I guess, what pain points am I experiencing at that stage in my career, that gets me to look behind the curtain and see what else is out there?

 

Brad Wales:
Yeah, the two main ones, one more of a pull and one more of a push, the latter being the pain points, the two big reasons folks generally look or start looking at the RIA model is the economics of it and the flexibility of it. And so the economics, and we might dive into some of that, is it is what it is, it's generally always better under that RIA model. I mean, every situation is unique. But it's a lot of advantages there, but from a pain point, you increasingly see, and so, not that anyone's not excited about the opportunity to generate more compensation every year and have a higher enterprise value on their firm, but it's really the flexibility piece that all too often comes up in the conversations I’m having with advisors. And it's tough, to the degree you're in a more captive firm, and you're either outright again not allowed to do things or it's harder to do them, or there's just so many hurdles, the reality is you're out competing against advisors in the marketplace that don't have those hurdles, and don't have those handcuffs, and it's hard enough to just compete in general, let alone to essentially trying to play basketball with one hand tied behind your back, that's hard to compete against. So that's primarily, from a pain point, just the flexibility of not being able to do things that oftentimes they believe, and that's part of what the discovery process is with me, they believe they can do in the RIA model and they're looking to kind of learn more about that.

 

David DeCelle:
I certainly agree and experienced myself when I was an advisor, the restrictions around things like marketing and testimonials, which, the testimonial rule actually has just recently changed, and we have an expert coming in to a future episode to talk all about that. So stay tuned for that episode. And so, I certainly agree with you there. In terms of the economics of it, I can certainly see how the economics are better, I guess, where I would play devil's advocate. So coming from Northwestern, there were things that they did that were awesome, and there were things that they did which maybe weren't so awesome. And the things that they did that were awesome was their structure around their training and development program, the fact that you didn't have to figure out any of the technology stuff. They already had all that stuff. So when you're leaving that sort of environments and then you're going out on your own, and you have this open architecture, you have no accountability, except for the people that want you to pay the bills and whatnot. So you have no accountability, and you don't know where to go from a technology standpoint, there's seven different CRMs or however many there are. So the economics may be better, but at the same time, the headaches may be more frequent, so to speak. So, I guess, how are you or your company, or what resources do you provide to help the advisors who are looking to make that transition do so smoothly?

 

Brad Wales:
And it is a daunting process until you get into it, and I think that's very fair. I would tell you, the model is not for everyone. I’ll give you a quick example that I do see from time to time and I think there will always be an employee channel out there that will forever exist for this reason that, you know, I can talk to you, and I’ve talked to plenty of advisors that tell me, hey Brad, at the end of the day, yeah, there's all this crazy comp plan that's always changing around and whatever, but I net about $500,000 a year, I come in at 9:00 a.m., I leave at 4:00 p.m., and I coach my kids basketball game, and I can come and go as I please; and yeah, Brad, you could show me how to make maybe 700,000 and I’d have more flexibility, but I live a great life, and I’m comfortable with that. And I totally respect that, there will always be the advisors that just, they're willing to kind of have some more constraints, maybe not make as much money but it's a lifestyle that's a great fit for them. So I certainly never suggest that everyone is meant to go down the RIA path, but for the ones that do, and you're correct, it's a two-edged sword, you absolutely gain the benefits of the flexibility where now you get to decide all the various vendors you work with, and I remind people all the time, a custodian is simply a vendor of yours. So while a lot of advisors have always thought, okay, I’m affiliated, that would be the correct terminology with a Morgan Stanley or Northwestern Mutual, whatnot, when you end up working with, as an example, a custodian, you're not affiliated with them at all, they are just solely one of your vendors just like you put together a vendor to help you with marketing and a vendor to help you with technology and things like that. So that's the beauty of it is you have that flexibility to choose on your own who you want to work with. The other side of the sword though is the complexity of how do I figure all that out. And quite frankly, that's, in part, why I developed my own firm, not to give a plug for myself is to help folks navigate all of that, and who are the vendors out there and why you might choose one over the other, and to piece that together and to make it not an overwhelming process. But it is a process nonetheless to work through it.

 

David DeCelle:
So when you work with advisors, you're helping them from, you know, forming their firm, all the way through the tech stack that they should use, through, like, kind of soup to nuts, am I understanding that correctly?

 

Brad Wales:
Yeah, so there's three main paths I'll give you real quick of how folks end up transitioning into the RIA model. And so, if you look at my website, it's not called start in RIA, its Transition To RIA, and the reason I say this, for some advisors that is starting up their own RIA, for others it might be something a little different. So quickly, and then you'll understand, to your question, the three main ways advisors go into the RIA models, okay, you start your own RIA, you piece together all the vendors to support you as need be, like I was just describing. The second path is you start your own RIA, but you look to outsource a lot of that, as they say, middle back office functionality to someone else that will help you kind of package it all together and kind of handle it all for you. And then the third is to join an existing RIA platform that essentially does that second option, but then even takes also the responsibility for the RIA itself under their wings, and so, it's not your responsibility, yet you can still go out and brand yourself however you want as a DBA name and those sorts of things. And so, it really depends which of those three paths you end up going down to determine how much you then need to figure out, hey, should I build out my own tech stack. So obviously, if you're down that first path, solely RIA, you want to do it all yourself, piece it together, a lot more steps than that third path where they've already put that tech stack together. They've gone out with what they feel is best of breed, and you get the chance to kind of plug and play for lack of a better term.

