PSV: Well, hello everybody. Welcome to the Monetized Advisor Podcast brought to all of you by JPTD Partners. I am Peter Vallardi, one of the founding partners and host of this podcast. On this podcast, we really like to share what we call real world strategies and conversations around both building enterprise value, but to help you also navigate this ever-changing kind of wild world of advisory firm &A. Please be sure to check us out on YouTube when you get a chance. Just go to JPTD Partners. ⁓ I am the P in JPTD. We're not terribly creative with branding, but we do a lot of other things right. ⁓ And don't forget to subscribe and share as well. Excited today to have a guest. We don't always have a guest with us, but I'm Excited to be joined by our friend and ⁓ really industry thought leader, ⁓ Duncan McPherson, who's the CEO of Pareto Systems. I'll give a quick intro to Duncan and he can say hello. He is a leading business coach, speaker, bestselling author, and he tends to work with top financial professionals to build more, not just profitable, but more purpose-driven practices. He's the creator of what's called the Blue Square Method. He's the author of the Advisor Playbook and the host of a podcast called Always On. So Duncan, great to have you and welcome to the show.
Duncan MacPherson: I appreciate that Peter and you've brought along with Ted exceptional value to Always On. I've always received great feedback when you're there, so thank you.
PSV: You're welcome. And we feel the same way when we work with Duncan's clients who have been through the Pareto bootcamp in essence. ⁓ We find because they're so systems oriented and think like a business owner, ⁓ we can get them much higher value for their practice. So it's great to work with your people. They're great people, run great shops. ⁓ And I know a lot of that is because of your leadership. thanks for that. So our focus today and our dialogue is gonna be around three things. We'll kind of bang through it, but it will be a conversation. We're gonna start with talking about the macro environment. What matters most to all of us now and all of you? What you should extract from industry trends. I know you see this a lot from people, but I'm gonna try to pull out for you with Duncan's help. What really matters about that? So we'll go big first, then we'll kind of jump into the meat of today. which is gonna be kind of a micro focus on your five year countdown. It doesn't have to be five years. We're gonna even have a nice little discussion about that. really, if your interest is at some point achieving maximum value and having an exit of some type that is above market and what we would call a premium exit, ⁓ make sure you stay on for that part as well. And just to clarify, exit does not necessarily mean you have to sell and retire or sell and transition. The vast majority of the clients we work with do not want that. They want to sell and stay for some time period. It's more about if you want to create great value, so at some point you can monetize, whether it's taking some chips off the table and bringing in a great growth partner that can help you grow faster or a full exit, whatever you want, there's going to be sell and stay, sell and go. ⁓ and this places in between. So part two will be, what do you really need to do to build premium value? And then part three is gonna be translating all of that to what's this all mean to you? So what's the right mindset to have as you're thinking about this? And then what are some actions you can take ⁓ to make this very practical for you so you can all walk away with some actions? So Duncan, let's start with you. ⁓ I'd your input first as a thought leader and strategist for so many teams you work with. But what are you seeing in terms of industry trends as it relates to ⁓ &A and ⁓ risk opportunities ⁓ that should pay attention to now?
Duncan MacPherson: Well, it's interesting as I was preparing for this conversation, I've been traveling like a gypsy. I'm highly caffeinated, full disclosure. But I wanted to get sort of level set for this again. And it's interesting. I went right to AI and I just gave chat GPT this prompt just to get myself back into this. And I said, what steps should a financial advisor consider? prior to selling their business for maximum value. In three seconds, I had an entire protocol and process to follow. Now, many issues, Peter, as you know, are two or three questions deep. So you can follow that up with deeper prompts that are specific to you. But this output alone, you know, first response, the shift from practice to enterprise, right? It's no longer a book of business. It's a business. Okay. And we'll talk about obviously enterprise value and how that is ⁓ engineered, but it just the response, just galvanizing your thoughts, thinking it through, not winging it. AI is such a phenomenal tool. So I do want to talk a little bit more about that as it impacts a financial professional, but definitely as it relates to their end game and exit strategy. The other thing I'll tell you in the meantime, I'm talking to a lot of very high caliber advisors about how to rejuvenate the appreciation their best clients have for them to ensure that they are always the first call. So that a client doesn't make any meaningful decision with their money without calling the advisor first, not to tell them what they've done. but to make sure the advisor's got eyes on this decision and can contribute advice as part of their planning approach. And with the proliferation of alternative investments, if you look at that surge in the last five to 10 years, an advisor needs to know what their clients holdings are that are outside of the advisor's primary process.
PSV: Mm-hmm.
Duncan MacPherson: to get out in front of liquidity events, to future pace where all of that's going directionally, that is massive. So I do want to talk about that. And then of course, as I said, you know, in the spirit of beginning with the end in mind, every investment of effort a financial professional makes working on their business is... an incredible and dynamic form of for savings. They are slamming money in the bank in terms of their enterprise value, which is why we call our podcast always on always work on the business. So ⁓ those are the trends that we're spending a lot of time bringing to life with our advisors today in our coaching and consulting.
