EP 79 | Practice and Operations Management Principles, Tips, and Tactics with Matt Sonnen

David DeCelle  10:48

Well, it's interesting. So I don’t know this came up in your conversation with Patrick Brewer or not, but we have a certain philosophy and even an assessment tool that we've developed where an advisor goes through a series of questions, and it really ends up with spitting them out as a certain personality type, and it falls into four categories. So the first one is the Connector. This is someone who really gets their energy from meeting new people and building relationships on the front end of that relationship. And then the second one is the Rainmaker. The Rainmaker is the type of person who really enjoys bringing people through the process and ultimately closing the deal. Then you have the Guardian, where they get their energy from the ongoing service and experience and the relationship with that client. And finally, you have that Architect, which is the mad scientist in the back, kind of putting together the building blocks of the firm and running it like a business. I don't know if you found this, and you can have a conversation with an advisor, you can kind of get a sense as to what personality type they are; the assessment tool just kind of solidifies that. So I find, I'm sure you find this too, a lot of advisors fit into the first three that I mentioned, which is the Connector, the Rainmaker and the Guardian. At the beginning stages, I think it's very manageable to not have SOPs and not have processes in place, but then they get to a certain size, whether it be AUM or amount of clients or amount of staff on the team. And then they realize, wow, things are falling through the cracks. I told this person, I was going to meet with them X amount of times per year, and I end up not meeting with them, and typically, it's because of the fact that they don't have that Architect style person on their team. That can come in many forms; it can come as a fractional relationship with your team over there. Or maybe they get to a point where it makes sense to just hire someone for that. So I guess my next question, with all that being said, what are the core processes where it's like, hey, this is a nonnegotiable, you got to have these mapped out in your business, otherwise, it will collapse at some point in time, and you'll start to have issues. What are the core SOPs that should be developed, and I'm sure that the list can go on for a while. So just, I guess, start rattling off different processes that need to be documented, and then we'll pick one or two to dive deeper into.

Matt Sonnen  13:18

The most important because it's your, you know, the advisors thinking, well, that's operation stuff, that's all back office. The first one I'm going to talk about, though, is your firm's first impression to a client, which is onboarding. And every RIA struggles with this. Advisors typically are not super detail oriented, and so they leave the office, they say, hey, I think this is the meeting where they're going to say yes. And the staff says, great, make sure you get, we're going to need this amount of information, this, this, this, to open the accounts, make sure you get all of that. Absolutely, I will. And they go to the meeting, and they come back, and their chest is puffed out, and they say Thompson is in, and they just keep walking. And then the staff is there going, what does that mean? Is it five accounts? Is it nine accounts? Is it 27 accounts? Is it an IRA? Is it a trust? Is it a family foundation? Is it a corporate account? So then the staff has to call the client, the prospect, back and say, I know you just met with him, and you probably gave him a lot of information, but nothing landed on my desk. So can I ask you all the same questions again. It just, again, it feels like, well, that's back office stuff. It's actually not. We're talking about that this is the very first impression this client is going to have with your firm. So we always start with that one — let's go through the data gathering process. And every firm's going to do it slightly differently. But little different things you can play with is the staff can send an email the night before the advisor is going to meet with them. Hey, John is very excited to meet with you. You don't want to put too much pressure on them, I understand. But if you choose to move forward, these are the questions he's going to need you to answer. And so you can say you're going to need the first page of your trust, you're going to need your statements, you're going to need, if it's a corporate account, we need the corporate resolution, whatever it may be. So you're telling the client, so when the adviser kind of forgets to ask the questions in the meeting, the client can say, hey, your team said I needed to give you this. Can I? I've printed it all out for you. It's here. Why don't you take it? So we spend a lot of time on that one, and I can go into others, but that's really the biggest one. And I like that example the best because again, I think it helps advisors sort of with the, well operations isn't sales, operations isn't client facing. It's all back office stuff. It really isn't.

David DeCelle  15:27

Now, do you find — I want to dive deep on this one, and the reason why I want to dive deep on this one is for a few reasons. One, there's principles within this process that can be applied to other processes in the business, but also because of what I've learned about being the anchoring effect. And if you can anchor the client in a certain mindset at the very beginning of the relationship, they're going to look for instances to reconfirm how they thought about you initially. And they're going to overlook and forgive if anything goes wrong past that, because they're already anchored in a certain, hopefully positive mindset. So a quick question more logistical in nature. Do you find that more firms put the onus of data gathering on the client? So be it like an electronic intake data gathering form that's emailed? Or do you find that the adviser or someone on the team holds their hand through that process? What do you find is more common? Because I know a lot of advisors are trying to figure out, at least the ones that I'm working with, how can I free up my team's time without delaying the process? So I want to know if that's a possibility that you've discovered in the folks that you're working with.