 

David DeCelle:
I would assume that it comes down to, of course, the advisor's vision, but I also find that there's advisors who are great salespeople and great advisors, and then there's advisors who are extremely entrepreneurial and can run a business. So I find that a lot of times there may be advisors who are great salespeople and great at relationship building and great at being an advisor. However, when it comes to running a business, they're not as good at it as maybe they think they are. And what they'll find is they continue to get in their own way, and it's tough to scale, whereas if they plugged into a platform to basically leverage all the noise off of their plate, they would be able to run that much faster. So for everyone listening, I try and, I don't know if you've taken, personal assessment tests like Myers Briggs or StrengthsFinder or things like that, but as you're going through that, I’d certainly make sure to do so. And maybe that's something that you help with as well, Brad, which is just understanding how they're wired to then determine which path to ultimately go down, because the more you can be in your zone of genius as opposed to your zone of competence, so if you ask me, hey David, do you want to start your own firm and deal with [00:20:00] compliance, I'm like, hell no, I don't want to deal with compliance. If I deal with compliance, I’m totally going to get in trouble, because all the stuff I want to do isn't compliant. Right? So I think it's a matter of leaning into your strengths. One thing, Brad, that I wasn't aware of when I was at Northwestern, because Northwestern is kind of like your own little bubble, and they do a good job of insulating you and buying into the culture and things like that. I had no idea what fee only and fee based was, until I started consulting and learning more about the industry. So I guess, my question would be: how do you talk to advisors about which model is more appropriate for them if they ultimately do go down the path of starting their own RIA because they have both options?

 

Brad Wales:
As far as being 100% fees or maybe some primary fees and primary commissions, is that what you're asking?

 

David DeCelle:
Exactly. So, like, for example, there's some advisors out there in the fee only space where, when they implement an insurance product, they don't get paid on that. Right? So, like, I think about my time at Northwestern, a lot of my income was from insurance, and then if I go into the fee only space, it's like, okay, you're telling me that, I'm not going to get those commissions anymore. And then when I was at Northwestern, I had to sell a certain amount of insurance to be able to ultimately charge a fee for a financial plan. So then I go over to the fee only place and it's like, oh wait, you're telling me that I can charge someone to just put together the plan that I was doing for free before. So there's those kind of back and forth moments. So as you're speaking with advisors, how do you determine which path is most appropriate for them?

 

Brad Wales:
Yeah, and that is a hotly debated topic and I would tell you there's very strong opinions on that out there. Some people believe to be an RIA you should be truly fee only as in that, it is as purest form as it is, you shouldn't do any commission business on the side, you shouldn't do anything for commissions on the side, and I totally respect that, for folks that want that to be how they structure it, they absolutely can, that is a powerful message to be telling to clients and prospective clients. And then the other school of thought is, and take the insurance example is, hey, yes, I want an RIA, yes, I want everything I can do with that and help my clients, but part of helping my clients is perhaps certain insurance solutions or, in some capacities, certain things that would generate a commission. And so, a lot of people don't realize, and that's kind of more your fee based where you're primarily fee driven, but there could be some auxiliary things outside of that. And there are solutions for that, that is a big misconception about the RIA model is that the only option is that 100% pure fee only and there's absolutely options, and even kind of variations of them. So with insurance, you can, as an example, you as an RIA, you can do insurance on the side for traditional insurance commissions or now there's folks that will work with you to put them in more of a fee based product. And so, it aligns with your kind of fee only approach to it. So it, like I said, strong opinions on either side, and part of what I hope is folks realizing what those options are. And then sometimes talking people out of it, as an example, if someone's not doing a meaningful enough amount of, for example, insurance, then perhaps they are just better off not making that part of their offer, and they do kind of outsource that to a center of influence they have or things like that. So it's really thinking through each situation.

 

David DeCelle:
Cool. So if I'm an advisor, and I've made my decision, you know what, I want to break away from where I'm at right now, I want to start my own thing, what's step one?

 

Brad Wales:
Step one is understanding it. I talk to advisors, of course, all day long, and I would tell you, I talked to some and they're clearly on a scale of one to 10, they're already at an eight or nine of understanding how the model works. And then on the other end, there's folks that admittedly, and I would verify, are one or two, and that's perfectly fine. And the reason you generally see that need in that education front first is, if you've been at a firm, particularly just one firm, say, for 20 years, and that's all you've ever known, or one affiliation model, maybe you've changed firms with one affiliation model, and you can be a fantastic advisor, but there's no reason to believe that 20 years of working with clients and everything, all the expertise [00:25:00] you've built out, that doesn't default to making you an expert on how some other affiliation option works. And so, a lot of that is that education and discovery, and so, generally, those first couple of conversations someone has with me, it's just starting from the beginning, what it looked like, how do those economics work, how does the flexibility work, here's how my practice is, is that compatible with the RIA model. So it's a lot of education, and that's the first couple of, you know, if you want to use a baseball analogy, the first couple of innings of the game is simply education at that point.