PSV: Yeah, those resonate with me, Duncan. And just to reinforce a couple things that you said, one is all things AI. What does that mean to me as an advisor? Two is, the more I work on my business and think of it as an enterprise, not a practice, I'm probably preparing myself and investing correctly for your vision where you want to go. ⁓ The third thing that you said that was so impactful and so important today, and I'll share why in my comments is this whole idea of value expansion, right? It's about the race to stay relevant and to add more value than the shop down the street. So that's critically important. So I speak about this a lot. I do about a podcast a week, ⁓ some type of educational workshop per week. ⁓ One of the slides that people always ask me for is what are these wealth management ⁓ &A trends and what do they mean to me? So I'll hit a few to reinforce Duncan what you said. So the first is that there are two wealth transfers underway. Most people only talk about the first, which should get you excited as an advisor, right? The wealth transfer anywhere from 80 to 100 trillion going from gen one to gen two and advisors are in the middle of. This is great news if you're an advisor, right? The second wealth transfer though is that the industry is consolidating and aging at the same time. When I came in in the early 80s as an advisor or CFP, the average age was 26. Now it is 62 with 40 % of these firms turning over and trying to transfer wealth from Gen 1, Generation 1 to Generation 2. But there's a big snap. And that is at today's optimal valuations, the highest we've ever seen in my 20 plus years doing this and 40 plus years in this space. G2s can't afford to buy out the G1s. So everybody is struggling to figure that out. So that's kind of trend one. Second trend is there's a shortage of advisors doing a whole host of things of over 100,000. I've even heard as much as 200,000 advisors. So again, good to be an advisor, but how do you create a scenario where ⁓ the right things can happen so a G1 doesn't have to give away their practice to a G2. They can have business continuity, but have a third party enter to create the capital to make that work. Industry is consolidating, private equity backed, private capital backed, ⁓ family office backed, sovereign wealth backed, super RIAs. think Barron's top 200, they're consolidating. Every CEO believes that there'll be 20 firms standing, like Home Depot and Lowe's, and you're the hardware store on the street. And because they're getting bites of their Apple and achieving tremendous capitalization, they're investing that capital in two places. One is making acquisitions and they've been driving up values as a result. And then second, they're investing in infrastructure. to expand value. Why are they doing that? Because they see a lot of risk. Let's go back to the AI. I talk about AI, Duncan, as this dual edged sword, right? Where if you do what you just did, and I do, and I know people listening to this broadcast do, that you use AI yourself to be more effective and efficient. And like you just did to prepare for something like this, great. So if we eat it, it works great. but AI can eat you as well. And a lot of advisors have fear around the realization that maybe AI right now can do five out of 10 tasks the traditional tasks an advisor can do. So will it be easier or harder to charge 1 % for example? Probably harder. So margin compression is real. So everybody's trying to figure this out. There's no easy answer, but one of them is to be aware of it, make sure we use what's gonna work.
Duncan MacPherson: Mm-hmm.
PSV: to create better systems to scale while at the same time, everybody is racing. So that whole comment Duncan, you made with first phone call to you is critical. You've got to be that QB, that point guard that says, let me understand today what your needs are and let me be this great resource broker, if not internal to your firm to satisfy their need. Having a network of solutions. that feel like a one-stop shop. The problem is the challenge is all these big firms are investing in their infrastructure, creating some version of a family office where one place you get it all. If you're a high net worth or ultra high net worth clients, that's what we all want. So that's a big trend. I'd say, and I'm not sure if you're seeing this yet Duncan and what you coach, but I'm seeing fear factor of ⁓ advisors kind of on the rise. What things are they afraid of? They're afraid of this AI relevancy risk. ⁓ They're afraid of market risk. They understand we've been in a 14 year-ish bull market of sorts, and at some point that's gotta change. And they know that when the market drops 20%, valuations will likely drop more and last in that place longer. They're concerned about that. They're concerned about tech overwhelm. So they're seeing all these shiny new toys born out of this AI era, what should I use? What should I not use? What's going to give me ROI? How can I afford it? And a lot of the ⁓ advisors, especially on the higher end of their growth, I start to wonder what they do about that. Biggest thing we're seeing is that advisors wake up one day and they're saying, Velarty, if you're telling me if I'm doing 2 million a rev, that my practice is worth six times rev or higher, ⁓ they wake up one day and say, ⁓ my gosh. My enterprise represents massive asset concentration. It represents maybe 80, 90 % of my net worth. Why am I not talking to somebody about taking some chips off the table and diversifying that, whether it's some or all, at maximum valuations of maximum markets? We're getting incoming calls, galore, from lots of sources coming to us saying, I don't know if I want to sell or not, and that's okay. but I know I got to be talking to somebody about it. And the last thing I'll say is this is massive wellness effort going on where advisors are trying to ⁓ align kind of three things. One is how do I achieve wealth for myself? How do I make sure that I have an advisor wellness that I'm have a good life and then I'm ⁓ have the right things going on that I can take time off because I run a business, not a practice. And let me make sure that I do things for my advisors, for my clients to give them wellness. So a lot of that's going on right now, but the opportunity lanes are massive for you to take a step back right now and say, okay, when does my countdown start? Has it started? And then how do I prepare for, if I have this conversation with Velarde and JPTD guided by Dunk Duncan, you know, what do I need to look like, feel like, be doing? to feel that I'm somewhat prepared to do it. those are some of the added trends that I would say, Duncan, I think they're very aligned with yours. Any other last thoughts on trends before we get to the meat of this today, Duncan?
