Peter Velardi: Hello, everybody. Thanks for taking the time and welcome to the Monetized Advisor Podcast brought to you by JPTD Partners. This is the podcast where we talk about all things, how financial advisors grow, protect, and ultimately monetize the value of their practice. I am Peter Villardi, one of the founding partners, and I am the P in JPTD. very excited to have a guest with us today. We don't always do this, but we have got one of the best advisor coaches we know in the industry, Kristen Andre, with us, and we're delighted to have you on with us. I checked out again your LinkedIn profile, though I've known you for years. I love your tagline. Less noise, better decisions, exceptional businesses, and it's all about transformation. Just love how. Descriptive that is, perhaps you can just give a quick intro and let our folks know who you are.
Kristin Andree, CFP®: Yeah, thank you. I'm excited to be here because yeah, I've known you guys forever. you know, you guys are the best at what you do and I'm excited to get to chat. But background on me, I'm a recovering advisor. So I've run a firm, I've run a practice, but my heart and passion is helping advisors scale and grow. But you kind of you mentioned it in the tagline. I think in our industry there's so much noise and no one knows what to pay attention to. So they just grab the next shiny object or listen to an idea they heard from somebody in their study group or someone at a conference. So my job is to really help them cut through the noise and figure out what works for them and their practice as they're scaling and eventually exiting.
Peter Velardi: That's wonderful. And boy, there's a lot of noise out there right now and the stand
Kristin Andree, CFP®: So much.
Peter Velardi: is shifting. So we use these opportunities to educate advisors, both pre-transformation, during the transformation, and then help them understand what to do when it's the right time for them to actually take some chips off the table and bring in a capital partner. So
Kristin Andree, CFP®: Absolutely.
Peter Velardi: today that's what it's all about. The main Focus of today is really the concept of scaling beyond yourself. So we're going to be talking about growth strategies after you gain a capital partner. But the reality
Kristin Andree, CFP®: Yes.
Peter Velardi: is, for those of you that are saying to yourself, well, I should shut this off because I don't have a capital partner, all that we're going to talk about is going to be highly relevant to prior to a time when you might monetize with a capital partner. All the things we're going to talk about post- monetization are going to be highly relevant to you prior. And that's why we brought in Kristen today to help us do that. Agenda-wise, we're going to first do an article review as we always do. Makes it fun, gives you perspective. So we'll kind of bat that around a little bit. The topic there is going to be this concept of independence. So you can start thinking even now, what does independence mean to you? And we're going to kind of give you our perspective on how the industry has changed. I've been in this space for 44 years. like Kristen, I was a CFP financial advisor. I hired and trained thousands and thousands, led groups of five to ten thousand, and then did my entrepreneurial thing for the last 20 years. And that's led to just a fantastic opportunity to help advisors come full circle, where if they listened to us and we didn't hurt them too bad, they went on to great success. And found now themselves being in a position where they can say, hey, I'm probably worth my net worth is probably 80% or more tied up in my business. I want to grow faster, I want to get things off my plate. So advisors come to us to help them make proper and informed choices about what all that looks like. So that'll be the bulk of today. We're doing an article review, we'll get into the bulk of the main content and have a discussion on it and try to add as much value to you as we can. then the the ever popular section where we review an offer with you will be kind of the last thing we do. we'll actually walk you through an offer, an LOI recently signed by one of our clients to give you an idea of what these deals could look like and then we'll kind of wrap things up. So that's our story and we are sticking to it, Kristen.
Kristin Andree, CFP®: Sounds good to me.
Peter Velardi: So let's talk about this notion of independence. The article I'm gonna cite was in CityWire. If you want to pull it up, it's an opinion piece. This was as of July 29th, and the opinion is the question what does independence actually mean? And it's from Adam Mulamed, who is chief executive for Sanctuary Wealth. He write, writes it. And you know, what I liked about the article, Kristen, is that it raised as many questions as answers. And you know, as you think about this whole world of independence, we, when we talk to advisors throughout our process, it is one of their top values and it's one of the top requirements of a deal. They need to at least feel more independence, but independence means different things and it probably it's changing in terms of what it means to people, but you know, how do you get your head around as you coach advisors? You know, what are you finding independence means to them and how have you seen that change over the years of your coaching?
Kristin Andree, CFP®: Yeah, for sure. I feel like it I think for all of us it used to mean ownership. Who owns it? Like what's the structure? So if they wanted
Peter Velardi: Yeah.
Kristin Andree, CFP®: to go independent, it was because they were tired of being, you know, owned by somebody else. They wanted to, you know, not stick it to the man, but they just want to be their own thing. So I think it used to be ownership, but now the conversations I'm having with advisors are more around optionality, control. Like what are you what's Branching out, you know, being independent means like, do I have more control or do I have less control? Am I losing it? Or is it creating more options, especially, you know, with the capital coming in? It's what does that create for me? So I think we're starting to see people look at it completely different than we did fifteen, twenty years ago for sure.
Peter Velardi: Yeah, I think that's accurate. We're seeing the same thing. I think back to the days where there was a massive movement, probably the biggest movement of advisors was from kind of these captive employee warehouses and banks. This whole
Kristin Andree, CFP®: Yep. Mm-hmm. Yep.
Peter Velardi: world began to open up for them, you know, the independent BD world or IBD world, where they perceived they would be super independent. And they kind of did it because they felt more in control. They had more access to things they couldn't get within those ecosystems. what's interesting to me is that now the biggest movement is from the IBD communities, some of the insurance ones, some some of the big names we all know. Now it's kind of the thinking that man, the most independent space is this open architecture RIA or RIA hybrid systems. Are you finding more interest of your people to kind of say, you know, I I need one last step to become unbridled, to be completely independent, and to, you know, have access to things like alt shops and things like that? Are you seeing the mindset of advisors beginning to shift more towards at least exploring that and often, especially today, exploring it through a capital partner?
Kristin Andree, CFP®: Absolutely. I mean, and I feel like it's, you know, what's been interesting in the discussions I have because usually when advisors are reaching out to me, it's because they're, I don't want to say disgruntled, but something's not working where they are. They're not
Peter Velardi: Hm.
Kristin Andree, CFP®: getting what they need. And, you know, so it's it's less, as I mentioned before, less about ownership and more like, I'm here, but I am handcuffed. You know, so
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: I'm starting to see people look at like where, where can I go that I feel like the thing's holding me back. From growing my practice or the things holding me back from serving my clients or growing my revenue. That's that's what they're looking for, whether it's technology, leadership, marketing, there's a lot of different things and they all come to me with different reasons, but it's usually because they're they're not they're not able to do what they want to build their practice. And it's not about you know, ego or anything usually usually. Sometimes it is, but usually it's just like I need some more optionality here. I can't get to where I want to be with where I am.
Peter Velardi: Yeah, there's no egos in our space, right?
Kristin Andree, CFP®: None at all. None at all.
Peter Velardi: Yeah, and you know, look, we we all worked hard to build a practice. we had to do hard things for a long time period. We had to do the right things for people, and and all of that, you start to feel like you know, you start to get in control. And we go from that survive phase to the grow phase, working with people like you to the scale phase, and then once you scale then it's time to think about monetization. So so you you can see why people do have a high opinion of themselves if they can make it through that cycle. And I and I get that. We were way more kind of arrogant and confident in our youth and our war warrior days. You know, you learn as you get older that there's way more that we don't know than we know, right?
Kristin Andree, CFP®: Well, those stages are different. You know, the needs of of an advisor at each stage of growth
Peter Velardi: Right.
Kristin Andree, CFP®: are very different. I think it humbles you. I think, you know, the advisor that's making half a million versus five million is very, very, very different. And it it this
Peter Velardi: Yeah, I can for sure.
Kristin Andree, CFP®: business humbles you as you go. I I get less egos, the better you're doing, honestly. They realize it's like,
Peter Velardi: Yeah, we we find the same
Kristin Andree, CFP®: this isn't all about me.
Peter Velardi: we we find the same thing. We just talked to so many great humans now that have been through that process and are eager to learn and grow. But this whole idea of independence is fascinating to us. We we have pretty intimate talks with our clients about what that means to them. What we're hearing about that this is very much like what you're hearing. We're hearing I want to control decision making. I want to be able to make the calls on my staff. I want to have a vision that's honored and supported. I want a certain culture. I want to maintain this great culture that I've built. I want to have values alignment with whoever my partner is, whether it's
Kristin Andree, CFP®: Mm-hmm.
Peter Velardi: a capital partner or existing partners in my firm. I want the values to align. So it it's more about control than ownership. it's more about how they feel. And it's also a lot about how they operate. And this is probably one of the biggest fears that advisors have when they come to us to say, Hey, look, I'm at a point where I've grown a lot, but I have some unique needs right now. I I see that the MA environment is peaked out in terms of valuations. I see that all markets are up, so it feels to me like there's ever a time to take some chips off the table. It's kind of like the peak of the real estate market. If you're gonna sell your house. The next few years, there is a period of time that would have been the time to do it. It's feeling to all of us like that's the time right now. So they're seeing that. They're also seeing in various ways they're all hitting the ceiling of complexity, and they're not quite at their highest and best use. And they know if they can get there, it's gonna lead to a much more productive practice and growth as a business. a lot of people are concerned about business continuity, and they're coming to us saying, You know, I may have a G2, I may not have a generation two advisor, but I need to firm all that up because if something happens to me, I want to make sure my clients are taken care of. At the same time, if there is this big kind of wealth transfer that's stuck between generation one and gen two, where
Kristin Andree, CFP®: Hmm.
Peter Velardi: even if somebody has a gen two advisor, they're kind of saying, I don't think they can afford to buy me out because Valuation of my practice used to be two to three times revenue. Now I'm hearing it maybe four to eight. And so I either have to take a big discount to get it to them. So they're trying to solve for that. so these these are going on. D do you think that there's a difference in your mind between independence and freedom? and I'll share my view on it, but what we're trying to help people see is that post deals. The deals that we do, and we see a lot, we do more deals than anybody. we see advisors who feel who sense fear before they do a deal because this whole thing, I don't want to let go of things, control and those things, not knowing what these deals look like. After the deal, they find, wow, I have all those controls still. The company's buying me because they want me to run my practice, run my business. But
Kristin Andree, CFP®: Yes.
Peter Velardi: now I feel this new sense of. Freedom, I've got more time in my hands. I'm doing highest and best use. Compliance is off. I've got some up some support for operations. So that's off my plate. So, you know, do you think we need to, you know, better educate advisors on you know, what does independence mean to you? But really what most people want is they want more freedom because
Kristin Andree, CFP®: Is freedom.
Peter Velardi: they want to live a certain life that their practice provides for. But you what do you you know, what do think about that idea between independence and freedom?
Kristin Andree, CFP®: Think I love both terms and I think they're completely different. And this is where, and I you guys do a really good job at JPTD, you guys do a really good job at this because when an advisor comes to me and I'm trying to help them scale, you know, used to be the people, especially the buyers, are like, we'll pay this valuation or this multiple or this that. It's really not the biggest thing most of my advisors are worried about. They are worried about that difference. So independence to me means is where you're going. Freedom to me means what you're gaining. And that's where the questions are. That's where if I'm talking with an advisor, it is things like culture. What G2 are you putting in place? What happens? I think the bigger question for me is I don't want to know, you know, whoever, whatever partner you're taking on or firm may acquire you. I'm less concerned with multiples, very important, but I'm concerned with. Who'd they buy three years ago? How are they loving it? Are they enjoying what happened? You know, that's
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: really where the questions need to be. Cause to gain true freedom, you have to make sure you've asked those questions way ahead of time. And I think for a lot of advisors, that's the piece they forget to ask. So then you guys do an excellent job of coming in and saying, all right, what's important to you? What do you want out of this? What do you want your next chapter to be? But the advisor has to be able to define what freedom looks like for them. And it's different for every single person I meet with. So I think that affects like where what offers they're gonna entertain to.