 

David DeCelle:
So we're past that point, we're making the move, if I’m an advisor, one of the things that I’m thinking about is shit, are my clients going to follow me, right? I guess, my first question would be: what do you see in the folks that you're working with, what do you see, and I don't know if you track, like, the exact percentages or if you have just a gut feeling in general, but what percentage of clients tend to make the move with that advisor when they make the move?

 

Brad Wales:
It's a great question, and I’ll rant about a pet peeve, I have actually made a whole video on this.

 

David DeCelle:
Where can that video be found, is it on your website?

 

Brad Wales:
Yeah, on my transitiontoria.com, and it drives me crazy when you see, and you'll see, and if you pay attention, whether advertisements, print ads or online ads, whatever, it's perhaps from a custodian or something and they're highlighting an advisor that made a successful move, and the advisor or the quote, at least, is I moved at 100% of my business, and that's not going to happen, you're not going to move 100%, and I’ll give you a couple of examples why. One, there might be some clients you just don't want to move, don't want to bring with you. There could be some esoteric account types that, for whatever reason, just logistically can't move, and so, even if you have wonderful relationships with your clients to think that it's going to be 100% – now, it might be 100% of the clients you wanted to bring and the clients are able to bring, and I will back that interpretation up, but I just think it's disingenuous to be tossing this, oh 100%, as if that's just a sure easy thing. Typically, you usually see, more in the 80 to 90% range, kind of in that first year point. So make no illusions to get back to say that 100% of whatever you are at, it generally does take more than just the first 12 months of moving the accounts, because again, you might lose some relationships by design perhaps. But also, keep in mind, it's just math – if your current, just simple numbers here and very simplistic, if your current payout is say, 40%, and under your own RIA, after all your expenses and everything, you're going to net 60%, just super, super easy numbers, you can just run that math, you don't have to even get 100% of your clients ever to come over and still be better off.

 

David DeCelle:
Yeah.

 

Brad Wales:
You can run the math on what that breakeven point is. It's not that you're looking to only breakeven, but there is that buffer just because of that additional compensation you'll make.

 

David DeCelle:
So I know that there's firms out there, including the ones that I was at, where I didn't realize, as I was a 20-year-old kid at the time when I started, as I’m signing all these legit contracts and whatnot that none of those clients were actually my clients, they were the firm's clients. So for someone who's in a similar setup, what have you seen in terms of the potential legal challenges that come into play when they try and transition folks like, are those contracts like legit enough to where you just cannot take your clients at all, or are there ways in which they can work around those contracts? And obviously, all the contracts are different, so we can be more general here, but what do you find are some of the legal challenges, and how do we overcome that?

 

Brad Wales:
That's another thing I walk advisors through, because – and it's a fantastic question, it's a very relevant question. It is all along the spectrum, as you can imagine, so the easy part of it is if you're already with an independent broker dealer who rightly recognizes that you own your, quote-unquote, book, you have little to no issues at all about making that move. To your point though, there are the traditional captive firms or the wirehouse or even some regional firms that very much believe, you advisor do not own this book of clients, these relationships, I don't care if you've been working with them for 20 years and have been to their high school, their kids' high school graduation, they are not yours, they are the firm's, [00:30:00] and they kind of hold that line, and then there's worries about, okay, did you sign something that was a non-solicit or anything like that. So absolutely, that's part of the conversation. Now, I would tell you, there is a process for working through most of those, and I'll give you an example of one that is fairly prohibitive, but it is a process of how you can successfully leave, sometimes firms are protocol or non-protocol and you got to weigh that into it for those that are or aren't aware of that, that's just a mechanism that kind of makes a transition from a legal perspective easier when it's applicable.

 

David DeCelle:
What do you mean when you say some firms have a protocol?

 

Brad Wales:
Yeah, so the protocol for those not familiar was created, I don't know, 10 years ago maybe or something, and it's not a regulatory thing, it was originally made by the traditional wirehouse firms, and the problem was, and you still see this kind of to this day, but back then the problem was they were just, they joked, it's the prisoner exchange, they were taking one advisor from the other firm and that firm has taken one advisor from their firm, and every time they'd leave, they'd sue each other because of these non-solicits, and it was just this fire...

 

David DeCelle:
An exchange.

 

Brad Wales:
Yeah, I mean, so prisoner exchange, and then then just nothing actually is getting done, except they're just suing each other back and forth, and so they got together and made this what's called the protocol. And basically, if you're a signatory to the protocol and if both sides – so the firm that the advisor's leaving from the and the firm the advisor is going to are both protocol. It says, okay, we both agree that the departing advisor can take, and it's very limited, but amount of information about the clients, like, their name and things like, it's very limited, can't take account statements or anything like that. And if you follow that, quote-unquote, protocol on how you do it, and how you depart, you got to give the departing firm the name of the clients that you've taken this information, that we agree, we're not going to sue each other. That expanded over the years into hundreds, I don't know, it might technically be thousands of firms now in the protocol, because even small RIA’s can be a signatory to it. Unfortunately, in the last couple years, some firms have dropped out, including some of those original ones, and some of the reasons why some of those original ones dropped out is to the degree they were losing more advisors than they were gaining as a result of the protocol, at some point, it's no longer, in their minds, beneficial for them to be part of it.