Duncan MacPherson: Yeah, okay. So you covered a lot of ground there. ⁓ First thing that comes to mind is if you think back to the art of war, within all chaos, there will be opportunity. There's always a bull market somewhere. So those three points you made, first of all, AI. It will eliminate some financial advisors whose primary focus at professional contrast is their technical ability. If they're living and dying by the performance sword and their stock selections, they're on a collision course with obsolescence. It's going to be very, very hard for them. Those that understand not what it is, not what AI is, but what it does, it liberates a financial advisor.
PSV: Hmm.
Duncan MacPherson: to go deeper into the things that make them fee worthy. The one thing AI will never have is EI. That's emotional intelligence, the bedside manner. Okay, so if it's harnessed properly, and Peter, you know this, I wrote a 51-page white paper on AI for the financial advisor. You know, it's funny. I was in ⁓ Denver recently talking to financial advisors about AI, and I said, just go into ChatGPT and say, how can I, as a financial advisor, AI to elevate the client experience, create more consistency and provide ⁓ and order to my life. That one prompt will lay out a complete incremental sequential approach to how to deploy it, to put more sand in your hourglass. So AI, it will serve you or hurt you, but I'm telling you, embrace it ⁓ it's going to be powerful. Volatility? A good financial advisor is at his or her highest level of referability and relevance and impact when there's volatility. So if they'll get out in front of that, ⁓ it can serve them incredibly well also. Now here's the thing. If a financial advisor's enterprise value is tied solely to their AUM recurring revenue EBITDA and EBOX, and the market drops by 50%, that's a pretty substantial haircut. If they've got other aspects built into their enterprise value and they can insulate themselves from some of these shocks based on the quality of the relationships and the measurable uptick in referability, they're insulated. And then the last thing regarding technology, the importance, and I write about this in the Blue Square Method, the importance of the tech stack is to create
PSV: Mm-hmm.
Duncan MacPherson: Consistency in the client experience people crave consistency Okay, so These are opportunities but it starts with a mindset Okay, the advisors got a mindset that every investment effort contributes to how I'm perceived and how I'm described by my clients and Coming back to getting out in front of evolving needs and positioning alternative investments Even if they're outside of the advisor's process If the client perceives the advisor through a lens of stewardship not salesmanship They don't think that the advisor is being opportunistic trying to put eyes on these other Holdings, know the the second home in Tahoe ⁓ The the biotech private placement deal they did with their brother or or you know precious metals or blockchain or whatever else they're sort of dabbling in The the client if there's a pure sense of fiduciary and stewardship Then the client feels predisposed and
PSV: Hmm.
Duncan MacPherson: to say, can I get your input on this? It's powerful, but it's engineered.
PSV: Yeah, and it's intentional, right? It's built into the way you think about your business and what you do. And you're so right on the tech stack. ⁓ I'm not sure if you went to future proof, I think in the spring down in Miami, but I love hearing ⁓ Michael Kitches talk about this, but there were two big ah-has from his talk on tech stacks. One is we're in a massive period of tech overwhelmed, not knowing what to do, which we all knew, right? That's no surprise to everybody. And navigating that with some help, like a Pareto, is mission critical. The other thing that was really interesting, he talked about ROI from your tech stack. And ⁓ this was eye opening, because what he talked about, Duncan, was that ROI and tech has way less to do with the tech or the software or the hardware. and has everything to do about implementation structure. So your staff, your infrastructure. So again, it comes down to this mindset. If I have a business, it's not so important what brand of software I choose, what I need to make sure. And he showed data on staff of, you know, one FT, two FT, three FT. And he showed the ROI going up significantly, the more staff you have to a point. and you all know what that means. But it was fascinating. So I think we're starting to get into this concept of, okay, all this is kind of changing around us. AI, we have to embrace it, lean into it. We have to use it ourselves. We've got to think like business owners. And we have to really start thinking about preparing ourselves, but most importantly, preparing our business. So let's get into that a little bit. So in your experience, Duncan, you know what? what leads to a premium exit? You've worked with us long enough to know ⁓ what we do to get a premium exit. But when we work with your clients, there are very intentional things that your clients do that make them kind of the top 10 % of value creation. You know, I know you went on chat and I know you have ideas yourself, but you know, give me the short list of small handful of things you say, hey, start here people and you'll be okay.
Duncan MacPherson: Well, the first thing I just want to comment back on the technology is the ultimate sweet spot. This is true north for an advisor is to land in that spot between high tech and high touch. This is absolutely critical because the more technology creeps into our lives, the more the human touch matters. It becomes a developing unmet need and gap, and it activates professional contrast because some people
PSV: Mm-hmm.