Peter Velardi: That's why every deal we do is completely bespoke. It's really about out
Kristin Andree, CFP®: Hundred percent. Yeah.
Peter Velardi: of the hundred and twenty, you know, capital acquisition partners that we've already done the vetting for, you know, which
Kristin Andree, CFP®: Mm-hmm.
Peter Velardi: five or so represent the cultural and values match for our client from
Kristin Andree, CFP®: Yes.
Peter Velardi: what we now know about them. And and it can I'm sure you find this too when you coach a ensemble practice that may have more than one principle, you know, the principals
Kristin Andree, CFP®: Yes.
Peter Velardi: may have different goals and thoughts about what independence. Yeah. You know, and sometimes they agree sometimes,
Kristin Andree, CFP®: They usually do. They they form these practices without asking themselves the same question. So
Peter Velardi: Yeah, yeah. So I I I think your point's a great one that this requires conversation. And it requires
Kristin Andree, CFP®: Yes.
Peter Velardi: conversation early and often about what independence means to to you and your partners and how is that best achieved through the next best and last strategic partner that may be a capital partner. And we spent a lot of time to vet that out and we want to make sure it's a great fit, but Generally speaking, people come in with the fear of independence. And to somewhat, it's a myth of post-deal, somebody's going to tell me what to do. It's actually quite the opposite. These firms are private equity, family office, sovereign wealth, private capital-backed super RIAs, where the principles are fiercely independent. They don't want to lead you. They don't want to do anything other than get things out of your way and off your plate because they're. Buying you or making an investment in you because they see the inherent value in what you're doing. They just want to help you do more of what adds value to the valuation, not things that are not your highest and best use. So the you know, fear is real, but what one of the things you said that jumped out to me, Kristen, is that we pretty much insist that they do speak to advisors in their culture. They do speak to that, they visit, shake hands. meet the people that they're gonna work with because post deal it's all about, you know, expectation set versus realized. and and we wanna make sure they have a chance to fully vet out on their own what the culture is. So fear, but don't be concerned about it, I guess is the headline. but do define it for yourself and then allow us to help you find the match that best supports it. any
Kristin Andree, CFP®: Well, and think the match is going to be a big thing, Peter, because you a lot
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: of times I'll hear an advisor where they are approached by a particular company and it may be a great firm, but if that is the only thing they're looking at, we can square peg round hole all day. They're gonna make it sound like this is going to be the best thing for you. And I personally think advisors are do a disservice if they don't have an advocate in their corner saying, let's look, let's look around. Let's you tell me what you want and let's go find that, as opposed to the company saying, here's why we'll work for you. So I do, you know, the approach that you guys take in terms of having 120 different potential people that you could approach, you you weed out, I'd say a I'm guessing a large majority of them just based on what the advisor is telling you they want. And I think that's critically important because advisors will assume that I have to go here, I have to go there. I'm like, See what's out there. Plenty of plenty of fish in the capital partner and and acquisition sea out there. So it it's important to kind of know what what you're looking for so you can go find the right fit. It's alignment way more than acquisition or capital to me.
Peter Velardi: It really is alignment. It's not just the deal or the deal terms. It's what does the partnership look like? and what's the best category and what's the best firm? You know, just to close us off with I guess more of a teaser, you know, part of the calculus that we go through with our clients is what category of potential partners is best. For example, on one end you may have aggregators which will kind of say, hey, We've got this menu of support. You get to choose what you want to use. On the other end, you might have integrators that say actually the our best value to help you scale is for you to switch over everything you're doing to what we're doing. and there's kind of gray shades of gray between those two. so it it's what mix of control do you want versus the mix of scaling? Scaling and independence, you most people find that. When they try to scale and have disparate s processes and systems, they can't because if they got if you know, if if all all your advisors are doing something different, it's very hard to scale. So that there's this kind of trade-off that you need to understand of what's best for you at a moment in time will depend again on what your goals are, what's important to you, what you value, and what culture is gonna best support it. So great stuff. Anything else on the concept of independence, Kristen?
Kristin Andree, CFP®: I think I mean those those are really the big things. I mean, independent, it's it can be really, really good, but you gotta ask the right questions. It'd be like, you know, I have I've got three girls. It's like if I just didn't teach them anything about the real world and just said, okay, you're out of school, out of college, go off and and do, it wouldn't work. So I think you've gotta really before you're think you're ready, need to start thinking and asking and figuring out what is independence or freedom look like for me. And for my team or my practice. You gotta start that way before you think you're you need to.
Peter Velardi: Yeah, sorta like what our advisors we work with do for their clients, right? It's like you don't want to start
Kristin Andree, CFP®: Exactly.
Peter Velardi: talking about retirement when you're a year or two away from retirement. You want to be talking about it now, whenever that now is in your life cycle. So same same kind of thing. Okay, good. So let's let's kind of role play a bit in a sense and kind of say, let's put put ourselves now in the shoes of an advisor. and they've work with somebody like you or with me in the past and they've built a practice, they've scaled a practice, and now they have accepted a deal with some capital partner. It might be minority, majority, full deal, but it's a capital partner that can do those things that we've been talking about, get things off their plate, help them de-risk, help them form a succession plan, help them achieve their highest and best use, grow faster, maybe start doing in organic growth with capital, maybe tapping into the operational infrastructure of a company, maybe tapping into a marketing department that can help them boost their client acquisition. So it's that kind of person we're talking to both before and post-transaction. You know, in your mind, you know, what's what's most important to that scaling? You know, one thing that comes to mind For me, that we can start to bat around a little bit. Is this concept that you know the capital that now is there and the infrastructure, that alone is not a strategy. That exists to accelerate your strategy. So it's important that you've got a strategy prior that allows you to scale in a predictable way. When is the ideal time for somebody, for example, to come to you and say, I'm ready to now scale? and I need to put the infrastructure and systems that depend less on me. Yeah, you know, at what point does that happen? And then tell us a little bit about kind of what that conversation looks like. How do you coach them to help them see what scaling could look like and then what the kind of ingredients to the cake need to be per se?
Kristin Andree, CFP®: Well, and I think I mean there's yesterday is the best time, obviously, with any stage of growth. But I would say once the once everything is dependent on you. If you so the easiest question is could you leave for six months and the business still run? Could you leave for a year and the business still run? If it can't, it is way too dependent on you. And that's where we need to look at processes, people, leadership, you know. everything, marketing all of the pieces. So I think that's that's really the first thing to look at is most of us come into the practice because we love it and we grow it and we are the the kind of the cog that keeps it stuck sometimes. So we're the reason it grew but we're also the reason it plateaus. For me,
Peter Velardi: Mm.
Kristin Andree, CFP®: I my favorite person to get is an advisor who is very successful but has been on a little bit of a plateau or just a tiny increase year over year because it means they've they've something's stuck and the cog in the wheel is usually the advisor or the leader. So that's
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: probably the best time. But as we're looking at at different sizes and different practices. You know, most people are doing what they learn to do. We did all things, right? We came in, you, you and I started the same. We come in and you do all the things. You run all the pieces of your practice. But advisors rarely, once they grow, stop to figure out what's my strength, what's my best and highest use. If they haven't done that, we've got to pause and figure that piece out because we can wrap everything around it, but we need to know what are you really good at? What are you uniquely qualified to do? What do you get excited? For some people, it's plannings, for others, it's portfolio management. For some, it's I like to be the rainmaker and be out meeting the people. So there's no wrong answer, but if we can't figure out that piece and slot the person in there, we we start to stifle the growth a lot. So and that's important as you're looking for. capital partner or anything is we've got to build around that. And that's the piece I think most advisors don't spend enough time on.
Peter Velardi: Yeah, it's interesting, right? I'm smiling because for forty-four years I've been doing this, this kind of idea of highest and best use, this kind of idea that less is more. So if I've if I'm doing 10 tasks today that I think add value to the business, if I were to prioritize those 10, I probably could come up with Pareto's law of the few that drive 80% of the result that I have a gift and a passion for. that I would want to do more of. And and it's it's so interesting. As soon as advisors get that is when I saw big growth. And sometimes that meant
Kristin Andree, CFP®: Huge.
Peter Velardi: teaming, sometimes that meant
Kristin Andree, CFP®: Mm.
Peter Velardi: staffing, sometimes that means bring in a partner, sometimes it means bring in a gen two advisor to take your lowest value hundred clients
Kristin Andree, CFP®: Your B's and C Yep. Yeah.
Peter Velardi: off of you and you just work with your highest value in segment clients. But as soon as advisors get that is when you just see this. hockey stick type growth. but
Kristin Andree, CFP®: Yeah. It's it's huge. You but you mentioned segment. I love I love good segmentation. But what's funny is I'll talk to a client or an advisor and I'm have you segmented? They're like, Yes, I have segments, and they'll tell me they're segments. And then I'm like, well, let's pull out your calendar. And they'll be 70, 80% of their time in front of B and C clients. And I'm like, You just told me this is these are the people you want to work with, but your activities, your calendar, your priorities don't reflect that. And I think most advisors, if they really are honest. That's what's that's why they're in the way. They're trying to be all things and do what they did to get get to here. But we want to get a lot higher.
Peter Velardi: Yeah, I think there's kind of two two important subparts to that. Part one is how you perceive yourself, right? If you perceive yourself as a practitioner, financial advisor, your dominant thoughts and actions will be one thing. if
Kristin Andree, CFP®: Yes.
Peter Velardi: you see yourself as a business owner building an enterprise, that's when you'll be thinking scale, things not depending on me, building infrastructure, building redundancy. all those things that any business, widget firm USA, for example, would need to do to scale. So let's let's shift into infrastructure. What systems have you seen, Kristen, you know, in the work you've done preparing somebody for an exit or somebody that already has exited to make sure they're executing with this capital partner? What are like the minimum infrastructure systems that they would need?
Kristin Andree, CFP®: It it's gonna be an odd end, it it varies. I'm gonna go back to kind of that highest and best use
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: because I have some advisors who truly love like I'm the planner. I want to be the planner, but then we have to hire around that, meaning if they're if they're lousy at being the CEO, then we need to hire a CEO, COO, president, somebody to run the business side of it.
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: But they may be good at the business side that we need to handle somebody to run the planning side. But what I see from an infrastructure standpoint is something that is not dependent on the the advisor, the one owner. So we've got to look at like how do we complement what you're bringing to the table? So I would say, I mean, I've seen very, very successful practices and firms that may have one advisor, maybe one junior, and you know. I hate to say an admin because they're really truly like the glue. I call them the glue. I have a couple of my advisors that that's literally what I call their main COO or admin. It's like that is your glue. We need that. So I don't I don't think there's a right or wrong for infrastructure. It varies, you know, and I've had other teams that I work with that have 25 people on them. And it they both work, but the key is putting the right get the right people on the bus first.