 

David DeCelle:
Sounds like they needed to get better at recruiting in their value proposition, it wouldn't be that way.

 

Brad Wales:
Yeah, I mean, so that's the harsh truth, that for a couple of the firms that dropped the protocol and they came out with some spin about why that was somehow in the best interest of their advisors, but clearly it was just trying to further tighten the handcuffs, and yeah, you should say, well, shouldn't you just try to keep us advisors at your firm because you provide great service and a great platform, not because you're putting these legal constraints in place, so indeed. So anyway, back to the original question, if you're protocol, opportunities, certainly it makes it easier, but if you're non-protocol and there's some firms that have never been part of protocol that people have left all along, but there absolutely is a very defined process for that, a defined dance, I help people with that, and ultimately it depends on their circumstances. There are specialty attorneys that I bring into the conversation that ultimately advisors want to work through to look at their specific agreement and tell them you can do this, you can't do that, but it's doable. But it is a defined dance, as I say, that you have to follow.

 

David DeCelle:
So you're serving as that quarterback, where you have all of these resources, from technology to compliance to legal, etc., that you're bringing to the fold to help get them off on the right foot.

 

Brad Wales:
Yeah, so a big part of my value add after you move past that education front, after you decide what path you want to go down is to the degree you need to work with vendors, which generally you always do, so whether that is the specialty lawyers or compliance folks is there's a whole lot of those folks out there, so who are the players, how are they different, why might you choose one over the other, what can you generally expect from a cost perspective, and then, by the way, if and when you're ready to make contact, I can introduce you to these specific people just from my years of network and whatnot, so you're not just blindly calling someone up to try to start a conversation.

 

David DeCelle:
So it sounds like this would be a part of the discovery process before someone even makes a decision, because if you leave and you realize that, for one reason or another, you can't take anyone with you, you're like, oh crap, that's not a good thing.

 

Brad Wales:
Yeah, and so I have some conversations, so it's very, [00:35:00] it just is apparent very early on, and I just try to save them the trouble of explaining, hey, this is just not going to be a situation that's going to work out well for you, that's tough to hear, but sometimes people need to hear just the brutal truth.

 

David DeCelle:
Cool. So we've talked about sort of the beginning stages, the before and kind of the process of organizing tech vendors and you can help with that and what not. Share with us a success story, someone who had great success where they were, but they didn't have great happiness where they were, and you would help them transition to doing their own thing – what's life look like for them now? I'd imagine you stay in touch with these folks.

 

Brad Wales:
Yes, I will give you a great example. We just happened, well, I won't, I generally never try to name firms just to...

 

David DeCelle:
That's fine.

 

Brad Wales:
Protect the guilty but we'll I think a great example, and this is back to that flexibility situation that how I began first talking to the advisors, he wanted to do, which I’m a fan of, because I do a lot of it myself, videos, instructional videos or whatnot, put them on YouTube, put them on his website to both demonstrate his expertise, to get his name out there, to build credibility, all the reasons people do videos, podcasts, everything like that. And his firm – so he went to his firm, it's a very large firm, and this advisor's very experienced, very competent, it's clearly the kind of guy that's not going to say something stupid, he's not going to, oh I, you know, guaranteed income off of whatever. There would be no issues with this kind of person doing these videos and putting them out there. And he went to his firm to say, okay, I’d like to do this, and their response back was no, and the reason was no. And they essentially even admitted to him that, hey, we don't have worries about you doing this, but we don't have the mechanism to corral our thousands of advisors and make sure that we're

 

David DeCelle:
One of my biggest pet peeves, Brad, it's like, figure it out, because you're missing the boat.

 

Brad Wales: Yeah.

 

David DeCelle:
Exactly. So sorry, but that brought up some past experiences.

 

Brad Wales:
Yes, I think most advisors can relate to that. They say it's the lowest common denominator approach to compliance that you got to worry about the one bad apple could bring down the whole ship of flexibility. And this was just something, you know, look, in today's day and age, videos, this was not trying to get on the latest app that all the kids are using, and he's the first guy to ever ask about them, this is pretty mainstream stuff at this point. And so, ultimately, and again that, you know, that was a driving factor. He liked other things about the RIA model as well, but ultimately did transition to that model and is now able to do that, and he doesn't have to get anyone's permission to make videos and is able to use that as, among other things, a business development mechanism, and it's just, it's sad that that maybe what ultimately forces people to make a change, something as simple as that, but it's the reality of, you know, I always say, I think most firms out there are run by well-intended people that are good people, and they are trying their best to make it as accommodative platform as possible. I don't think there's the evil overlords up in the ivory tower that are just trying to make things miserable for advisors, I'm certain that's not the case. I say it's not a firm problem, it's a structural problem. As long as you're the firm with thousands of advisors, you start falling in some of these traps of where you get lumped in and it is going to confine you. So as a success story, that's just an easy example of someone wanting that flexibility and made the move as a result of it.