Matt Sonnen  16:47

I've seen both and I tried to cheat and say, well, you want to sort of do both. I like the you can send the questionnaire, something in writing for the client to see all the what's going to be required. But then I still offer that high touch service of, but we're here to help you in any way. As you can imagine, you can blame the custodian if you want, if you're very worried about oh, I don't want to make it feel complicated for the client. As you can imagine, in order to open accounts with Schwab, Fidelity, whatever, you can put it on that they are going to require a lot of information. We're here to help you answer Schwab's question. You can frame it that way, if that makes you feel better. So I kind of like both. The intake forms, some firms just say, I send it out, and I expect them to fill it out, upload everything that needs to be uploaded, it comes back, and they're hoping it's going to magically fill in their CRM, and then they're completely out of the process. But I would say most firms are offering some type of hand holding in that process. But I kind of like both. I think the firms that go the other way and say, oh, I could never send something to the client, I have to hold their hand through the entire process. That's where they, again, where the adviser tends to miss things. So I kind of like finding an in between where you send something in writing with a list of what's going to be required, or the questionnaire, whatever, but then offering Suzy on my team is going to call you and walk through it with you and make sure that you're comfortable with each step of that process.

Patrick Brewer  18:08

Hey, Model FAs, I know you're enjoying this conversation, but I wanted to take a quick break to talk to you about the Model FA Accelerator. This is a unique collaboration between us and you, where we help you build a financial advising practice that you can be proud of. We focus on the foundational concepts around how to pick a niche, or a specialization, how to price your services, how to construct an offer that people are going to buy, and then how to market it and sell it in a way that will get people to sign on the dotted line and become clients of your firm, all while giving you the information to scale and set up workflows and operational processes that will allow you to reclaim your time and build a practice that doesn't run you. So if you'd like to hear more about that, go to www.ModelFA.com/accelerator, or www.ModelFA.com. Hover over Work With Us and click on Accelerator. Hope to see in the program.

David DeCelle  18:58

So do you find that as advisors are putting this together, because this is where I start to get passionate about this process. I don't get energy from the logistics of collect this information and enter it into this. I get passionate about how they're layering on an experience component throughout each of those steps. So do you find when advisors are putting together these SOPs, do you find that their first pass through tends to be very service oriented? Or do you find that there's a natural inclination to add an experience component on to that, or is there a gap between those two?

Matt Sonnen  19:39

Well, the client experience is filling all of the promises you've made, right? So when we do an operational diagnostic, the first session we like to do with a firm, is we want you to send us your marketing deck and pretend like I am, I'm a business owner. I will pretend that I've got $10 million, whatever their ideal client is, pretend I'm your ideal client. Give me the pitch. And they say, why are you asking? You're the operations guy; why are you asking for my pitch? And I word it exactly the way I just did. I want to hear the promises you're making in the prospect phase, and then we're going to go through all of your operational processes, workflows, everything else to make sure you're fulfilling on all of those promises. So it's not an either or right. Is it service? Or is it operations? Is it a client experience it? To me, and I'm biased. I'm a nerdy ops guy. But to me, it's all the same thing. It is all the client experience. So it's just you want to make the process as easy as possible. But if you're going back to them multiple times, because oh, we forgot to ask this, we forgot to ask that — it's not a great client experience. So I think helping advisors make that mindset shift is helpful in this process.