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: You know, I like I like if you read any read any of John Gordon's work, he talked that book, The Energy Bus, get the right
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: people on the bus. Get the people who match your culture and your values and your drive and your ambition. And then we find the right seats for But so I think if you lead with people and then we get people leadership and then processes in that order.
Peter Velardi: Yeah, I think that's so true. Talent is everything. Right people, right seats, right bus going in the right direction, led by somebody who can drive the bus. All all of that is really important. And that's the way a business owner would think, right?
Kristin Andree, CFP®: Yes.
Peter Velardi: if you're thinking like a practice person only, which is fine. you know, plenty of wonderful people out there just they've just chosen to build a practice, not a business that scales. and that's fine. It's not gonna be worth as much in the end, but
Kristin Andree, CFP®: Exactly. It won't no.
Peter Velardi: You know, but that's okay. That's okay. As as long as you're accomplishing what you want for yourself, there's nothing wrong with that. so
Kristin Andree, CFP®: That may be a good person to align with somebody. You know, you may have one I've had teams before where I have one that's
Peter Velardi: No question we have.
Kristin Andree, CFP®: a great business owner and then I have one that's a great practitioner. And that may be a a beautiful, beautiful combination.
Peter Velardi: Yeah, it's absolutely true. What we kind of look at when we look at it from a buyer's perspective and say, okay, what what would our buyer, what's what systems would a buyer need to see in place? Some of the things that come to mind, there's kind of the retail di distribution concept of you grow through more stores times more productive stores or more profitable stores. So do you do you have systems to grow your staff, your talent? Your advisors, and are you doing it organically through, you know, let's just recruit talent? do you have a talent development strategy to help build the talent from within and get referrals from within because your culture is so good? but firms are are are going to want to look at you and say, I'll value you higher if you've got a business with with more than one seat on the bus. that are filled by high talent. So what's your, you know, recruiting and talent dev function? That's one they look at.
Kristin Andree, CFP®: Yes.
Peter Velardi: another one, of course, is the leadership of the firm. You know, do you how big is big to you? W what do you want to accomplish? What's the vision of it? your tech stack is important to them in in a few
Kristin Andree, CFP®: Yes.
Peter Velardi: ways. One is that could there be s a synergies between your tech stack and their tech stack? Put another way, could you have a lot of cost saves together to use their scaled tech stack that may be the same as yours and just better pricing, for example. same same yeah, and that you know,
Kristin Andree, CFP®: Same with marketing, the marketing stack is really big too. Yeah.
Peter Velardi: that's an you know another area. You know, really what a buying firm is looking at is if I buy some or all of your of your net cash flow as a business, which is what any business in the end is buying, some version of EBITDA. Eboch, free cash flow. and what they're gonna do is they're gonna say, yeah, I think that this is predictable in itself, but with us, I think we can, you know, double, triple the growth of that cash flow together and everybody win. And that's so they're trying to look for systems that you have in
Kristin Andree, CFP®: Yes.
Peter Velardi: place that don't depend on you. The more
Kristin Andree, CFP®: Yes.
Peter Velardi: it depends on you, the less it is worth to them. And that's why that question we ask our clients. If you left for a month, would you still grow, not just maintain? because we believe you're either growing or you're dying. I've I've yet to see a practice that during all ups and downs in the marketplace that says we want to maintain, I've yet to see one grow or
Kristin Andree, CFP®: Exactly.
Peter Velardi: even maintain, right? so
Kristin Andree, CFP®: I make them leave for more than a month. I'm like, if you left for six months or a year, because Yeah. Yeah, I like it. But it it's true and that,
Peter Velardi: Yeah, I like yours. We we may change ours to six months too. I I I it's very important.
Kristin Andree, CFP®: but that goes to what you said earlier with recruiting and development. You know, le you know, I I see a lot of firms recruit good talent, right?
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: I do not see a lot of firms develop that talent once they're there. And that's a huge opportunity. You know, I'd I like to get in if I'm taking on a new private client and I'm looking at their firms, I want to meet with their G2s, their G3s. I want to meet with all their admin because most of the time the the ad main advisor, the owner, is frequently really unaware of their potential, what their challenges are, what they're struggling with. So We you've got to develop them. Like we do a great job at pulling people into the industry. Still some room to grow, but we don't always do a great job once we get them. So I think the development, you know, I'm wanting to see how are you growing these these future leaders?
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: You know, how are they if you retire tomorrow or you take off a year, are they you? Are they kind of, you know, a mini Kristen that's gonna run around and and be able to carry on what you've built? Because most of us, you said forty-four years in the I'm only twenty six. So forty-four year,
Peter Velardi: Mm.
Kristin Andree, CFP®: I've been twenty six years, you've been forty-four years in the industry. We wanna know what we've built. Like we've we've sacrificed a lot to build our businesses. We wanna
Peter Velardi: Mm.
Kristin Andree, CFP®: know that's gonna be carried on. And I think advisors are are selling themselves a little short by not developing who they have coming up behind Huge opportunity. Huge opportunity.
Peter Velardi: Yeah, I think I I think we hear the word legacy a lot as it relates
Kristin Andree, CFP®: Mm-hmm.
Peter Velardi: to kids that may come up in the business or not.
Kristin Andree, CFP®: Yeah.
Peter Velardi: we hear people seeking higher meaning than just money once they kind of hit what they think they need. you know, we hear a lot of that and we flush that out to find out what exactly does that mean. and we help them see both the opportunities, but also help them see the risks because the
Kristin Andree, CFP®: Yes.
Peter Velardi: sand is shifting a lot in terms of industry consolidation.
Kristin Andree, CFP®: Mm, huge.
Peter Velardi: the wealth transfer from G1 to G2 being stuck, shortage of financial advisors, the AI relevancy risk, the fact that everything is peaked out, and what how will this world change? Your practice that may be worth six times today, midway through next year with a market correction could be worth four times. That's millions of dollars that you left on the table, just like if you happen to be fortunate or smart enough to sell your house at the peak of the real estate market, where you would have been there versus if you waited six months to a year is very different. And so, you know,
Kristin Andree, CFP®: And that but that's why it's important, I think, for advisors to start asking questions. Like when you said when's the time to think about this growth and that it's yesterday. It's I wanna know, you know, ask these questions now because I mean, I I know I've I've, you know, sent people to you guys before. We've talked to about certain potential advisors that I work with that y'all like They're not there yet. They're not ready or let's hold out. You know, you guys are gonna tell one way or the other 'cause you know the the landscape. You know, that's where I'm like, that's me. I'm like, I can tell you how to grow the practice. Let's, you know, we just need to figure out where we're going, what we're growing it for, what's our in game legacy, if you will.
Peter Velardi: I think that's the headline. I think the headline of all of this, when you start to enter a capital partner into the equation and somebody transacts with who they think is the best and last partner, and whatever form it may come in, that's right for you and kind of bespoke and structured around what you want and how you want it. Once you get to that place, I think the headline is that all of the strategic planning and infrastructure needs to have happened prior to that. And then what you want to do is not give that up. in a transaction, quite the opposite. What you want to do is look for the right culture, values, and infrastructure that complements it and accelerates that strategy. And and what we
Kristin Andree, CFP®: Enhances it. Yeah. Yeah.
Peter Velardi: know, for example, is post transaction, our clients grow an average of two times faster than they did prior. You almost have
Kristin Andree, CFP®: Expand.
Peter Velardi: to when people get things off your plate. And if you take any of that extra time and invest it in a little bit more of your highest and best use. But then there's all these growth drivers like capital. These these firms have completely wired MA departments. And so, you know, our philosophy has always been from the sell side, the people who we love, advisors that we represent only, we don't represent the buy side, we only represent the sell side. We believe you should have the representation that the buy side has. They have a complete MA departments. So when you go to negotiate
Kristin Andree, CFP®: Yes, absolutely.
Peter Velardi: a deal, if you did that on your own, you're severely handicapped because it's you versus a department of MA experts. But
Kristin Andree, CFP®: Yes.
Peter Velardi: when you now are on the other side, you can leverage that infrastructure. You know, on your own, you might say, I don't know how to do an acquisition. I want to, I've always grown organically, that's been great. But you know, I'm having people coming to me saying, I want to maybe be part of this special thing that you've built, right? But you don't have the capital, you don't want to go into debt, you don't want to hock your house and you don't have the MA expertise. That's very specific to the industry. and now you've got this infrastructure and that group that you had to kind of compete with to get a deal done. Now, now you're on the home team and now you've got this support to help you do that. So, you know, I think the headline is work with somebody like Kristen, prepare for the transaction, and then work with somebody like us just to make sure that the fit is right with the company you're talking to, so that you can not only preserve it, but accelerate that. any other headlines for you, Kristen, in this discussion?
Kristin Andree, CFP®: It's a you know, and I think I keep coming back to the word you said bespoke. I mean, that's really at the heart of it. And you know, I I kind of tell the advisors I work with, you know, I am so customized and it is bespoke site type of consulting because what's gonna work for one advisor, one practice is not necessarily what I'm going to recommend for somebody else. None of my clients are the same. They're you know,
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: they may have similar revenue levels or similar companies, even within the same companies, they're not the same.
Peter Velardi: Right, right.
Kristin Andree, CFP®: But it's, you know, you've got to take that bespoke approach to it, or you're going to end up being shoved in the wrong place, both from a growth strategy standpoint and a you know, capital partner acquisition standpoint. You've got to make sure that you're taking the time to ask the right questions. And since we know advisors don't always know the questions to ask, that's what we're here for. Whether it's growth or, you know, bringing on a partner, it's you've got to know what to ask. And let us, you know, I ask a ton of questions. I kind of joke the first time I meet somebody, I'm like, I'm gonna ask a lot of questions. You're gonna be tired of me asking questions, but I need to know everything I can possibly know to find the right growth strategy. And the same it's the same thing with with JPTD is y'all are asked y'all do ask a lot of questions, but it's to make sure the alignment is there. So I think bespoke alignment are kind of the two things I feel like are the biggest opportunity for advisors that, you know,
Peter Velardi: Yeah.
Kristin Andree, CFP®: on the growth side or the acquisition side that They need some help with.
Peter Velardi: Yeah, I think so too. And and I think at the end of day, all the juice is in the questions. And we spend an ordinary amount time coaching our clients about what questions to even ask when we start to date these firms to flesh
Kristin Andree, CFP®: Yes.
Peter Velardi: out if it could be a good fit. We'll for example, I coach my clients on the three must questions you must ask a buyer. and so and that's important. It's important for you to know what those things are at May maybe the next podcast or two that I host. I'll I'll get into that a little bit more.
Kristin Andree, CFP®: Yeah.