 

David DeCelle:
Well, and they can actually be, because in today's day and age, whatever it is that your – this is my belief anyways – whatever it is that you're providing for a service or selling as a product, you're not a financial advisor anymore, you're a media company that adds value at scale, who happens to provide financial advice. And if you're not positioned like that currently, I think you'll get phased out sooner rather than later and just become, just slowly and surely you'll become more and more irrelevant. So for those of you who haven't adopted that mindset, I would certainly consider checking out Gary Vaynerchuk book, Crushing It, it's a phenomenal book, it goes through all the platforms, it goes through the whys in the house, and the whats for all that stuff. So definitely check that out. And speaking of books, so, as I mentioned, in the prior episodes, [00:40:00] one thing that I'm doing with all these guests is I am asking them what their favorite book is, and why that had an impact on them. So Brad, you submitted two, one of which I’ve read, the other one I haven't, and you mentioned that with Trump's The Art of the Deal, which I love that book, you said it had an impact on your life. What was that impact that it had on your life, and when was this, when did you read it?

 

Brad Wales:
Yeah, right, it's a slippery slope nowadays in the world we live in to say, oh, one of my favorite books of all time was The Art of the Deal. But the true story, I actually went little peculiar part of my background, I lived in Alaska for high school and then went to my first year of college up there University of Alaska, Fairbanks, and...

 

David DeCelle:
Where are you living now?

 

Brad Wales:
I’m in St. Pete, Florida, so [inaudible]

 

David DeCelle:
Yeah, I can probably wave to you from this window.

 

Brad Wales:
Yeah, we are enjoying our sun at this time...

 

David DeCelle:
Well, that's what threw me off because we talked about that before. And then you said Alaska, and I was like, wait a second.

 

Brad Wales:
There's a reason I live in St. Pete, Florida now, and not Alaska.

 

David DeCelle:
You finally thought out.

 

Brad Wales:
Yeah, exactly. So speaking of falling out, so how I came across that book was that freshman year, I remember, I was wandering around campus one day between classes or something, and it's crazy cold during the wintertime, and went into the campus bookstore, and was just wandering around. And at that point, I didn't really know what path I wanted to pursue from a degree wise, and on the used – there's like a little cart of used books or whatever, somehow I started looking at it and there was Trump's paperback, The Art of the Deal, and I ended up buying it for, I don't know, $4 or something like that, and just read it, and was just fascinated by it. I mean, no matter what you think of Trump, I think it's a fantastic book as far as exciting folks about, wow, there's all the things you can do from business front and just be persistent in trying to make stuff happen, and literally, that book got me intrigued with the business world and ended up having me go down that path with my education, and then into the industry I went. So I guess, a little different story to tell nowadays than it was perhaps 10 years ago, but it has a place in my heart for me.

 

David DeCelle:
Well, I will say, and we won't go too far down this path, but regardless of whether it's political folks, religious folks, polarizing folks, in general, I think if someone's going to allow their ego to get in the way of getting a nugget from someone, that's an issue in and of itself, and there's a great book called The Ego is the Enemy that you should check out where it helps to suppress your ego, because I know for me anyways, I try and read a bunch of different perspectives from a bunch of different walks of life, so that I’m more well-rounded in my thinking, and can have really that free thinking mindset, as opposed to only getting something from one source and having that be the way. So as you're consuming content, we'd encourage you that to have an open mind in doing so regardless of who actually wrote that book. The other one that you mentioned, which I have not had a chance to read, but it is on my wish list is The Man Who Solved the Market. So it's tough for me to ask some specific questions about it outside of why is that on your list, but I’ll be sure to follow up with you once I do finish that. So why was that on your list, and what's the impact that had on you?

 

Brad Wales: I think it's just a fascinating read, so for those that aren't familiar, it's about Jim Simons of the hedge fund Renaissance Technologies, who is the original or is kind of given the crown as being the original quantitative hedge fund, that as opposed to hiring MBAs, hired PhDs in physics and all these different fields of study and went on, and this started decades ago and went to try to – would there be a way with enough data to get an edge on the market – and he is attributed oftentimes even more so than Warren Buffett as the greatest trader of all time, because his firm has just absolutely printed money in an insane fashion – to give you an example, his main hedge fund, which is the main one that generates the returns he's known for, it's very secretive, it's now at the point where only him and some select employees of the firm are even investors in it. But most hedge funds, as an example, charge the proverbial two and 20 of fees. This particular fund, the Medallion Fund is like four and 44, some absurd thing, and the reality is because it creates such absurd returns that they can take these enormous fees out of it and still create these marketing returns. So, anyways, he's just a fascinating guy, a lot of people are enamored by him, but he's highly secretive. I haven't looked at their website recently, but there was, not up to, even not too long ago, the Renaissance Technologies website looked like 1985 AOL call and wants the website back. I mean, it was this amateurish looking thing because they purposely don't want anyone to know about them or to be asking questions about them, and the author, Gregory Zuckerman, fantastic author, somehow got a lot of people to talk more so than ever before, and he created just this amazing book about – and he got Jim Simons himself to talk which is unique. And so, for anyone that's just fascinated by people that are tempted to, quote unquote, beat the market, which, of course, most people try, in long term that's obviously hard to do, it is a fascinating read. And you got to give it to the guy, the guy's made ridiculous amounts of money. Now, he's a huge philanthropist. So it's nice, he's given it back. But a great, great read.