Duncan MacPherson: ⁓ are defaulting too much. It's the pendulum swinging too much technology and they're forgetting about this element of a client feeling like they're in safe hands, a belonging, the safe harbor element, especially. And people give me a hard time about being negative about market volatility. Peter, I read a book a long time ago that is etched and the book was called Only the Paranoid Survive. Okay, there's a
PSV: Mm-hmm. I read that book.
Duncan MacPherson: Very positive, yeah, very positive power that comes from negative thinking because it can balance and liberate you to be optimistic and look to the future with anticipation. It's a hedge, okay? It's like risk management. anyway, back to your question. As you know, we frame everything ⁓ being process driven. We drive everything with a solid philosophy of stewardship, but everything is framed with a process. Enterprise value the frame we use is top the acronym top be at the top of your game Okay, so top the acronym means tidy optimized and proprietary Okay, so tidy is self-evident and you guys are phenomenal at this no hair No skeletons in the closet Everything's transparent. It's like an open kitchen. Everything's addressed. It's like staging a home before you list it Right? Everything's addressed. There's no, there's nothing that can come up and be revealed that can undermine the buyer feeling compelled to want to take action. So there's an entire drill down on building a tidy business. And you've seen it all. We've seen it all. Sometimes an advisor needs to do this in 30 days. Some advisors are a little more methodical, not driven by a sense of urgency and they take three years. and we've seen everything in between. But it starts with being tidy. Optimize means just basically know your numbers, you know, in terms of ⁓ how deeply you've been embraced within the family tree, the quality and quantity ⁓ of introductions you're getting, client retention, you know, all sorts of quantitative, optimized, refined approaches to the business. And then lastly, and this is frankly my favorite because the values are being represented here is that's proprietary. Okay. So nothing of value resides in your head exclusively. If the advisors way, if their process is primarily in their heads or in the heads of their team members, their skills, they don't add value to the enterprise value. If they're documented, digitally, physically, standardized, optimized, professionalized in a playbook. It's no longer the Peter show. Now it's an actual enterprise. You can put it in the hands of somebody else. This elevates the client experience. It liberates the advisor. So the business serves their life, not the other way around. And it drives enterprise value. So I'm grossly oversimplifying that frame. We generally spend anywhere between six to 12 months helping an advisor and their team bring this to life. But that's the framework we use just as a kickstart.
PSV: Yeah, it's a great kickstart. I love that framework and I prefer it to be simple because the complexities and the execution, right? ⁓ But it's a good place to start and I don't have a ton to add other than some drivers that we see as a way to think about this. It's not about just top line growth. It's about earnings. It's about earnings growth and it's about quality of earnings. And I think that's kind of what your acronym represents. So it's about when firms look at you, they're looking for indications that if they invest in you or buy you, ⁓ that the earnings are going to grow faster through a partnership with them. And it'll be not just a creed of, but they can achieve an arbitrage of what they buy you for and what perhaps when somebody takes a bite of their apple, what that looks like. And there's a calculation.
Duncan MacPherson: Right.
PSV: To your point, the more a business depends on a principle, the principles, the less it's worth. And a great asset test that we tell clients, because we have a lot of clients, Duncan, as you know, that we kind of send back to you or send to you if they're not working with you. And that's more the case. It just aren't ready for an exit. And one of the things we tell them is get to the place where you can go take off 30, maybe 60 days. And not only do the wheels not fall off the bus, but you continue to grow your earnings fast and scale. And so that's a good way to kind of look at that. If you're like freaking out when I say that, and it's like no way I could do that now. If I was away for a week, things start to unravel. That's just a clue that you need to kind of engage or yourself do it or engage with Pareto to say, help me get to that place that I can do that because I've got systems and consistency. So that's part one. And then,
Duncan MacPherson: Pete, just have to say that is such a powerful proof of concept, a stress test. The paradox is when the advisor has made himself or herself obsolete, the business can run like a Swiss watch. They've depersonalized the business and it just hums along. It is so incredibly powerful. So I completely agree.