Peter Velardi: Make sure you understand what those will be. But I do want to jump to the final part of today's podcast. It's always interesting for advisors to hear real actual offers. we operate in the world of transparency. We want you to know everything so you can make informed choices. So this is a practice, this is a ensemble type practice. they are doing, and I'll just kind of walk you through this. Real quick, and then I can get Christian your reaction to it and what you may have learned and give you a few headlines and then we'll wrap things up. But so this is a ensemble type practice. and this is a full acquisition. So this is one where they felt the best fit. We don't really care what you do, whatever is best for you. We have no horse in the race. and and we want you to be informed about the differences of different Partners, different type of deals, but this is one where it was best for the client to do a full acquisition. And this is with one of these super RIAs that have scaled. their equity is worth a lot and will be worth a lot more down the road, that are backed by, you know, call it some capital source, private equity, family office, private capital, sovereign wealth that have already taken a bite of their apple and with it comes. tremendous amount of capital for them to do two things usually. One is to expand the client deliverable to compete with kind of this threat of AI and to be, you know, one of the 20 firms left standing. This is very predictable. This industry consolidation happened in the medical industry, dental industry, hardware industry. This is a predictable cycle, usually lasts five to ten years. And If there's a thousand firms in the beginning, there's 20 or so left standing. and those 20 own a vast you know percentage of the market share. So this is not pie in the sky. This is happening, it's been happening. We're probably in the seventh inning of all this happening. We're about six years into this, somewhere around that. Who knows who's got the crystal ball? It's certainly not you or I, Krista, right?
Kristin Andree, CFP®: No, we like to think. I wish. I wish.
Peter Velardi: Yeah, you know what? I bet we still be doing this, even if we had it. So because we love what we do. But but so these so that's the type of group that this is. So just real quick, this deal came in. This deal the way these deals usually work, full deals, is you get fifty percent or more of your entire deal value at the transaction when you close. That takes about six months or so from the time that you For example, we're to engage with the JPTD partners. so once you close, there's an amount paid up front, usually in some percentage of cash and equity. In this deal, the amount at close came out to on a 3.9 million Rev shop. This came down to the upfront consideration was 21 million and change, of which 70% or 14 million was paid in cash. So at the close, they're gonna get $14 million in cash. And the equity is 6.3. So that's about a 70% cash, 30% equity split at the time of the close. That's that's unusual to get that much, and that's one of the reasons why we like this company. Some of our clients want more paid up front, some want more paid over time. It just depends upon what it is. So we want to get as much air in the balloon as possible. And then we help you push around the air to get the money when you want. Generally, you want to get as much up front as possible because the way these deals work is like any other sale of anything where they're buying forward cash flow. And you would much rather, of course, get $10 paid today at capital gains rates than a dollar per year for 10 years at ordinary income. So just the math and time value of money, a dollar is worth today more than it is tomorrow. Let's get a lot of it up front. Let's invest it. Let's get return on it. And let's get more of it pushed into the capital gain pot, not the ordinary income. So this firm gets that and they say, all right, we're gonna support this particular advisor by saying we're gonna give you a lion share up front, which makes it a more interesting deal. so just that amount is 21 million. Combined. Then they've got most firms have some version of an earnout paid sometimes in year two, three, four, sometimes five. They keep it real simple. They they just have a simple true up in three years. And basically they look at your growth, average annual, or Kagger over a three-year and they project it. So if you hit 10% Kagger, for example, in the third year, you would get another 3.6 million. That same distribution of equity and cash. So the the if you threw if you grew 10% over three years, your consideration or deal value would be 24 and change 0.8. That's a 6.3 times rev deal at the 10% growth. If you grew 15%, that would be $29 million in total of consid of that same deal value. That's a 7.45 times Rev. and this group I think will hit the 15% because they're a growth machine prior to the acquisition. and again, you'll grow more after the acquisition. so that's a very strong deal. I mean, did you ever think, Kristen, that a practice that in our day used to be worth two to three times rev, today could be worth in this case, you know, six to eight times rev.
Kristin Andree, CFP®: it's a it sounds like a great deal to me and and the neat i mean obviously without knowing the owners like i'm going all right let's hit the 15 growth i mean that's that's very reasonable if the alignment's there they've got all the systems in place to really grow rapidly that that's a sweet deal they didn't have these back in our day mm mm no
Peter Velardi: Yeah, exactly. No, no, nothing like it. The whole world has changed a lot in the last five years. but wait, there's more, as they say.
Kristin Andree, CFP®: Like it.
Peter Velardi: so that's that's kind of one bite of the apple. That's the deal value. That in essence you can think of is there, they're gonna buy you for what they think the practice is worth today, right? Then
Kristin Andree, CFP®: Yeah. Yeah.
Peter Velardi: there's kind of two other bites of the apple that make this really interesting. One is that that Equity of anywhere between seven and eight million of equity, depending on whether you hit the 10 or 15%. What these firms do is they do conservative projections and they say things like, If our equity grew at this rate, it's usually ballpark, don't hold me too, it's usually about half of what the growth has been in the past. If they're if if if they've grown, you know, 30% of the equity, they don't want to throw that out as being. Predictable. So they'll use like 10, 10, 10 to 15%. So the conservative estimate of this firm of that amount of equity is that that's going to add another 25 million to your deal. So on 3.9, if over the next 10 years, for example, and what these firms do is they, because it's a partner model, everybody usually has the same share class of stock in the company. Everybody's rolling in the same direction. To create more global enterprise value of the firm that's buying you. And then they wanna open up windows for people to cash out every three to five years or so along the way. This can be super accretive to your wealth. So this could be a $50 million all-in deal, something like that, over a 10-year time period, most of that at cap gains rates. And then the last piece to this is the ongoing payout. most of these deals they range between 30 and 40 percent and you have no expenses. So full deals, the company usually picks up most, if not all the expenses, and and you get a payout. and and a lot of people are surprised by that, Kristen, because they're thinking, wait a minute, you gave me my $10, right?
Kristin Andree, CFP®: Yeah.
Peter Velardi: Why would you also give me a piece of that one dollar? and the answer is that they want to provide you cash flow as well. Some of these deals are salaries. Plus make maybe a growth bonus. We like the payout concept for our clients generally more because that gives you a chance to even get back up to your past cash flow. In fact, most of our clients, two to three years of superior growth with this new entity, the advisor compensation at the payout, and their payout, what they do is they subtract the opex of the company. what you're gonna pay staff, what you're gonna pay it, you know, advisors, and they give you a 40% payout. In in reality, that cause that that the math works out to about a thir 30% payout. So you're you're gonna these deals are so amazing right now because you get your $10, you know,
Kristin Andree, CFP®: They're very rich, yeah.
Peter Velardi: you get your you know 30 cents on the dollar. And then because you're growing so fast, that payout, because they're the the percentage is fixed by contract, they don't change payout rates. They don't have a target of these complicated four family. There's no global admin fee. That's a surprise. It's all completely transparent what the deals are. so you know, I I thought you'd find this one interesting.
Kristin Andree, CFP®: like that one and I think you know because normally I think so many advisors think about I'm getting close to the end I'm retired in five years, 10 years, but I'm sitting here going, my gosh, if I'm 30s, 40s managing a few hundred million, I've got some complexity that I, you know, I can grow, but not that fast. I mean, this opens up a lot. They can have capital, they can have income, they can get additional payouts. I mean, it really, it's like the best of all three worlds.
Peter Velardi: Yeah, it's we're having a blast. The four
Kristin Andree, CFP®: Yeah, I like that. That was a good deal.
Peter Velardi: of us, we love working with people like you. You know, this whole thing started on people coming to us saying, you know, thanks for helping us build and scale a practice.
Kristin Andree, CFP®: Right.
Peter Velardi: You know, and and the four of us partners, we did this by the thousands, you know. A lot of them start coming to us saying, you know, we hear there's a whole new world of this beyond the old world of only sell and leave and retire and go to Live Oak Bank and get a Business valuation that always come back at two to three times the rev. that's not the market. And we create a higher market for our clients, of course, because
Kristin Andree, CFP®: Yes.
Peter Velardi: we create an auction where we compete these five firms against each other to bid for you. so
Kristin Andree, CFP®: Yes.
Peter Velardi: that's why you see these kind of valuations. but we love it, and what we love most about it is at the close when people say, you know, thank you for changing my life again. You brought me in the business. you know,
Kristin Andree, CFP®: Yeah.
Peter Velardi: or or or perhaps you brought people like me in. That was fun to help people build careers. But honestly, when you see these people, the smiles on their face when they close and then most importantly, we stay in touch with them. and we talk to them a year, two years, three years. I just had a client ping me and say, you know, thanks. I just got my my my earnout, my my growth earnout that I hit. thanks for your help in finding the right partner. This has been amazing.
Kristin Andree, CFP®: I love that. That's fantastic.
Peter Velardi: So that that's why we do it. I'm sure you find the same thing, just to wrap this up, Kristen, that the end of the day, you know, it's so fun to see people grow, right?
Kristin Andree, CFP®: Yeah, I do and it's it's fun. Yeah. It's fun. I love seeing them grow and I'm but now they've grown so well I'm getting those calls. That's why I partner with you guys because I'm getting those calls like, what's next?
Peter Velardi: Yeah.
Kristin Andree, CFP®: What do I do? And you know, most of us grew up and we didn't really know what was out there, I think, you know, because it's the landscape's changed so much. So I'm seeing people like, you know, somebody offered me one and a half X or two X and I'm like, No, no, no, no, no, let's let's see what our options are. So This is just, it's fun. I think it's really and it's exciting to see advisors rewarded for everything they built. So I think it's I think it's awesome.
Peter Velardi: Perfect. Well, let's wrap it up there. to me, a couple headlines jump out to me. One is think about what independence means to you. Think about what freedom means to you. The better you can define that, that'll help you implement whatever strategy comes next. Second is make sure you're exploring what your strategy should be to scale your practice. It's a magnificent time to be an advisor. There's more demand than ever. This wealth transfer is going to hit the majority of it in the next 10 years, starting now. and there's a shortage of advisors. So be an advisor, don't fear technology and AI. Just you've got to be in a position where your value to your client expands beyond what it is today. And most businesses simply can't do that alone. They need a larger partner. and the whole idea that you can now, unlike the past, find the right strategic partner. That can give you this unique type of support and capitalize your life for you through a transaction is just remarkable. these deals did not exist prior to what we did. they, you know, they they existed in a very small part of what these deals look like today. so you know that there's a timing thing here. So there's a win a window to do it. so have a strategy. Work with the right people both to implement that strategy like Kristen, work with the right people to make sure you've got good representation, should you want to explore what it could look like to partner with somebody for capital and for growth. So those are my thoughts. Anything else on your end, Kristen?
Kristin Andree, CFP®: I think wrap up it's the ask the right questions and then find as you mentioned, find somebody that will help you find the bespoke answers to those questions. So you get alignment above everything else. It helps out there. Just find it. Yeah.
Peter Velardi: Perfect. So yep, perfect. And so if somebody wants to reach you or reach out to you to get any questions answered or to explore working with you, what's the best way for that
Kristin Andree, CFP®: Absolutely.
Peter Velardi: to get a hold of you, Chrisman?
Kristin Andree, CFP®: That's it. Website Myfa Coach. Made it easy. Myfa Coach.com. I'm I'm also extremely active on LinkedIn. So connect with me there. I love engaging and I share a lot of tips and ideas there too.
Peter Velardi: Wonderful. You can connect with me on LinkedIn as well. and just go check out JPTDpartners.com. a lot of cool things you can do. You can see real offers, real deals. again, we're completely transparent. So you can kind of pick out yourself in there and say, here's a deal that looks like one that might be good to me. we can also get you a free business market valuation. It's right on the top page of the website. so engage with us. Let us be a resource to you. We are here to help. Kristen, always fun to be chatting with you. Thanks so much for
Kristin Andree, CFP®: Always fun. Of course.