David DeCelle  20:46

Cool. So I don't want to overshadow and turn me into the guest here, but this is where the part of the process lights me up. So as I'm thinking about the onboarding experience, and expectations, because I think those are two different things, I think the expectations need to be met in order for them to start to have a good experience. I think that when expectations are met, it's more of a well, yeah, I would expect that my expectations are met, and not so much of a wow, this is an amazing experience. And what I'm getting at is if you can solidify the fact on the front end that they're going to feel amazing every interaction they have with you, what that does on the back end is it makes it much, much more likely that they're going to be willing to talk about that experience with other folks and, in turn, make introductions. So the example I always use, Matt, is if you go to a McDonald's, which hopefully you don't, but if you go to a McDonald's, and you ask for a Big Mac with no onions on it, and you get that Big Mac and it doesn't have onions on it; first of all, you're not going to tell people that you went to McDonald's, but just because your expectations were met doesn't mean you're going to talk about that, because that's what you expected, right? But when you go to that Steakhouse, and they pull out your date's chair, and they scrape off the crumbs in between the courses, they fold the napkins when you go to the restroom, they comp a dessert at the end, the chef makes sure your steak is cooked perfectly. That's something that's worth talking about. So little things that I suggest folks do along the way and actually build in their SOPs — and a great book about this is Delivering Happiness by Tony Shea. That's kind of where I got some of the foundational ideas that I share. It's just all about making it feel like it's their birthday every time they're talking to you. So it's, once you start the actual onboarding process, can there be a quick welcome video that you share with them? Could there be an instance where you give them a sense as to who your team is, and who they should be reaching out to about what? On the front end through the discovery process, did you actually spend time getting to know their hobbies and interests and passions so that you can simply add a P.S. to a follow up email to share a podcast, a book, or a recipe if they like cooking. Just like those little things, where they're like, oh, this is different. This isn't what I was expecting, but it makes me feel good. Can you link them up with someone on your team to handhold them in account aggregation for whatever software tool that you use; a small gift or handwritten note. So again, I could talk about that stuff for days, but I think that in order for an onboarding process to turn to an onboarding experience, it's what are the things that I can layer on top to exceed expectations so I go from making them feel like they made a good decision to making them feel like they can't help but talk about that with other people? I don't necessarily know if I'm even looking for a response, but I just wanted to like hit on that where even when I come across folks that have SOPs, I noticed that they're very service oriented and not experience oriented. So just for what it's worth wanted to include that in this podcast.

Matt Sonnen  24:04

Yeah, I'll throw out two different stories related to that. So that hotshot team that I got paired with at Merrill Lynch, they sat me down on day one or two, it was one of the very first, and they said, listen, this is how we've built our business. The markets are going to go up and down. We can't control that at all. But we can control our service. Every single phone here needs to be answered by the second ring. That was like one of their things — nobody ever goes to voicemail ever. You always take a message, we'll call you back, whatever, but all phones must be —and they had other service things. But if the service is good, this was their theory of how they had built their successful business, if the service is good, clients will forgive us when markets are going down. If the markets are going down, and their portfolio is going down, and they haven't had a great service experience, they're much more likely to start looking around. So that's one and then the other thing that came to mind as you're telling that story, you mentioned McDonald's, I don't know how I wound up — one of the papers I wrote in college was about franchises, and it's always stuck with me. The biggest risk for a Taco Bell or McDonald's, whatever, is the locations in the middle of nowhere that they know it's not a repeat customer ever. It's on Highway 5 between Los Angeles and San Francisco and people are driving by at midnight. They have no incentive, the McDonald's, that franchise has no incentive to give you the no onions when you ask for it. And so they have to really watch those, whereas they don't have to watch the local, in the middle of Redondo Beach here where I live. The theory is that they're going to work very hard to make sure this even McDonald's, Taco Bell, fast food, they're going to work very hard to at least meet the expectations, if not create this amazing experience, because they know, it's all about repeat business. So I just thought that always stuck with me. And of course, our business is 100% referrals. So you have to be creating that client experience, and you have to always be thinking of how you're servicing the clients so that not only are they going to stick with you and not get wooed by other advisors that are probably calling them and meeting them at parties and things, but that they're going to be telling their friends about you as well.

David DeCelle  26:05

I agree 100%. So I think in an ideal world, and in ideal world, it's obviously tough to achieve that status, because there's always going to be some changes and exceptions along the way. But in an ideal world, an advisor should basically work with the same type of person over and over and over and over and over again, be it business owners, be it retirees, be it medical professionals. And the purpose of that is obviously you can become an expert in that niche, and it allows you to build systems and processes to actually be able to scale, as opposed to making different promises to different people along the way, and then trying to coordinate all of that. So do you find that certain aspects of various SOPs that you're helping folks create, do you find that there's differences depending on the type of client? And if so, how much time should an advisor spend on actually creating those? Or are you suggesting, hey, let's scrap these types of clients and just focus on this one? I guess, how much is client's niche or niches, how much does that affect the SOPs that they're putting together?