 

David DeCelle:
Well, that motivates me to move it up my wish list. So I appreciate you sharing the excitement from it. So Brad, before we enter into the afterhours section of the podcast, I want to say thank you for being here, I want to say thank you for providing the information and insight. I think, thinking back to where I was, when I was an advisor, this would have been super helpful for me to just understand at least what the landscape looks like, and why people would consider and what the steps are, so I appreciate you doing so. For all of our listeners who may be at that point or soon to be at that point where they're considering a change, where can they find you, what's the best way to contact you, feel free to give yourself a plug.

 

Brad Wales:
Okay, I appreciate that, and will, and before I do, I just want to throw it back at you as well. I think equally that the content you guys are putting out, if you go back 10 years ago or whatnot, the access to the sort of content that's now out there, whether it's folks like me, it's folks like you on podcast videos, 10 years ago, you were much more walled off if you were an advisor to kind of know really what else was out there and how to learn about it. And now, it's just incredible, the amount that you can, without having to pick up the phone and talk to anyone, that you can just learn, and so I think it's great, all that you guys are putting in, all your guests, that's invaluable for advisors to learn from. So on behalf of the industry, I appreciate what you're doing as well.

 

David DeCelle:
I appreciate that.

 

Brad Wales:
Yeah, so on reaching out to me, I'm a big believer, I need to demonstrate, hopefully, for those who listen to this podcast, you found value in the message I've given. But I believe you need to demonstrate your expertise, demonstrate how you can help people before you just expect them to perhaps give you a call. So I won't even give you my email or give you my phone number, I'll just say, hey, if people are interested, go to the website, transitiontoria.com, tons of videos, tons of podcasts I do myself; white papers I’ve written, and if the message resonates, if you like what you see there, you like what you've heard here, I’d love to connect and the website makes it easy to do so.

 

David DeCelle:
Awesome. I appreciate that. So for everyone listening, what we've been doing is just plugging a little bit of an ask. So if you have found value in today's episode, if you know anyone that's in undesirable setup currently, and they've voiced some interest in potentially making a transition, feel free to share this episode with them. If you found value from this episode or prior episodes, one thing that quite frankly, would really help us help more people and get more exposure is reviews on iTunes and continue to move up the ranks with that. So if you would be so kind as to leave a review, we'd really appreciate that. And as a thank you for that, if you take a screenshot of that review, and you shoot me a text at 978-228-2338, again, 978-228-2338, if you shoot me a screenshot with that text, on a monthly basis, we're entering in all the folks who have done so, and we'll do a complimentary coaching session with you and help you out with whatever's on your mind, on your plate, anything that you're struggling with as a challenge or any opportunities that you have in front of you, happy to spend some time and help you guys out. So appreciate that. Brad, again, thank you for being on the show, and now we'll transition to the after-hours portion. 

 

Cool man, that was freaking awesome.

 

Brad Wales:
Yeah.

 

David DeCelle:
In all seriousness, I wish I had access to that information when I was an advisor, because it's just, as I transitioned over to consulting for the industry in general and not just folks at my prior firm, like, sometimes I felt silly asking questions like what's the tamp. Right? It's like now we have a tamp, you know what I mean?

 

Brad Wales:
Yeah.

 

David DeCelle:
So it's little things like that, the various industry acronyms. It was just something that I was never exposed to, so I think that what you're putting out there and what you're – the fact that you're providing so much content from an educational standpoint, I think is much needed for a lot of people out there. So I found a lot of value in it.

 

Brad Wales:
Yeah, thanks man. I think it's, well, not think, it is resonating. I'm happy to say people do reach out, just like I talked about, hey, look at the website, and I think it's just a different world, and I was in a role once where the expectation was the way you connect with folks, the way you try to drum up business is cold calling and that world is gone. People expect you to provide value, provide content before they're going to trust you with their time or energy or anything like that, and so, I've gone full board with it, you guys obviously have as well, I think that's just where the future's going. I think advisors need to be doing the same thing.

 

David DeCelle:
For sure. When was the last time business or personal life, whatever, you can answer it however you want, when was the last time that you were flat out rejected from something, and how did you handle it? Obviously, I’m putting you on the spot here.

 

Brad Wales:
Yeah, good question. I don't know what would be more fun from a – I've been happily married for many years, so at least no personal rejection.

 

David DeCelle:
Not kind of personal rejections.

 