Peter Velardi: all the wisdom you've shared today. So I guess combined we've got 60 plus years in the business. All right, look, you know, we're still still still alive, still having fun. So it's all good. Thank you everybody
Kristin Andree, CFP®: We're doing it, we're doing all right. We made it. Still going. Exactly. That's the big part. Having fun.
Peter Velardi: for taking the time to listen, and you all have a great day.
Kristin Andree, CFP®: Yeah, thank you. I'm excited to be here because yeah, I've known you guys forever. you know, you guys are the best at what you do and I'm excited to get to chat. But background on me, I'm a recovering advisor. So I've run a firm, I've run a practice, but my heart and passion is helping advisors scale and grow. But you kind of you mentioned it in the tagline. I think in our industry there's so much noise and no one knows what to pay attention to. So they just grab the next shiny object or listen to an idea they heard from somebody in their study group or someone at a conference. So my job is to really help them cut through the noise and figure out what works for them and their practice as they're scaling and eventually exiting.
Peter Velardi: That's wonderful. And boy, there's a lot of noise out there right now and the stand
Kristin Andree, CFP®: So much.
Peter Velardi: is shifting. So we use these opportunities to educate advisors, both pre-transformation, during the transformation, and then help them understand what to do when it's the right time for them to actually take some chips off the table and bring in a capital partner. So
Kristin Andree, CFP®: Absolutely.
Peter Velardi: today that's what it's all about. The main Focus of today is really the concept of scaling beyond yourself. So we're going to be talking about growth strategies after you gain a capital partner. But the reality
Kristin Andree, CFP®: Yes.
Peter Velardi: is, for those of you that are saying to yourself, well, I should shut this off because I don't have a capital partner, all that we're going to talk about is going to be highly relevant to prior to a time when you might monetize with a capital partner. All the things we're going to talk about post- monetization are going to be highly relevant to you prior. And that's why we brought in Kristen today to help us do that. Agenda-wise, we're going to first do an article review as we always do. Makes it fun, gives you perspective. So we'll kind of bat that around a little bit. The topic there is going to be this concept of independence. So you can start thinking even now, what does independence mean to you? And we're going to kind of give you our perspective on how the industry has changed. I've been in this space for 44 years. like Kristen, I was a CFP financial advisor. I hired and trained thousands and thousands, led groups of five to ten thousand, and then did my entrepreneurial thing for the last 20 years. And that's led to just a fantastic opportunity to help advisors come full circle, where if they listened to us and we didn't hurt them too bad, they went on to great success. And found now themselves being in a position where they can say, hey, I'm probably worth my net worth is probably 80% or more tied up in my business. I want to grow faster, I want to get things off my plate. So advisors come to us to help them make proper and informed choices about what all that looks like. So that'll be the bulk of today. We're doing an article review, we'll get into the bulk of the main content and have a discussion on it and try to add as much value to you as we can. then the the ever popular section where we review an offer with you will be kind of the last thing we do. we'll actually walk you through an offer, an LOI recently signed by one of our clients to give you an idea of what these deals could look like and then we'll kind of wrap things up. So that's our story and we are sticking to it, Kristen.
Kristin Andree, CFP®: Sounds good to me.
Peter Velardi: So let's talk about this notion of independence. The article I'm gonna cite was in CityWire. If you want to pull it up, it's an opinion piece. This was as of July 29th, and the opinion is the question what does independence actually mean? And it's from Adam Mulamed, who is chief executive for Sanctuary Wealth. He write, writes it. And you know, what I liked about the article, Kristen, is that it raised as many questions as answers. And you know, as you think about this whole world of independence, we, when we talk to advisors throughout our process, it is one of their top values and it's one of the top requirements of a deal. They need to at least feel more independence, but independence means different things and it probably it's changing in terms of what it means to people, but you know, how do you get your head around as you coach advisors? You know, what are you finding independence means to them and how have you seen that change over the years of your coaching?
Kristin Andree, CFP®: Yeah, for sure. I feel like it I think for all of us it used to mean ownership. Who owns it? Like what's the structure? So if they wanted
Peter Velardi: Yeah.
Kristin Andree, CFP®: to go independent, it was because they were tired of being, you know, owned by somebody else. They wanted to, you know, not stick it to the man, but they just want to be their own thing. So I think it used to be ownership, but now the conversations I'm having with advisors are more around optionality, control. Like what are you what's Branching out, you know, being independent means like, do I have more control or do I have less control? Am I losing it? Or is it creating more options, especially, you know, with the capital coming in? It's what does that create for me? So I think we're starting to see people look at it completely different than we did fifteen, twenty years ago for sure.
Peter Velardi: Yeah, I think that's accurate. We're seeing the same thing. I think back to the days where there was a massive movement, probably the biggest movement of advisors was from kind of these captive employee warehouses and banks. This whole
Kristin Andree, CFP®: Yep. Mm-hmm. Yep.
Peter Velardi: world began to open up for them, you know, the independent BD world or IBD world, where they perceived they would be super independent. And they kind of did it because they felt more in control. They had more access to things they couldn't get within those ecosystems. what's interesting to me is that now the biggest movement is from the IBD communities, some of the insurance ones, some some of the big names we all know. Now it's kind of the thinking that man, the most independent space is this open architecture RIA or RIA hybrid systems. Are you finding more interest of your people to kind of say, you know, I I need one last step to become unbridled, to be completely independent, and to, you know, have access to things like alt shops and things like that? Are you seeing the mindset of advisors beginning to shift more towards at least exploring that and often, especially today, exploring it through a capital partner?
Kristin Andree, CFP®: Absolutely. I mean, and I feel like it's, you know, what's been interesting in the discussions I have because usually when advisors are reaching out to me, it's because they're, I don't want to say disgruntled, but something's not working where they are. They're not
Peter Velardi: Hm.
Kristin Andree, CFP®: getting what they need. And, you know, so it's it's less, as I mentioned before, less about ownership and more like, I'm here, but I am handcuffed. You know, so
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: I'm starting to see people look at like where, where can I go that I feel like the thing's holding me back. From growing my practice or the things holding me back from serving my clients or growing my revenue. That's that's what they're looking for, whether it's technology, leadership, marketing, there's a lot of different things and they all come to me with different reasons, but it's usually because they're they're not they're not able to do what they want to build their practice. And it's not about you know, ego or anything usually usually. Sometimes it is, but usually it's just like I need some more optionality here. I can't get to where I want to be with where I am.
Peter Velardi: Yeah, there's no egos in our space, right?
Kristin Andree, CFP®: None at all. None at all.
Peter Velardi: Yeah, and you know, look, we we all worked hard to build a practice. we had to do hard things for a long time period. We had to do the right things for people, and and all of that, you start to feel like you know, you start to get in control. And we go from that survive phase to the grow phase, working with people like you to the scale phase, and then once you scale then it's time to think about monetization. So so you you can see why people do have a high opinion of themselves if they can make it through that cycle. And I and I get that. We were way more kind of arrogant and confident in our youth and our war warrior days. You know, you learn as you get older that there's way more that we don't know than we know, right?
Kristin Andree, CFP®: Well, those stages are different. You know, the needs of of an advisor at each stage of growth
Peter Velardi: Right.
Kristin Andree, CFP®: are very different. I think it humbles you. I think, you know, the advisor that's making half a million versus five million is very, very, very different. And it it this
Peter Velardi: Yeah, I can for sure.
Kristin Andree, CFP®: business humbles you as you go. I I get less egos, the better you're doing, honestly. They realize it's like,
Peter Velardi: Yeah, we we find the same
Kristin Andree, CFP®: this isn't all about me.
Peter Velardi: we we find the same thing. We just talked to so many great humans now that have been through that process and are eager to learn and grow. But this whole idea of independence is fascinating to us. We we have pretty intimate talks with our clients about what that means to them. What we're hearing about that this is very much like what you're hearing. We're hearing I want to control decision making. I want to be able to make the calls on my staff. I want to have a vision that's honored and supported. I want a certain culture. I want to maintain this great culture that I've built. I want to have values alignment with whoever my partner is, whether it's
Kristin Andree, CFP®: Mm-hmm.
Peter Velardi: a capital partner or existing partners in my firm. I want the values to align. So it it's more about control than ownership. it's more about how they feel. And it's also a lot about how they operate. And this is probably one of the biggest fears that advisors have when they come to us to say, Hey, look, I'm at a point where I've grown a lot, but I have some unique needs right now. I I see that the MA environment is peaked out in terms of valuations. I see that all markets are up, so it feels to me like there's ever a time to take some chips off the table. It's kind of like the peak of the real estate market. If you're gonna sell your house. The next few years, there is a period of time that would have been the time to do it. It's feeling to all of us like that's the time right now. So they're seeing that. They're also seeing in various ways they're all hitting the ceiling of complexity, and they're not quite at their highest and best use. And they know if they can get there, it's gonna lead to a much more productive practice and growth as a business. a lot of people are concerned about business continuity, and they're coming to us saying, You know, I may have a G2, I may not have a generation two advisor, but I need to firm all that up because if something happens to me, I want to make sure my clients are taken care of. At the same time, if there is this big kind of wealth transfer that's stuck between generation one and gen two, where
Kristin Andree, CFP®: Hmm.
Peter Velardi: even if somebody has a gen two advisor, they're kind of saying, I don't think they can afford to buy me out because Valuation of my practice used to be two to three times revenue. Now I'm hearing it maybe four to eight. And so I either have to take a big discount to get it to them. So they're trying to solve for that. so these these are going on. D do you think that there's a difference in your mind between independence and freedom? and I'll share my view on it, but what we're trying to help people see is that post deals. The deals that we do, and we see a lot, we do more deals than anybody. we see advisors who feel who sense fear before they do a deal because this whole thing, I don't want to let go of things, control and those things, not knowing what these deals look like. After the deal, they find, wow, I have all those controls still. The company's buying me because they want me to run my practice, run my business. But
Kristin Andree, CFP®: Yes.
Peter Velardi: now I feel this new sense of. Freedom, I've got more time in my hands. I'm doing highest and best use. Compliance is off. I've got some up some support for operations. So that's off my plate. So, you know, do you think we need to, you know, better educate advisors on you know, what does independence mean to you? But really what most people want is they want more freedom because
Kristin Andree, CFP®: Is freedom.
Peter Velardi: they want to live a certain life that their practice provides for. But you what do you you know, what do think about that idea between independence and freedom?
Kristin Andree, CFP®: Think I love both terms and I think they're completely different. And this is where, and I you guys do a really good job at JPTD, you guys do a really good job at this because when an advisor comes to me and I'm trying to help them scale, you know, used to be the people, especially the buyers, are like, we'll pay this valuation or this multiple or this that. It's really not the biggest thing most of my advisors are worried about. They are worried about that difference. So independence to me means is where you're going. Freedom to me means what you're gaining. And that's where the questions are. That's where if I'm talking with an advisor, it is things like culture. What G2 are you putting in place? What happens? I think the bigger question for me is I don't want to know, you know, whoever, whatever partner you're taking on or firm may acquire you. I'm less concerned with multiples, very important, but I'm concerned with. Who'd they buy three years ago? How are they loving it? Are they enjoying what happened? You know, that's
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: really where the questions need to be. Cause to gain true freedom, you have to make sure you've asked those questions way ahead of time. And I think for a lot of advisors, that's the piece they forget to ask. So then you guys do an excellent job of coming in and saying, all right, what's important to you? What do you want out of this? What do you want your next chapter to be? But the advisor has to be able to define what freedom looks like for them. And it's different for every single person I meet with. So I think that affects like where what offers they're gonna entertain to.