Matt Sonnen  27:14

We have spent a lot of time talking about client segmentation, talking about the importance of having a niche. One of the lessons we have inside this COO society was misconceptions around client segmentation. And whenever those words come out of our mouth, advisors typically just immediately think you're going to tell me they fire the bottom 10% of my book. I'm not doing it, these people I love, they've been with me forever. And others will say, I don't even understand, you're the ops guy, why are you talking to me about client segmentation? It’s a marketing thing, and a marketing consultant should be talking to us about it. And I say no, it's about the service offering. You posed it really well. What is your service offering? And you're going to eviscerate your staff if you're trying to have this very broad based service offering that's going to somehow fit everybody. So you have to narrow down on who is our ideal client, what is that service offering. And then, if we're not getting rid of them, which I'm fine not getting rid of them completely, you're going to need to go hire some service advisors that are going to work with that other segment of your client base. But you, I'm just talking to the one advisor at this point, you need to figure out what your ideal client is, who you want to work with, and how your firm is going to serve as them. And then you don't have enough hours in the day to service people outside of that niche. So either you're going to get rid of them and your firm is no longer going to service them, find referrals to other advisors that you know, or you're going to need to spend some money, some more staff, then they can focus on that. But you can't be all things to all people, it'll fall apart.

David DeCelle  28:46

So before we get into the book that you had suggested, I just want to be able to give advisors context. I'm not going to quote you on this actual number, because I'm putting you on the spot, but I feel like when I come across advisors, they underestimate the amount of stuff that them and their team actually does. So when they think about SOPs, they think about, okay, our onboarding, and then perhaps our review process, and then they're kind of okay, I got my business documented now. And you and I both know that there's many more SOPs than that. So again, I'm not going to quote you on this number, but I just want to get a sense as to like your initial reaction, how many different SOP should be documented within an advisor’s business, on average?

Matt Sonnen  29:35

You don't want to go crazy, and off the top of my head, I'm thinking 10. It's a nice round number. Billing is hugely important, and you want to have a smooth process around that because that's oxygen. That's your revenue. We talked about onboarding. The performance reporting, whether you're sending quarterly reports or you're putting people into the portal, whatever, you're going to need a lot of processes around that. So I won't go through all of them, but I won’t try to oh no, we need 37, we need 42, even 107 processes documented. You want some leeway for people to — one mistake advisors make, especially inside a CRM, is their workflows are so specific that people will get stuck. It's opening an account, follow these specific steps. And it's so tight that you get to step three, and you say, well, but this one's a trust, and it doesn't apply here. And then it's like, what do I, I can't move on in the workflow. So you want to have some leeway. So high level, I'm thinking probably 10 high level, and then you can have very detailed instructions underneath that. But in terms of just like major systems in your firm, I'm thinking 10.

David DeCelle  30:43

Cool, awesome. Well, this has been super helpful. And it's cool, too, because when we're working with advisors, we stay, I guess, more conceptual around the systems and processes, because where we shine is business development, experience, relationship building, marketing, things like that. So it's good to get this level of detail around not just the SOPs, but just overall philosophy of running a business. And I can see how you and I specifically can be a resource to one another into one of those clients moving forward. So I appreciate the time spent today. With that being said, before we close out, if this is your first episode that you're listening to, first of all, welcome. I appreciate you joining us today. But one theme that you'll notice if you go back and listen to some other episodes, or listen to the future ones from here, is every guest, I ask them one of their favorite books that's had an impact on them. And the purpose of that is I find that a lot of times advisors, when they are looking to learn, they tend to, to a certain degree anyway, stay within the confines of our industry. But there's a wealth of knowledge when you look at other general business books or marketing books or learning about other founders and business owners, and you can extract some principles along the way. So with that being said, there's a lot of stuff to read out there. So hopefully, what you'll find is leveraging our guests and their experience and what they've consumed to kind of filter some of the best books that are out there that can apply to our industry, even though they're not directly related. So with that being said, Matt, the book that you had identified, and I forget exactly who but I think we had brought this book up before so I'm excited to get your perspective on it. But it's called The E Myth Revisited. Or actually, this may be a different book than The E Myth if there's two. Okay, so The E Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It. So give me a sense as to why that book has had an impact on you, and perhaps why an advisor should be motivated to actually get that book and take it in.