PSV: Yes, yes. That's right. Yeah, you know it is and thanks for saying that. you the end of the day, the only thing I'd add to this part is that ⁓ a way to think about this is to even think larger in terms of the evolution phases of a practice and to be self aware enough to identify where you're at and where you want to be. I love your statement and I use it all the time Duncan of begin with the end in mind and then reverse engineer your practice, which Now we want you to think of as a business. So there's four kind of phases of growth and this will kind of lead us into the mindset. But I'll start by kicking it off by saying, hey, ⁓ first of all, did you survive? We need to survive. A lot of people don't survive ⁓ in this. And what Duncan feels, I feel too, I'm fairly optimistic and not even cautiously optimistic that there was a very bright future. ⁓ for advisors in the next 10 years, for example, and possibly especially because of AI, right? ⁓ However, there are some, my fear is that advisors are gonna miss the window on two things. They're gonna miss this window that exists to say, hey, ⁓ we have an ⁓ &A window here that supply and demand are starting to shift. For the first time, there's more sellers than buyers in the marketplace. Last five years, It's been just the opposite. So as we predicted, when the average age is 62 and people are popping up talking to JBTD, our phone is ringing off the hook because you people saying, now I've got to take some chips off the table. So there's more sellers entering and a lot of this cash is getting deployed. But my fear is that advisors are not going to be urgent and self-aware enough to say, I need to poke my head up and talk to Duncan and Velarde. firms to say, what should I know about this and what's it mean to me? And that's why we're trying to do podcasts like this. ⁓ As for some, a reinforcement, if you're already in that game for others, a wake up call. ⁓ it's very important right now to kind of poke your head up. ⁓ But it starts out with surviving. ⁓ you say, all right, I've survived. Now I want to grow. Grow, you're not really thinking yet. You're thinking still as a practitioner, as a financial advisor. ⁓ But at some point you say, wait a minute, I see my friends scaling. That's the third phase where that's the phase where you create valuation. So part of the mindset shift is if you're still in growth mode and excited about 10, 20 % growth, maybe with market, maybe net a market, you're growing, but you're not scaling. The firms that are scaling are doing it intentionally. They're starting to explore things like, So far, it's been all organic growth. Now I need to maybe add an element of inorganic growth and build an acquisition machine. If I don't have the expertise or capital to do it, maybe I should bring in a partner to help me do that. And then the last part is exit, but exit is very misunderstood. Again, exit could be monetized just to have a partner. We have a lot of firms coming to us, principals in their 40s and 50s. They got 15, 20 plus years left, but they are working with us to find the right and last strategic partner because they want to grow faster. They want to scale and they want to leverage the infrastructure of their firm to increase client value and to start playing Pacman doing acquisitions as opposed to trying to invest millions themselves and try to create competency quickly. ⁓ So that's kind of the mindset shift. I think we've talked a lot about so far what kind of leads to evaluation, but let's ⁓ close with kind of this mindset and you're a thinker and I love the way you talk to people about this space, but you know why in your brain Duncan is starting with mindset to make this shift so important to an advisor.
Duncan MacPherson: Well, OK, I'll answer that, but I also will dovetail it to something you said earlier, because there is a spectrum around the stage of readiness. Yeah, sometimes advisors aren't fully ready because you're thinking I don't want you to leave chips on the table and have any unintended consequences from your exit all the way across to anti climax that can come from the exit. You we've all seen there are two types of exits. are examples. Perfect. And then there's warnings, not great. Okay. And you're not involved in the warnings, but you still have that contrast. So this is something I say to advisors on an ongoing basis. You're well aware of caveat emptor. Buyer beware. You understand due diligence as a buyer. I want you to now look at it in terms of caveat venditor. Seller beware. And I'll say this because
PSV: Mmm.
Duncan MacPherson: You're either going to be a steady burner. This is going to be awesome. Or it's a shooting star. It just fizzles out. And it's interesting. You talk about demography. It's not just financial services. I know people who have taken chips off the table and de-risk in other sectors because private equity is buying optometrists. They're buying dentists. They're buying HVAC. They're buying veterinarians. They're buying cashflow with all their overhang. Now, here's what's interesting.
PSV: Mm-hmm. Mm. Always.
Duncan MacPherson: The people who are not fully prepared and just reach for the money. In a sell and stay dynamic, for example, they shift from their role being a calling to now it's a job. And a job means I got to hit my numbers and incrementally a little bit of remorse sets in. It's not how much we earn, it's who we become from these events. You know, I know of dentists.
PSV: Mm-hmm.
Duncan MacPherson: who used to be phenomenal at what they do. They sold their practice. They had to stick around for a couple of years and they're mailing it in. And that's now their legacy. So A, it's gotta be a good fit in terms of if you're gonna sell and stay, who you're going to align with. It better be a good fit. And there's, as you know, a process to establish that fit. We follow PSP. It's a great framework. But you also have to be thinking in terms of your clients.
PSV: Mm-hmm. Mm-hmm.
Duncan MacPherson: your legacy. And you know, it's interesting. I talked to an advisor recently and I told him to shift his mindset from winding down. to growing down. Peter, here is a phenomenal insight on this conversation I had with this advisor.
PSV: Hmm.
Duncan MacPherson: Because he was talking about things that he's lacking in his life and things that he doesn't like doing and winding down to basically get out. And I said to him, I said, ⁓ let's talk about your purpose. Let's talk about things that give you fulfillment. And I said, after this conversation, I said, let's shift from winding down to growing down. So you can end on your terms. This guy, great business, very valuable 350 clients. said, why don't you entertain a partial book sale and with a component that says you will probably fully exit in the next five years.
PSV: Hmm.
Duncan MacPherson: But let's make these next five years the best five years of your life. So we grew down to 50 clients and he was primarily responsible for, and something happened. Because I said to him, I said, what do you crave? Do you crave freedom or do you crave to be needed? What do you crave? Because he was micromanaging, he was getting involved. I said, let it go. Disassociate respectfully.