Peter Velardi: That's why every deal we do is completely bespoke. It's really about out
Kristin Andree, CFP®: Hundred percent. Yeah.
Peter Velardi: of the hundred and twenty, you know, capital acquisition partners that we've already done the vetting for, you know, which
Kristin Andree, CFP®: Mm-hmm.
Peter Velardi: five or so represent the cultural and values match for our client from
Kristin Andree, CFP®: Yes.
Peter Velardi: what we now know about them. And and it can I'm sure you find this too when you coach a ensemble practice that may have more than one principle, you know, the principals
Kristin Andree, CFP®: Yes.
Peter Velardi: may have different goals and thoughts about what independence. Yeah. You know, and sometimes they agree sometimes,
Kristin Andree, CFP®: They usually do. They they form these practices without asking themselves the same question. So
Peter Velardi: Yeah, yeah. So I I I think your point's a great one that this requires conversation. And it requires
Kristin Andree, CFP®: Yes.
Peter Velardi: conversation early and often about what independence means to to you and your partners and how is that best achieved through the next best and last strategic partner that may be a capital partner. And we spent a lot of time to vet that out and we want to make sure it's a great fit, but Generally speaking, people come in with the fear of independence. And to somewhat, it's a myth of post-deal, somebody's going to tell me what to do. It's actually quite the opposite. These firms are private equity, family office, sovereign wealth, private capital-backed super RIAs, where the principles are fiercely independent. They don't want to lead you. They don't want to do anything other than get things out of your way and off your plate because they're. Buying you or making an investment in you because they see the inherent value in what you're doing. They just want to help you do more of what adds value to the valuation, not things that are not your highest and best use. So the you know, fear is real, but what one of the things you said that jumped out to me, Kristen, is that we pretty much insist that they do speak to advisors in their culture. They do speak to that, they visit, shake hands. meet the people that they're gonna work with because post deal it's all about, you know, expectation set versus realized. and and we wanna make sure they have a chance to fully vet out on their own what the culture is. So fear, but don't be concerned about it, I guess is the headline. but do define it for yourself and then allow us to help you find the match that best supports it. any
Kristin Andree, CFP®: Well, and think the match is going to be a big thing, Peter, because you a lot
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: of times I'll hear an advisor where they are approached by a particular company and it may be a great firm, but if that is the only thing they're looking at, we can square peg round hole all day. They're gonna make it sound like this is going to be the best thing for you. And I personally think advisors are do a disservice if they don't have an advocate in their corner saying, let's look, let's look around. Let's you tell me what you want and let's go find that, as opposed to the company saying, here's why we'll work for you. So I do, you know, the approach that you guys take in terms of having 120 different potential people that you could approach, you you weed out, I'd say a I'm guessing a large majority of them just based on what the advisor is telling you they want. And I think that's critically important because advisors will assume that I have to go here, I have to go there. I'm like, See what's out there. Plenty of plenty of fish in the capital partner and and acquisition sea out there. So it it's important to kind of know what what you're looking for so you can go find the right fit. It's alignment way more than acquisition or capital to me.
Peter Velardi: It really is alignment. It's not just the deal or the deal terms. It's what does the partnership look like? and what's the best category and what's the best firm? You know, just to close us off with I guess more of a teaser, you know, part of the calculus that we go through with our clients is what category of potential partners is best. For example, on one end you may have aggregators which will kind of say, hey, We've got this menu of support. You get to choose what you want to use. On the other end, you might have integrators that say actually the our best value to help you scale is for you to switch over everything you're doing to what we're doing. and there's kind of gray shades of gray between those two. so it it's what mix of control do you want versus the mix of scaling? Scaling and independence, you most people find that. When they try to scale and have disparate s processes and systems, they can't because if they got if you know, if if all all your advisors are doing something different, it's very hard to scale. So that there's this kind of trade-off that you need to understand of what's best for you at a moment in time will depend again on what your goals are, what's important to you, what you value, and what culture is gonna best support it. So great stuff. Anything else on the concept of independence, Kristen?
Kristin Andree, CFP®: I think I mean those those are really the big things. I mean, independent, it's it can be really, really good, but you gotta ask the right questions. It'd be like, you know, I have I've got three girls. It's like if I just didn't teach them anything about the real world and just said, okay, you're out of school, out of college, go off and and do, it wouldn't work. So I think you've gotta really before you're think you're ready, need to start thinking and asking and figuring out what is independence or freedom look like for me. And for my team or my practice. You gotta start that way before you think you're you need to.
Peter Velardi: Yeah, sorta like what our advisors we work with do for their clients, right? It's like you don't want to start
Kristin Andree, CFP®: Exactly.
Peter Velardi: talking about retirement when you're a year or two away from retirement. You want to be talking about it now, whenever that now is in your life cycle. So same same kind of thing. Okay, good. So let's let's kind of role play a bit in a sense and kind of say, let's put put ourselves now in the shoes of an advisor. and they've work with somebody like you or with me in the past and they've built a practice, they've scaled a practice, and now they have accepted a deal with some capital partner. It might be minority, majority, full deal, but it's a capital partner that can do those things that we've been talking about, get things off their plate, help them de-risk, help them form a succession plan, help them achieve their highest and best use, grow faster, maybe start doing in organic growth with capital, maybe tapping into the operational infrastructure of a company, maybe tapping into a marketing department that can help them boost their client acquisition. So it's that kind of person we're talking to both before and post-transaction. You know, in your mind, you know, what's what's most important to that scaling? You know, one thing that comes to mind For me, that we can start to bat around a little bit. Is this concept that you know the capital that now is there and the infrastructure, that alone is not a strategy. That exists to accelerate your strategy. So it's important that you've got a strategy prior that allows you to scale in a predictable way. When is the ideal time for somebody, for example, to come to you and say, I'm ready to now scale? and I need to put the infrastructure and systems that depend less on me. Yeah, you know, at what point does that happen? And then tell us a little bit about kind of what that conversation looks like. How do you coach them to help them see what scaling could look like and then what the kind of ingredients to the cake need to be per se?
Kristin Andree, CFP®: Well, and I think I mean there's yesterday is the best time, obviously, with any stage of growth. But I would say once the once everything is dependent on you. If you so the easiest question is could you leave for six months and the business still run? Could you leave for a year and the business still run? If it can't, it is way too dependent on you. And that's where we need to look at processes, people, leadership, you know. everything, marketing all of the pieces. So I think that's that's really the first thing to look at is most of us come into the practice because we love it and we grow it and we are the the kind of the cog that keeps it stuck sometimes. So we're the reason it grew but we're also the reason it plateaus. For me,
Peter Velardi: Mm.
Kristin Andree, CFP®: I my favorite person to get is an advisor who is very successful but has been on a little bit of a plateau or just a tiny increase year over year because it means they've they've something's stuck and the cog in the wheel is usually the advisor or the leader. So that's
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: probably the best time. But as we're looking at at different sizes and different practices. You know, most people are doing what they learn to do. We did all things, right? We came in, you, you and I started the same. We come in and you do all the things. You run all the pieces of your practice. But advisors rarely, once they grow, stop to figure out what's my strength, what's my best and highest use. If they haven't done that, we've got to pause and figure that piece out because we can wrap everything around it, but we need to know what are you really good at? What are you uniquely qualified to do? What do you get excited? For some people, it's plannings, for others, it's portfolio management. For some, it's I like to be the rainmaker and be out meeting the people. So there's no wrong answer, but if we can't figure out that piece and slot the person in there, we we start to stifle the growth a lot. So and that's important as you're looking for. capital partner or anything is we've got to build around that. And that's the piece I think most advisors don't spend enough time on.
Peter Velardi: Yeah, it's interesting, right? I'm smiling because for forty-four years I've been doing this, this kind of idea of highest and best use, this kind of idea that less is more. So if I've if I'm doing 10 tasks today that I think add value to the business, if I were to prioritize those 10, I probably could come up with Pareto's law of the few that drive 80% of the result that I have a gift and a passion for. that I would want to do more of. And and it's it's so interesting. As soon as advisors get that is when I saw big growth. And sometimes that meant
Kristin Andree, CFP®: Huge.
Peter Velardi: teaming, sometimes that meant
Kristin Andree, CFP®: Mm.
Peter Velardi: staffing, sometimes that means bring in a partner, sometimes it means bring in a gen two advisor to take your lowest value hundred clients
Kristin Andree, CFP®: Your B's and C Yep. Yeah.
Peter Velardi: off of you and you just work with your highest value in segment clients. But as soon as advisors get that is when you just see this. hockey stick type growth. but
Kristin Andree, CFP®: Yeah. It's it's huge. You but you mentioned segment. I love I love good segmentation. But what's funny is I'll talk to a client or an advisor and I'm have you segmented? They're like, Yes, I have segments, and they'll tell me they're segments. And then I'm like, well, let's pull out your calendar. And they'll be 70, 80% of their time in front of B and C clients. And I'm like, You just told me this is these are the people you want to work with, but your activities, your calendar, your priorities don't reflect that. And I think most advisors, if they really are honest. That's what's that's why they're in the way. They're trying to be all things and do what they did to get get to here. But we want to get a lot higher.
Peter Velardi: Yeah, I think there's kind of two two important subparts to that. Part one is how you perceive yourself, right? If you perceive yourself as a practitioner, financial advisor, your dominant thoughts and actions will be one thing. if
Kristin Andree, CFP®: Yes.
Peter Velardi: you see yourself as a business owner building an enterprise, that's when you'll be thinking scale, things not depending on me, building infrastructure, building redundancy. all those things that any business, widget firm USA, for example, would need to do to scale. So let's let's shift into infrastructure. What systems have you seen, Kristen, you know, in the work you've done preparing somebody for an exit or somebody that already has exited to make sure they're executing with this capital partner? What are like the minimum infrastructure systems that they would need?
Kristin Andree, CFP®: It it's gonna be an odd end, it it varies. I'm gonna go back to kind of that highest and best use
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: because I have some advisors who truly love like I'm the planner. I want to be the planner, but then we have to hire around that, meaning if they're if they're lousy at being the CEO, then we need to hire a CEO, COO, president, somebody to run the business side of it.
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: But they may be good at the business side that we need to handle somebody to run the planning side. But what I see from an infrastructure standpoint is something that is not dependent on the the advisor, the one owner. So we've got to look at like how do we complement what you're bringing to the table? So I would say, I mean, I've seen very, very successful practices and firms that may have one advisor, maybe one junior, and you know. I hate to say an admin because they're really truly like the glue. I call them the glue. I have a couple of my advisors that that's literally what I call their main COO or admin. It's like that is your glue. We need that. So I don't I don't think there's a right or wrong for infrastructure. It varies, you know, and I've had other teams that I work with that have 25 people on them. And it they both work, but the key is putting the right get the right people on the bus first.
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: You know, I like I like if you read any read any of John Gordon's work, he talked that book, The Energy Bus, get the right
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: people on the bus. Get the people who match your culture and your values and your drive and your ambition. And then we find the right seats for But so I think if you lead with people and then we get people leadership and then processes in that order.