Matt Sonnen  32:52

I mean, it's very personal to me, because I didn't read it until a few months after I left my corporate job and started PFI and became an entrepreneur as well. So it applied to me as well, the E Myth, the entrepreneurial myth, according to the book, which I agree with, is I'm very good at this task, this service, therefore, I should start my own business that performs that task. And so I think in the book, it's plumber, maybe; I'm the best plumber in town, and everybody asks for me, and I'm really good at all plumbing problems, I should go start a plumbing — I don't need a boss, I'm going to stick it to the man, and I'm going to go start my own plumbing business. It's a whole different skill set, fixing sinks and toilets and everything else and plumbing issues is very different than how many employees do we need and who should be doing what and documenting processes, as we've been talking about. Advisors are it, right, it fits exactly with what advisors are. Hey, I'm at Merrill Lynch, Morgan Stanley, whatever it is. I'm really good at going and getting clients, getting them to trust me, long term relationships, I've worked with the family, etc., etc. I've been to the birthdays and the birth, they love me. I should start my own investment advisory firm. And for all the right reasons, that's a great idea. And we could go on and on for why that's such a good idea. But I think a lot of times, then advisors, and we've talked about a little bit already on this during this interview, oh, wait a minute, the skill set of getting/finding clients, getting them to trust me, building investment portfolios, understanding their long term financial goals, etc., is very different than running a business and figuring out operational efficiencies and again, who's sitting where and what roles they're doing. So I love the book, and it addresses all of that, and a lot of the book speaks to the need to document processes, etc. So I recommend that book all the time. I love it.

David DeCelle  34:45

Well, it's interesting, because obviously, that directly correlates to what we were just discussing. And it's funny, it's an example of me as well. So when I got out of being an advisor, I was doing that for seven years, and I started a consulting business, same idea. I was like, hey, I've been coaching advisors, they've been seeing success, let me do this on my own. And it got to a certain point, and then I could see a ceiling because I wasn't passionate about other aspects of the business; I was passionate about helping people. So then I came across Patrick and his team, and we had done some work together initially at more of like an arm's length, and then finally, we decided, hey, let's do this together. The success that we've had at Model FA has purely come from our team's dynamic and the difference in skill set, and I have a role in that, Eric on our team, Gram, and Natalia, and Ryan, and Pat, like, they all have a specific role in that, but what I wasn't good at, at that time, was putting those people in place. So it's almost transitioned me from that entrepreneur ambition or mindset to more of an intrapreneur, and you can still very much succeed in that type of role. So it's interesting how that not only applies to advisors, but also my personal story, as well, so I appreciate your sharing. So with that, Matt, if I'm an advisor and listening to this podcast, and I'm like, I don't even know what SOP stands for, never mind having SOPs. So, obviously, standard operating procedures is what we were referring to, but if there's someone listening today, and their business needs some love from a systems and processes standpoint, I know you got a podcast, I know you provide the service. So if I'm an advisor, I want to learn more about either your content or what it's like to work with you, where would you like them to spend some time visiting?

Matt Sonnen  36:46

Yeah, it's all at PFIadvisors.com. We have in six years, we're over 200 blog posts, all practice management. So from PFIadvisors.com, you can go to our blog and see all the articles we've written. There's a link to our podcast. There's a link to the COO society, which is our digital consulting, where we have the courses and things. Everything starts there, so that's the best place to go to learn more.

David DeCelle  37:10

Awesome, I appreciate you joining. And for those of you who are listening, you know that we always have two asks here at the end. So number one, assuming that you found some value today, which I'm sure you did, feel free to share this with other advisors that you're connected to. And number two, if you would be so kind as to leave us a review on iTunes, that would just help with our overall visibility to be able to get in front of more listeners in the advisor community. So we'd very much appreciate that. And if you do go ahead and leave that review, do me a favor and just take a screenshot of that, and then shoot me a text to 978-228-2338, again 978-228-2338, and just reference Matt Sonnen, S-O-N-N-E-N. What I'll do as a thank you for that is I'll shoot you a document that we have that lists out like over 100 different questions that you can ask prospects and clients throughout the relationship, which will start to seed things in their life, make you aware of things in their life that you can leverage for that experience component that we were talking about earlier on in the show. So if you would be so kind as to do that, that would be great. And with that being said, third ask that just came to mind, if there's a guest that you think would be great for our podcast, we're always open to introductions and appreciate you thinking of us in regards to that. So with that, Matt, I appreciate you joining. Excited to see how our relationship between you and I and our firms progresses into 2022. Thank you so much for joining.

Matt Sonnen  38:48

Thank you. This was a lot of fun. Thanks.

David DeCelle  38:50

Awesome. Take care.