PSV: Mmm. Great.
Duncan MacPherson: allocate it, grow down to 50 clients, position it properly to those 50, activate professional scarcity, grow up market, grow down, zoom out, be more strategic about where your life is going, and level up all the things you've been putting off in terms of your own life, vacations, wellness, ⁓ all of it. So the philosophy, the mindset coupled with a process That's how you knock this thing out of the park on your terms. So fit trajectory, directionally, where is this going? And never lose sight of your calling. So there's no anticlimax or unintended consequences. This is where this role that we're in becomes so incredibly complex and fulfilling. So there.
PSV: Yeah, no, I think that's beautifully said and you apply that to what you do, adding value to other people and therefore you achieve that for yourself and we're the same way. It kind of reminds me of, I'm not sure where I got this and you may know about this, but early on in my career and in my 20s, I heard a speaker that talked about the expanded three types of wealth and it stuck with me and I've shared it to ⁓ thousands if not millions of advisors over the years. ⁓ I talked about those three types of wealth. There's the financial wealth that everybody talks about. That's kind of the scorecard. That's the enabler. It's just a tool to help you achieve what you want. But the other two parts are generally more meaningful to people. The second is social wealth, where it's all about how you make an impact on others, the impact of your success. So everything from ⁓ You become wealthy and you set up a family foundation and make a difference that way or because you've got knowledge and skill you add value with communities, mentoring people. So that is generally more important once you hit your number than financial wealth. And then what you said was so interesting. The third one ends up being the by far winner and that's what's called personal wealth. And that's basically who you become along the way and is it aligned with where you want to end your journey? Because we all have this thought about, know, people come to your funeral, they're speaking about you, what are they saying? And what we all crave, to use your word, is some version of that. So message to you from both of us is no matter where you poke your head up to get some support and some help, what's most important is start to think this way. This is the mindset shift. Because to the degree you as a financial advisor become the steward to help people achieve all three types of wealth, you will be not obsolete. You will be not only relevant, but you will be the preferred resource for people above and beyond anybody else. If you can help people achieve those three things with your firm, with your business, not just you. And then second is to be open to and self-awareness and say, where am I on that? Am I like a 10 on all three of those? And if you're not, you've got this unique opportunity in this space right now with this window open to achieve all three of those pretty quickly with the right partners in crime like Duncan and us to help you guide those things. So ⁓ I'll stop there for today. Duncan, anything else you'd like to add before we talk about next steps?
Duncan MacPherson: balance.
PSV: Kin and Yang, man, right?
Duncan MacPherson: how much we earn and who we become. I mean, we are mercenaries about monetizing to the fullest, but it's like Zig Ziglar said, money's not everything, but it ranks up there with oxygen. Like it's important. But who we become is so incredibly powerful. I'm talking to advisors about finishing strong. The Japanese have a word, Peter, it's called Oma Tenashi.
PSV: Mm-hmm.
Duncan MacPherson: It's their form of karma and value added. Like it's only value added if it's something people value. Omitanashi means you bring value without expectation of reciprocity, recognition, or any return. You're just doing it because it's the right thing to do. If you can find that sweet spot, how much you're worth, how much are you earning? What are you getting with who you're becoming here? And you have immense gratitude for this entire
PSV: That's right.
Duncan MacPherson: process and journey, you'll be in an elite level of accomplishment in this space. And it's such a phenomenal space. And I do agree with what you said. I think the next five to 10 years are going to be the greatest time to be a financial advisor, maybe the greatest time to be alive. If you trust the plan and you stick to the process with consistency and enlightened philosophy and a methodical process deployed and executed flawlessly, I'm telling you, how high is high? It's gonna be incredible.
PSV: Yeah, well, I can't think of a ⁓ better place to end it. So two action steps for everybody. This has been great. ⁓ Really value you being here with me, Duncan, to ⁓ share what we've shared and share what we've learned from others. two action steps. One is you can go to, for anything advisory, ⁓ &A, to both prepare and to exit or at least explore it. You can go to www. sellyouraum.com that will get you to our website which is also jptdpartners.com. Lots of fun stuff there, one of which on the very front. ⁓ We will do a market valuation of your business for free and give you a sense of where you'd land if in fact you work with a firm like us, and us specifically. There's also offers that you can see in the top that we get for our clients, we're totally. transparent about everything. And if you want to have a conversation with us, simply go and click on the button for that. And one of the partners will be talking to you about you mostly, and then sharing what's going on or whether there could be a fit and help you with your timing of all of this. ⁓ And I know Duncan, you've got this podcast always on. What's the best way for people to engage in that and with you?
Duncan MacPherson: ⁓ Yeah, I mean, go to our website, ParetoSystems.com. You can get to know us a little bit better and access all of our resources. We throw the kitchen sink at people in terms of actionable content without an expectation that it goes anywhere beyond that. I'm also very active on LinkedIn, just Duncan McPherson. I should pop right up and we're sharing actionable proven strategies on LinkedIn pretty much every business day. So, love to hear from everybody.