Peter Velardi: Yeah, I think that's so true. Talent is everything. Right people, right seats, right bus going in the right direction, led by somebody who can drive the bus. All all of that is really important. And that's the way a business owner would think, right?
Kristin Andree, CFP®: Yes.
Peter Velardi: if you're thinking like a practice person only, which is fine. you know, plenty of wonderful people out there just they've just chosen to build a practice, not a business that scales. and that's fine. It's not gonna be worth as much in the end, but
Kristin Andree, CFP®: Exactly. It won't no.
Peter Velardi: You know, but that's okay. That's okay. As as long as you're accomplishing what you want for yourself, there's nothing wrong with that. so
Kristin Andree, CFP®: That may be a good person to align with somebody. You know, you may have one I've had teams before where I have one that's
Peter Velardi: No question we have.
Kristin Andree, CFP®: a great business owner and then I have one that's a great practitioner. And that may be a a beautiful, beautiful combination.
Peter Velardi: Yeah, it's absolutely true. What we kind of look at when we look at it from a buyer's perspective and say, okay, what what would our buyer, what's what systems would a buyer need to see in place? Some of the things that come to mind, there's kind of the retail di distribution concept of you grow through more stores times more productive stores or more profitable stores. So do you do you have systems to grow your staff, your talent? Your advisors, and are you doing it organically through, you know, let's just recruit talent? do you have a talent development strategy to help build the talent from within and get referrals from within because your culture is so good? but firms are are are going to want to look at you and say, I'll value you higher if you've got a business with with more than one seat on the bus. that are filled by high talent. So what's your, you know, recruiting and talent dev function? That's one they look at.
Kristin Andree, CFP®: Yes.
Peter Velardi: another one, of course, is the leadership of the firm. You know, do you how big is big to you? W what do you want to accomplish? What's the vision of it? your tech stack is important to them in in a few
Kristin Andree, CFP®: Yes.
Peter Velardi: ways. One is that could there be s a synergies between your tech stack and their tech stack? Put another way, could you have a lot of cost saves together to use their scaled tech stack that may be the same as yours and just better pricing, for example. same same yeah, and that you know,
Kristin Andree, CFP®: Same with marketing, the marketing stack is really big too. Yeah.
Peter Velardi: that's an you know another area. You know, really what a buying firm is looking at is if I buy some or all of your of your net cash flow as a business, which is what any business in the end is buying, some version of EBITDA. Eboch, free cash flow. and what they're gonna do is they're gonna say, yeah, I think that this is predictable in itself, but with us, I think we can, you know, double, triple the growth of that cash flow together and everybody win. And that's so they're trying to look for systems that you have in
Kristin Andree, CFP®: Yes.
Peter Velardi: place that don't depend on you. The more
Kristin Andree, CFP®: Yes.
Peter Velardi: it depends on you, the less it is worth to them. And that's why that question we ask our clients. If you left for a month, would you still grow, not just maintain? because we believe you're either growing or you're dying. I've I've yet to see a practice that during all ups and downs in the marketplace that says we want to maintain, I've yet to see one grow or
Kristin Andree, CFP®: Exactly.
Peter Velardi: even maintain, right? so
Kristin Andree, CFP®: I make them leave for more than a month. I'm like, if you left for six months or a year, because Yeah. Yeah, I like it. But it it's true and that,
Peter Velardi: Yeah, I like yours. We we may change ours to six months too. I I I it's very important.
Kristin Andree, CFP®: but that goes to what you said earlier with recruiting and development. You know, le you know, I I see a lot of firms recruit good talent, right?
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: I do not see a lot of firms develop that talent once they're there. And that's a huge opportunity. You know, I'd I like to get in if I'm taking on a new private client and I'm looking at their firms, I want to meet with their G2s, their G3s. I want to meet with all their admin because most of the time the the ad main advisor, the owner, is frequently really unaware of their potential, what their challenges are, what they're struggling with. So We you've got to develop them. Like we do a great job at pulling people into the industry. Still some room to grow, but we don't always do a great job once we get them. So I think the development, you know, I'm wanting to see how are you growing these these future leaders?
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: You know, how are they if you retire tomorrow or you take off a year, are they you? Are they kind of, you know, a mini Kristen that's gonna run around and and be able to carry on what you've built? Because most of us, you said forty-four years in the I'm only twenty six. So forty-four year,
Peter Velardi: Mm.
Kristin Andree, CFP®: I've been twenty six years, you've been forty-four years in the industry. We wanna know what we've built. Like we've we've sacrificed a lot to build our businesses. We wanna
Peter Velardi: Mm.
Kristin Andree, CFP®: know that's gonna be carried on. And I think advisors are are selling themselves a little short by not developing who they have coming up behind Huge opportunity. Huge opportunity.
Peter Velardi: Yeah, I think I I think we hear the word legacy a lot as it relates
Kristin Andree, CFP®: Mm-hmm.
Peter Velardi: to kids that may come up in the business or not.
Kristin Andree, CFP®: Yeah.
Peter Velardi: we hear people seeking higher meaning than just money once they kind of hit what they think they need. you know, we hear a lot of that and we flush that out to find out what exactly does that mean. and we help them see both the opportunities, but also help them see the risks because the
Kristin Andree, CFP®: Yes.
Peter Velardi: sand is shifting a lot in terms of industry consolidation.
Kristin Andree, CFP®: Mm, huge.
Peter Velardi: the wealth transfer from G1 to G2 being stuck, shortage of financial advisors, the AI relevancy risk, the fact that everything is peaked out, and what how will this world change? Your practice that may be worth six times today, midway through next year with a market correction could be worth four times. That's millions of dollars that you left on the table, just like if you happen to be fortunate or smart enough to sell your house at the peak of the real estate market, where you would have been there versus if you waited six months to a year is very different. And so, you know,
Kristin Andree, CFP®: And that but that's why it's important, I think, for advisors to start asking questions. Like when you said when's the time to think about this growth and that it's yesterday. It's I wanna know, you know, ask these questions now because I mean, I I know I've I've, you know, sent people to you guys before. We've talked to about certain potential advisors that I work with that y'all like They're not there yet. They're not ready or let's hold out. You know, you guys are gonna tell one way or the other 'cause you know the the landscape. You know, that's where I'm like, that's me. I'm like, I can tell you how to grow the practice. Let's, you know, we just need to figure out where we're going, what we're growing it for, what's our in game legacy, if you will.
Peter Velardi: I think that's the headline. I think the headline of all of this, when you start to enter a capital partner into the equation and somebody transacts with who they think is the best and last partner, and whatever form it may come in, that's right for you and kind of bespoke and structured around what you want and how you want it. Once you get to that place, I think the headline is that all of the strategic planning and infrastructure needs to have happened prior to that. And then what you want to do is not give that up. in a transaction, quite the opposite. What you want to do is look for the right culture, values, and infrastructure that complements it and accelerates that strategy. And and what we
Kristin Andree, CFP®: Enhances it. Yeah. Yeah.
Peter Velardi: know, for example, is post transaction, our clients grow an average of two times faster than they did prior. You almost have
Kristin Andree, CFP®: Expand.
Peter Velardi: to when people get things off your plate. And if you take any of that extra time and invest it in a little bit more of your highest and best use. But then there's all these growth drivers like capital. These these firms have completely wired MA departments. And so, you know, our philosophy has always been from the sell side, the people who we love, advisors that we represent only, we don't represent the buy side, we only represent the sell side. We believe you should have the representation that the buy side has. They have a complete MA departments. So when you go to negotiate
Kristin Andree, CFP®: Yes, absolutely.
Peter Velardi: a deal, if you did that on your own, you're severely handicapped because it's you versus a department of MA experts. But
Kristin Andree, CFP®: Yes.
Peter Velardi: when you now are on the other side, you can leverage that infrastructure. You know, on your own, you might say, I don't know how to do an acquisition. I want to, I've always grown organically, that's been great. But you know, I'm having people coming to me saying, I want to maybe be part of this special thing that you've built, right? But you don't have the capital, you don't want to go into debt, you don't want to hock your house and you don't have the MA expertise. That's very specific to the industry. and now you've got this infrastructure and that group that you had to kind of compete with to get a deal done. Now, now you're on the home team and now you've got this support to help you do that. So, you know, I think the headline is work with somebody like Kristen, prepare for the transaction, and then work with somebody like us just to make sure that the fit is right with the company you're talking to, so that you can not only preserve it, but accelerate that. any other headlines for you, Kristen, in this discussion?
Kristin Andree, CFP®: It's a you know, and I think I keep coming back to the word you said bespoke. I mean, that's really at the heart of it. And you know, I I kind of tell the advisors I work with, you know, I am so customized and it is bespoke site type of consulting because what's gonna work for one advisor, one practice is not necessarily what I'm going to recommend for somebody else. None of my clients are the same. They're you know,
Peter Velardi: Mm-hmm.
Kristin Andree, CFP®: they may have similar revenue levels or similar companies, even within the same companies, they're not the same.
Peter Velardi: Right, right.
Kristin Andree, CFP®: But it's, you know, you've got to take that bespoke approach to it, or you're going to end up being shoved in the wrong place, both from a growth strategy standpoint and a you know, capital partner acquisition standpoint. You've got to make sure that you're taking the time to ask the right questions. And since we know advisors don't always know the questions to ask, that's what we're here for. Whether it's growth or, you know, bringing on a partner, it's you've got to know what to ask. And let us, you know, I ask a ton of questions. I kind of joke the first time I meet somebody, I'm like, I'm gonna ask a lot of questions. You're gonna be tired of me asking questions, but I need to know everything I can possibly know to find the right growth strategy. And the same it's the same thing with with JPTD is y'all are asked y'all do ask a lot of questions, but it's to make sure the alignment is there. So I think bespoke alignment are kind of the two things I feel like are the biggest opportunity for advisors that, you know,
Peter Velardi: Yeah.
Kristin Andree, CFP®: on the growth side or the acquisition side that They need some help with.
Peter Velardi: Yeah, I think so too. And and I think at the end of day, all the juice is in the questions. And we spend an ordinary amount time coaching our clients about what questions to even ask when we start to date these firms to flesh
Kristin Andree, CFP®: Yes.
Peter Velardi: out if it could be a good fit. We'll for example, I coach my clients on the three must questions you must ask a buyer. and so and that's important. It's important for you to know what those things are at May maybe the next podcast or two that I host. I'll I'll get into that a little bit more.
Kristin Andree, CFP®: Yeah.
Peter Velardi: Make sure you understand what those will be. But I do want to jump to the final part of today's podcast. It's always interesting for advisors to hear real actual offers. we operate in the world of transparency. We want you to know everything so you can make informed choices. So this is a practice, this is a ensemble type practice. they are doing, and I'll just kind of walk you through this. Real quick, and then I can get Christian your reaction to it and what you may have learned and give you a few headlines and then we'll wrap things up. But so this is a ensemble type practice. and this is a full acquisition. So this is one where they felt the best fit. We don't really care what you do, whatever is best for you. We have no horse in the race. and and we want you to be informed about the differences of different Partners, different type of deals, but this is one where it was best for the client to do a full acquisition. And this is with one of these super RIAs that have scaled. their equity is worth a lot and will be worth a lot more down the road, that are backed by, you know, call it some capital source, private equity, family office, private capital, sovereign wealth that have already taken a bite of their apple and with it comes. tremendous amount of capital for them to do two things usually. One is to expand the client deliverable to compete with kind of this threat of AI and to be, you know, one of the 20 firms left standing. This is very predictable. This industry consolidation happened in the medical industry, dental industry, hardware industry. This is a predictable cycle, usually lasts five to ten years. And If there's a thousand firms in the beginning, there's 20 or so left standing. and those 20 own a vast you know percentage of the market share. So this is not pie in the sky. This is happening, it's been happening. We're probably in the seventh inning of all this happening. We're about six years into this, somewhere around that. Who knows who's got the crystal ball? It's certainly not you or I, Krista, right?