Brad Wales:
My wife did reject me initially, at first. So thankfully, I was persistent and came back around on that front. I think there's no doubt in a professional capacity, have been rejected, in not so much thankfully, again, under my new structure, because I designed it that way, where generally, the people I end up talking to are the people that want to talk to me. Right? That's a crazy business development ideas to talk to people that want to talk to you. But back when I was kind of tasked with trying to drum up business, whether it's just directly cold calling or before someone even knows who you are, clearly you get rejected by that. And, I guess, the more you get rejected, that the more it helps you, but that doesn't mean that's how I wanted to do business. There is, by the way, rejection, if that's a topic that you find intriguing, there's a guy, I think he did a TED talk on it that I thought was fascinating. And you might have seen it, and if you did cut me off, you can share that as well. But he wanted to overcome for professional, personal reasons, everything that right there, no one likes rejection. It's ego, it's embarrassing, whatever the case is. And so, he wanted to kind of oversee, hey, could that be overcome. And so, he made a challenge to himself that once a day for a 100 days, he would do something, I’ll give you some examples, that there's a good likelihood he'd be rejected. And his theory, which ended up there and out was that you do that enough, you get to the point, whether it's thick skin or whatever analogy you want to use, it didn't bother him anymore. And then part of the lesson too is it's surprising, which we talked about at the very beginning podcast of what you can actually achieve if you're willing to ask, and so, he did little stuff at first, whether it's, on a personal front, ask someone for their phone number right out of the gate, and okay, you're probably going to get rejected. But it's interesting, he said he had to keep raising the bar, because he's like, it's incredible what – you're not always, but incredible what you can accomplish if you just ask. And it got to the point, I remember one of the examples was using some neighborhood and he saw in someone's backyard there was a swing set, and he thought, okay, what happens if I knock on the door and ask them as a full grown man, if I can play on their swing set a little bit, and [inaudible 00:54:15] there's no way in hell they're going to say yes to this. And they said, yes. They were so intrigued by this, whatever, and in most instances, people are like, dude, get the hell out of here.

 

David DeCelle:
Yeah.

 

Brad Wales:
Yes, and it just validated his point that one, again, you could get more than you think if you're willing to ask; and then, man, if you're willing to ask them to plan someone's swing set that you don't know, there's not a whole lot in life that you're not willing to ask for so...

 

David DeCelle:
That's so interesting. Well, it goes back to, as you mentioned, what we were talking about before, which is, you have not because you ask not. Right?

 

Brad Wales:
Yeah.

 

David DeCelle:
So you're building your calluses, so to speak. But I also do agree that there's better ways to warm that person up before [00:55:00] going in for an [inaudible 00:55:01]. So, like, you do a really good job at the content production, so basically, if someone reaches out to you, they're probably 80 or 90% certain that they're going to end up working with you, because they've already done their due diligence. So I think that if you have patience, when you're starting your business, and you have either some financial run room, or other ways in which you can create income, in the meantime, you can go about business development, I think, in the right way, and the more comfortable way for all parties, and certainly, like, cold calling and stuff like that, like, that still works. I have a buddy of mine, I’ll give him a little shoutout here at Tyler DiMauro, and he's just an animal. He just runs through people's faces, and I’m talking, he'll make, depending on the day and how many meetings he has, he'll do 300 to 500 cold calls a day.

 

Brad Wales:
Wow.

 

David DeCelle:
He also elevated his business to the point where, like, this month, he'll do as much business as he did half of last year. Right? Because it's finally coming to a head and he's just cold calling heavy hitters, people who are making $1 to $10 million a year, and his mindset is, as soon as they answer the phone and tell me no, we have a relationship now, and he could follow up with them. So, there's times where people are like, dude, you've called me literally 12 times and I've answered, never mind the times, I’ve ignored you, I’ll take a meeting with you. He just breaks them down. Me personally, I couldn't do that, that doesn't give me energy. For him, again, he's a psychopath in a good way, and he's just, hammering the phones.

 

Brad Wales:
Well, good for him. I mean, to each their own, and it is, I mean, it's a numbers game. Right? I mean, the math and theory says it works. It's just, yeah, you got to be that, it's got to work for you, it doesn't work for me, but I’m happy for him it does.

 

David DeCelle:
Yeah. What's the biggest mistake that you've seen an advisor make during their transition, that I would assume would be against your guidance, because you try and help them with that, but there had to have been something where an advisor tripped up somewhere and someone else can learn from their mistake?

 

Brad Wales:
Yeah, I’ll give me kind of a general answer, and then kind of, you know, be careful of type thing, which thankfully, the latter one wasn't specific to me, but you see it happen in the industry. So the first one and this is self-serving for me to say this, but if you're looking at wanting to learn about the RIA model and whatnot, if you reach out, and again, I used to be one of these people, so I'm not knocking it, but if you reach out to particular solution company like a custodian or existing IRA or whatnot, again, they'll help you, but again, they do have a particular agenda of where they'd like you to land, and so there is benefits. Again, it's self-serving for me to say this, because this is the value I provide is to work with someone completely independent of that, that can walk you through it and make sure you're going down the right path, and not perhaps getting too far down the path and not realizing other options exist. So I think you want to call it a mistake, I think it is important just to really know what all is out there and not get your information solely from one source that perhaps has an agenda to kind of steer you down a path. And you see this from time to time, and we talked about this earlier in the podcast of, leaving particular firms and do you have solicitation agreements and things like that, and you will see occasionally the industry press that, oh some advisor left this firm, and now that firms going after them, they put a TRO, a temporary restraining order against them, and sometimes that's even successful. And 99% of the time, every time I see that headline, I open it up, and I'm like, okay, here we go, read the article, read the article, wait for it, wait for it, the advisor did something absolutely stupid that they should not have done, whether they went out guns blazing, they were so annoyed with their firm that they go out all poking the bear on the way out, or they specifically do the things you shouldn't do. And again, that's where it comes back to, I talk about this particular dance, you have to play, don't think you can go outside of that, because there's a reason those kind of parameters have been set of generally how this works. And so, from a mistake, that's enormously costly, that could be a career mistake, but almost in every instance, it's something that could have been avoided if they just followed, but if they got the guidance to begin with, and then they followed it to go with it.