PSV: Wonderful. And you can find me on LinkedIn as well, S. Velardi, because my son is on there already and he's got the same name. ⁓ So feel free to connect with me if you're not already. Duncan, always fun to hang with you, man. It was a great ⁓ dialogue and really value your presence and your insights.
Duncan MacPherson: Likewise. Thanks, Pete.
PSV: You bet. You all take care. Have a great day.
Duncan MacPherson: I appreciate that Peter and you've brought along with Ted exceptional value to Always On. I've always received great feedback when you're there, so thank you.
PSV: You're welcome. And we feel the same way when we work with Duncan's clients who have been through the Pareto bootcamp in essence. ⁓ We find because they're so systems oriented and think like a business owner, ⁓ we can get them much higher value for their practice. So it's great to work with your people. They're great people, run great shops. ⁓ And I know a lot of that is because of your leadership. thanks for that. So our focus today and our dialogue is gonna be around three things. We'll kind of bang through it, but it will be a conversation. We're gonna start with talking about the macro environment. What matters most to all of us now and all of you? What you should extract from industry trends. I know you see this a lot from people, but I'm gonna try to pull out for you with Duncan's help. What really matters about that? So we'll go big first, then we'll kind of jump into the meat of today. which is gonna be kind of a micro focus on your five year countdown. It doesn't have to be five years. We're gonna even have a nice little discussion about that. really, if your interest is at some point achieving maximum value and having an exit of some type that is above market and what we would call a premium exit, ⁓ make sure you stay on for that part as well. And just to clarify, exit does not necessarily mean you have to sell and retire or sell and transition. The vast majority of the clients we work with do not want that. They want to sell and stay for some time period. It's more about if you want to create great value, so at some point you can monetize, whether it's taking some chips off the table and bringing in a great growth partner that can help you grow faster or a full exit, whatever you want, there's going to be sell and stay, sell and go. ⁓ and this places in between. So part two will be, what do you really need to do to build premium value? And then part three is gonna be translating all of that to what's this all mean to you? So what's the right mindset to have as you're thinking about this? And then what are some actions you can take ⁓ to make this very practical for you so you can all walk away with some actions? So Duncan, let's start with you. ⁓ I'd your input first as a thought leader and strategist for so many teams you work with. But what are you seeing in terms of industry trends as it relates to ⁓ &A and ⁓ risk opportunities ⁓ that should pay attention to now?
Duncan MacPherson: Well, it's interesting as I was preparing for this conversation, I've been traveling like a gypsy. I'm highly caffeinated, full disclosure. But I wanted to get sort of level set for this again. And it's interesting. I went right to AI and I just gave chat GPT this prompt just to get myself back into this. And I said, what steps should a financial advisor consider? prior to selling their business for maximum value. In three seconds, I had an entire protocol and process to follow. Now, many issues, Peter, as you know, are two or three questions deep. So you can follow that up with deeper prompts that are specific to you. But this output alone, you know, first response, the shift from practice to enterprise, right? It's no longer a book of business. It's a business. Okay. And we'll talk about obviously enterprise value and how that is ⁓ engineered, but it just the response, just galvanizing your thoughts, thinking it through, not winging it. AI is such a phenomenal tool. So I do want to talk a little bit more about that as it impacts a financial professional, but definitely as it relates to their end game and exit strategy. The other thing I'll tell you in the meantime, I'm talking to a lot of very high caliber advisors about how to rejuvenate the appreciation their best clients have for them to ensure that they are always the first call. So that a client doesn't make any meaningful decision with their money without calling the advisor first, not to tell them what they've done. but to make sure the advisor's got eyes on this decision and can contribute advice as part of their planning approach. And with the proliferation of alternative investments, if you look at that surge in the last five to 10 years, an advisor needs to know what their clients holdings are that are outside of the advisor's primary process.
PSV: Mm-hmm.
Duncan MacPherson: to get out in front of liquidity events, to future pace where all of that's going directionally, that is massive. So I do want to talk about that. And then of course, as I said, you know, in the spirit of beginning with the end in mind, every investment of effort a financial professional makes working on their business is... an incredible and dynamic form of for savings. They are slamming money in the bank in terms of their enterprise value, which is why we call our podcast always on always work on the business. So ⁓ those are the trends that we're spending a lot of time bringing to life with our advisors today in our coaching and consulting.