Kristin Andree, CFP®: No, we like to think. I wish. I wish.
Peter Velardi: Yeah, you know what? I bet we still be doing this, even if we had it. So because we love what we do. But but so these so that's the type of group that this is. So just real quick, this deal came in. This deal the way these deals usually work, full deals, is you get fifty percent or more of your entire deal value at the transaction when you close. That takes about six months or so from the time that you For example, we're to engage with the JPTD partners. so once you close, there's an amount paid up front, usually in some percentage of cash and equity. In this deal, the amount at close came out to on a 3.9 million Rev shop. This came down to the upfront consideration was 21 million and change, of which 70% or 14 million was paid in cash. So at the close, they're gonna get $14 million in cash. And the equity is 6.3. So that's about a 70% cash, 30% equity split at the time of the close. That's that's unusual to get that much, and that's one of the reasons why we like this company. Some of our clients want more paid up front, some want more paid over time. It just depends upon what it is. So we want to get as much air in the balloon as possible. And then we help you push around the air to get the money when you want. Generally, you want to get as much up front as possible because the way these deals work is like any other sale of anything where they're buying forward cash flow. And you would much rather, of course, get $10 paid today at capital gains rates than a dollar per year for 10 years at ordinary income. So just the math and time value of money, a dollar is worth today more than it is tomorrow. Let's get a lot of it up front. Let's invest it. Let's get return on it. And let's get more of it pushed into the capital gain pot, not the ordinary income. So this firm gets that and they say, all right, we're gonna support this particular advisor by saying we're gonna give you a lion share up front, which makes it a more interesting deal. so just that amount is 21 million. Combined. Then they've got most firms have some version of an earnout paid sometimes in year two, three, four, sometimes five. They keep it real simple. They they just have a simple true up in three years. And basically they look at your growth, average annual, or Kagger over a three-year and they project it. So if you hit 10% Kagger, for example, in the third year, you would get another 3.6 million. That same distribution of equity and cash. So the the if you threw if you grew 10% over three years, your consideration or deal value would be 24 and change 0.8. That's a 6.3 times rev deal at the 10% growth. If you grew 15%, that would be $29 million in total of consid of that same deal value. That's a 7.45 times Rev. and this group I think will hit the 15% because they're a growth machine prior to the acquisition. and again, you'll grow more after the acquisition. so that's a very strong deal. I mean, did you ever think, Kristen, that a practice that in our day used to be worth two to three times rev, today could be worth in this case, you know, six to eight times rev.
Kristin Andree, CFP®: it's a it sounds like a great deal to me and and the neat i mean obviously without knowing the owners like i'm going all right let's hit the 15 growth i mean that's that's very reasonable if the alignment's there they've got all the systems in place to really grow rapidly that that's a sweet deal they didn't have these back in our day mm mm no
Peter Velardi: Yeah, exactly. No, no, nothing like it. The whole world has changed a lot in the last five years. but wait, there's more, as they say.
Kristin Andree, CFP®: Like it.
Peter Velardi: so that's that's kind of one bite of the apple. That's the deal value. That in essence you can think of is there, they're gonna buy you for what they think the practice is worth today, right? Then
Kristin Andree, CFP®: Yeah. Yeah.
Peter Velardi: there's kind of two other bites of the apple that make this really interesting. One is that that Equity of anywhere between seven and eight million of equity, depending on whether you hit the 10 or 15%. What these firms do is they do conservative projections and they say things like, If our equity grew at this rate, it's usually ballpark, don't hold me too, it's usually about half of what the growth has been in the past. If they're if if if they've grown, you know, 30% of the equity, they don't want to throw that out as being. Predictable. So they'll use like 10, 10, 10 to 15%. So the conservative estimate of this firm of that amount of equity is that that's going to add another 25 million to your deal. So on 3.9, if over the next 10 years, for example, and what these firms do is they, because it's a partner model, everybody usually has the same share class of stock in the company. Everybody's rolling in the same direction. To create more global enterprise value of the firm that's buying you. And then they wanna open up windows for people to cash out every three to five years or so along the way. This can be super accretive to your wealth. So this could be a $50 million all-in deal, something like that, over a 10-year time period, most of that at cap gains rates. And then the last piece to this is the ongoing payout. most of these deals they range between 30 and 40 percent and you have no expenses. So full deals, the company usually picks up most, if not all the expenses, and and you get a payout. and and a lot of people are surprised by that, Kristen, because they're thinking, wait a minute, you gave me my $10, right?
Kristin Andree, CFP®: Yeah.
Peter Velardi: Why would you also give me a piece of that one dollar? and the answer is that they want to provide you cash flow as well. Some of these deals are salaries. Plus make maybe a growth bonus. We like the payout concept for our clients generally more because that gives you a chance to even get back up to your past cash flow. In fact, most of our clients, two to three years of superior growth with this new entity, the advisor compensation at the payout, and their payout, what they do is they subtract the opex of the company. what you're gonna pay staff, what you're gonna pay it, you know, advisors, and they give you a 40% payout. In in reality, that cause that that the math works out to about a thir 30% payout. So you're you're gonna these deals are so amazing right now because you get your $10, you know,
Kristin Andree, CFP®: They're very rich, yeah.
Peter Velardi: you get your you know 30 cents on the dollar. And then because you're growing so fast, that payout, because they're the the percentage is fixed by contract, they don't change payout rates. They don't have a target of these complicated four family. There's no global admin fee. That's a surprise. It's all completely transparent what the deals are. so you know, I I thought you'd find this one interesting.
Kristin Andree, CFP®: like that one and I think you know because normally I think so many advisors think about I'm getting close to the end I'm retired in five years, 10 years, but I'm sitting here going, my gosh, if I'm 30s, 40s managing a few hundred million, I've got some complexity that I, you know, I can grow, but not that fast. I mean, this opens up a lot. They can have capital, they can have income, they can get additional payouts. I mean, it really, it's like the best of all three worlds.
Peter Velardi: Yeah, it's we're having a blast. The four
Kristin Andree, CFP®: Yeah, I like that. That was a good deal.
Peter Velardi: of us, we love working with people like you. You know, this whole thing started on people coming to us saying, you know, thanks for helping us build and scale a practice.
Kristin Andree, CFP®: Right.
Peter Velardi: You know, and and the four of us partners, we did this by the thousands, you know. A lot of them start coming to us saying, you know, we hear there's a whole new world of this beyond the old world of only sell and leave and retire and go to Live Oak Bank and get a Business valuation that always come back at two to three times the rev. that's not the market. And we create a higher market for our clients, of course, because
Kristin Andree, CFP®: Yes.
Peter Velardi: we create an auction where we compete these five firms against each other to bid for you. so
Kristin Andree, CFP®: Yes.
Peter Velardi: that's why you see these kind of valuations. but we love it, and what we love most about it is at the close when people say, you know, thank you for changing my life again. You brought me in the business. you know,
Kristin Andree, CFP®: Yeah.
Peter Velardi: or or or perhaps you brought people like me in. That was fun to help people build careers. But honestly, when you see these people, the smiles on their face when they close and then most importantly, we stay in touch with them. and we talk to them a year, two years, three years. I just had a client ping me and say, you know, thanks. I just got my my my earnout, my my growth earnout that I hit. thanks for your help in finding the right partner. This has been amazing.
Kristin Andree, CFP®: I love that. That's fantastic.
Peter Velardi: So that that's why we do it. I'm sure you find the same thing, just to wrap this up, Kristen, that the end of the day, you know, it's so fun to see people grow, right?
Kristin Andree, CFP®: Yeah, I do and it's it's fun. Yeah. It's fun. I love seeing them grow and I'm but now they've grown so well I'm getting those calls. That's why I partner with you guys because I'm getting those calls like, what's next?
Peter Velardi: Yeah.
Kristin Andree, CFP®: What do I do? And you know, most of us grew up and we didn't really know what was out there, I think, you know, because it's the landscape's changed so much. So I'm seeing people like, you know, somebody offered me one and a half X or two X and I'm like, No, no, no, no, no, let's let's see what our options are. So This is just, it's fun. I think it's really and it's exciting to see advisors rewarded for everything they built. So I think it's I think it's awesome.
Peter Velardi: Perfect. Well, let's wrap it up there. to me, a couple headlines jump out to me. One is think about what independence means to you. Think about what freedom means to you. The better you can define that, that'll help you implement whatever strategy comes next. Second is make sure you're exploring what your strategy should be to scale your practice. It's a magnificent time to be an advisor. There's more demand than ever. This wealth transfer is going to hit the majority of it in the next 10 years, starting now. and there's a shortage of advisors. So be an advisor, don't fear technology and AI. Just you've got to be in a position where your value to your client expands beyond what it is today. And most businesses simply can't do that alone. They need a larger partner. and the whole idea that you can now, unlike the past, find the right strategic partner. That can give you this unique type of support and capitalize your life for you through a transaction is just remarkable. these deals did not exist prior to what we did. they, you know, they they existed in a very small part of what these deals look like today. so you know that there's a timing thing here. So there's a win a window to do it. so have a strategy. Work with the right people both to implement that strategy like Kristen, work with the right people to make sure you've got good representation, should you want to explore what it could look like to partner with somebody for capital and for growth. So those are my thoughts. Anything else on your end, Kristen?
Kristin Andree, CFP®: I think wrap up it's the ask the right questions and then find as you mentioned, find somebody that will help you find the bespoke answers to those questions. So you get alignment above everything else. It helps out there. Just find it. Yeah.
Peter Velardi: Perfect. So yep, perfect. And so if somebody wants to reach you or reach out to you to get any questions answered or to explore working with you, what's the best way for that
Kristin Andree, CFP®: Absolutely.
Peter Velardi: to get a hold of you, Chrisman?
Kristin Andree, CFP®: That's it. Website Myfa Coach. Made it easy. Myfa Coach.com. I'm I'm also extremely active on LinkedIn. So connect with me there. I love engaging and I share a lot of tips and ideas there too.
Peter Velardi: Wonderful. You can connect with me on LinkedIn as well. and just go check out JPTDpartners.com. a lot of cool things you can do. You can see real offers, real deals. again, we're completely transparent. So you can kind of pick out yourself in there and say, here's a deal that looks like one that might be good to me. we can also get you a free business market valuation. It's right on the top page of the website. so engage with us. Let us be a resource to you. We are here to help. Kristen, always fun to be chatting with you. Thanks so much for
Kristin Andree, CFP®: Always fun. Of course.
Peter Velardi: all the wisdom you've shared today. So I guess combined we've got 60 plus years in the business. All right, look, you know, we're still still still alive, still having fun. So it's all good. Thank you everybody
Kristin Andree, CFP®: We're doing it, we're doing all right. We made it. Still going. Exactly. That's the big part. Having fun.
Peter Velardi: for taking the time to listen, and you all have a great day.