 

David DeCelle:
Yeah, I feel like that happens a lot of times and people can be headstrong, and they're like, screw this, I’m just going to do it my way, and they're like, oh no, these laws and these contracts are real, and they come and bite you in the butt. Last question that I have for you, and I don't care if you bring me all the way back to [01:00:00] grade school or if it was yesterday or anywhere in between. But thinking about your whole life, what's the most embarrassing thing that's ever happened to you?

 

Brad Wales:
Wow, I like it. Most embarrassing. I don't know, if I’ve had any massive one-off....I'll tell you a time that was, I guess, embarrassing, but tough to adapt to. Thankfully, it wasn't self-inflicted crazy story, this is thankfully a number of years ago, but I had actually a problem with my vocal cord and had to have a bunch of surgeries on it. And now, I have a new respect, sometimes you hear about singers or bands whatever that have to take a hiatus from their tour, because the lead singer has a vocal cord issue. And I used to think, oh that's crap, that's just their way to get off the road, and they're being lazy. But actually, anyways, I did have a problem, and we've all these surgeries and part of it was one of them, I couldn't talk for 10 days after the surgery. And so, for someone that their whole life has talked, that is an awkward challenge and it's actually a little soul searching. But where it's maybe embarrassing, and I hated this, is just little – and I sympathize because unfortunately there's people in the world that can't ever talk, but little things like someone would open the door for me, and I'd walk right on through and then not even be able to tell them thank you or anything like that.

 

David DeCelle:
Oh, you're so rude, Brad.

 

Brad Wales:
Yeah, it's just a jerk move, and I couldn't even explain, but seriously, I can't talk for 10 days, you know...

 

David DeCelle:
...get a note card or like a recording device that you could just play it for them.

 

Brad Wales:
Yeah, so that was embarrassing, and I’d see it happening, and I'd be like, oh my gosh, I'm coming up on door, I'm coming up on door, someone looked back, they see me, they're about to open this door, I’m like, oh. So if that's the worst embarrassing thing I’ve had in my life, it's certainly not the worst life you could live, but that was a challenging time and made me appreciate – it's interesting, there's a lot of stuff in life you don't appreciate that you've had your whole life until it's taken from you. So there was a little lesson in it too.

 

David DeCelle:
Well, that question, I can't ask that and not answer it myself.

 

Brad Wales:
Yeah, please do.

 

David DeCelle:
I've already shared embarrassing stuff on other episodes, so I won't be too repetitive, but this one actually happened the other day. So I’ve been working out a lot and, as a result, my muscles are becoming more tight and I’m becoming less flexible. So I’ve been stretching a lot more, and finally, I was like, you know what, I did yoga a few years ago for six to nine months or something like that and I really enjoyed it, and for one reason or another, I just kind of got away from it. So I’m going to go check out yoga. So I did this yoga class, and it was like a restorative yoga, and it was just basically like sitting in the room with other people and stretching. And I was like, I don't really like this. So then the next day, I went to their hot yoga session, in this beautiful studio, beautiful women as well, and yoga is awesome for that reason as well. It was funny because what ended up happening was during hot yoga you're drenched in sweat, so I took my shirt off and just dripping sweat, had a towel, wiping myself off. And there was one pose, I forget what it was, but you like got up on your toes and then you sat down on your butt and you rolled back on your back. Well, my mat and my back was so wet that, and mind you, like, brand new to the studio, second class, don't know anyone, and I roll back, and it sounds like I let out the big fart because the way that my back and the mat hit with the sweat in between, and like immediately turned like beet red. And so, that literally just happened – today's Friday and that happened on Wednesday. So there's an embarrassing story for you.

 

Brad Wales:
Well, so you’re saying you've concocted this story and you can now deliver it pretty well to actually cover up the real task at hand that...

 

David DeCelle:
It's funny. Well, I guess we will never know. You'll never know. W
hen COVID first came out, there was something that I thought was funny about it which was before I used to cough to cover up a fart and now I fart to cover up a cough.

 

Brad Wales:
I've not heard that, that's funny. Oh my gosh, let's hope we're never in that world again where we ever have to use that saying.

 

David DeCelle:
No.

 

Brad Wales:
We are good.

 

David DeCelle:
Cool man. I appreciate it, and I know we are basically living right down the street, so once we stop recording here, we'll organize a get-together and meet in person, but appreciate you joining, appreciate the time of course, and grateful to continue to explore what it could look like to work together beyond just sharing some [01:05:00] content back and forth.

 

Brad Wales:
Yeah, great time. Thank you for having me on. And you know it's a good podcast when it runs from talking about securities' attorneys to yoga farts. So [inaudible 01:05:13]

 

David DeCelle:
That's the point man, humanize ourselves, so appreciate it. For everyone who stuck around for the afterhours portion, appreciate your additional time. Hopefully, there was some chuckles along the way, and we'll see you on the next episode. Take care. 

 

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