PSV: Yeah, those resonate with me, Duncan. And just to reinforce a couple things that you said, one is all things AI. What does that mean to me as an advisor? Two is, the more I work on my business and think of it as an enterprise, not a practice, I'm probably preparing myself and investing correctly for your vision where you want to go. ⁓ The third thing that you said that was so impactful and so important today, and I'll share why in my comments is this whole idea of value expansion, right? It's about the race to stay relevant and to add more value than the shop down the street. So that's critically important. So I speak about this a lot. I do about a podcast a week, ⁓ some type of educational workshop per week. ⁓ One of the slides that people always ask me for is what are these wealth management ⁓ &A trends and what do they mean to me? So I'll hit a few to reinforce Duncan what you said. So the first is that there are two wealth transfers underway. Most people only talk about the first, which should get you excited as an advisor, right? The wealth transfer anywhere from 80 to 100 trillion going from gen one to gen two and advisors are in the middle of. This is great news if you're an advisor, right? The second wealth transfer though is that the industry is consolidating and aging at the same time. When I came in in the early 80s as an advisor or CFP, the average age was 26. Now it is 62 with 40 % of these firms turning over and trying to transfer wealth from Gen 1, Generation 1 to Generation 2. But there's a big snap. And that is at today's optimal valuations, the highest we've ever seen in my 20 plus years doing this and 40 plus years in this space. G2s can't afford to buy out the G1s. So everybody is struggling to figure that out. So that's kind of trend one. Second trend is there's a shortage of advisors doing a whole host of things of over 100,000. I've even heard as much as 200,000 advisors. So again, good to be an advisor, but how do you create a scenario where ⁓ the right things can happen so a G1 doesn't have to give away their practice to a G2. They can have business continuity, but have a third party enter to create the capital to make that work. Industry is consolidating, private equity backed, private capital backed, ⁓ family office backed, sovereign wealth backed, super RIAs. think Barron's top 200, they're consolidating. Every CEO believes that there'll be 20 firms standing, like Home Depot and Lowe's, and you're the hardware store on the street. And because they're getting bites of their Apple and achieving tremendous capitalization, they're investing that capital in two places. One is making acquisitions and they've been driving up values as a result. And then second, they're investing in infrastructure. to expand value. Why are they doing that? Because they see a lot of risk. Let's go back to the AI. I talk about AI, Duncan, as this dual edged sword, right? Where if you do what you just did, and I do, and I know people listening to this broadcast do, that you use AI yourself to be more effective and efficient. And like you just did to prepare for something like this, great. So if we eat it, it works great. but AI can eat you as well. And a lot of advisors have fear around the realization that maybe AI right now can do five out of 10 tasks the traditional tasks an advisor can do. So will it be easier or harder to charge 1 % for example? Probably harder. So margin compression is real. So everybody's trying to figure this out. There's no easy answer, but one of them is to be aware of it, make sure we use what's gonna work.
Duncan MacPherson: Mm-hmm.
PSV: to create better systems to scale while at the same time, everybody is racing. So that whole comment Duncan, you made with first phone call to you is critical. You've got to be that QB, that point guard that says, let me understand today what your needs are and let me be this great resource broker, if not internal to your firm to satisfy their need. Having a network of solutions. that feel like a one-stop shop. The problem is the challenge is all these big firms are investing in their infrastructure, creating some version of a family office where one place you get it all. If you're a high net worth or ultra high net worth clients, that's what we all want. So that's a big trend. I'd say, and I'm not sure if you're seeing this yet Duncan and what you coach, but I'm seeing fear factor of ⁓ advisors kind of on the rise. What things are they afraid of? They're afraid of this AI relevancy risk. ⁓ They're afraid of market risk. They understand we've been in a 14 year-ish bull market of sorts, and at some point that's gotta change. And they know that when the market drops 20%, valuations will likely drop more and last in that place longer. They're concerned about that. They're concerned about tech overwhelm. So they're seeing all these shiny new toys born out of this AI era, what should I use? What should I not use? What's going to give me ROI? How can I afford it? And a lot of the ⁓ advisors, especially on the higher end of their growth, I start to wonder what they do about that. Biggest thing we're seeing is that advisors wake up one day and they're saying, Velarty, if you're telling me if I'm doing 2 million a rev, that my practice is worth six times rev or higher, ⁓ they wake up one day and say, ⁓ my gosh. My enterprise represents massive asset concentration. It represents maybe 80, 90 % of my net worth. Why am I not talking to somebody about taking some chips off the table and diversifying that, whether it's some or all, at maximum valuations of maximum markets? We're getting incoming calls, galore, from lots of sources coming to us saying, I don't know if I want to sell or not, and that's okay. but I know I got to be talking to somebody about it. And the last thing I'll say is this is massive wellness effort going on where advisors are trying to ⁓ align kind of three things. One is how do I achieve wealth for myself? How do I make sure that I have an advisor wellness that I'm have a good life and then I'm ⁓ have the right things going on that I can take time off because I run a business, not a practice. And let me make sure that I do things for my advisors, for my clients to give them wellness. So a lot of that's going on right now, but the opportunity lanes are massive for you to take a step back right now and say, okay, when does my countdown start? Has it started? And then how do I prepare for, if I have this conversation with Velarde and JPTD guided by Dunk Duncan, you know, what do I need to look like, feel like, be doing? to feel that I'm somewhat prepared to do it. those are some of the added trends that I would say, Duncan, I think they're very aligned with yours. Any other last thoughts on trends before we get to the meat of this today, Duncan?
Duncan MacPherson: Yeah, okay. So you covered a lot of ground there. ⁓ First thing that comes to mind is if you think back to the art of war, within all chaos, there will be opportunity. There's always a bull market somewhere. So those three points you made, first of all, AI. It will eliminate some financial advisors whose primary focus at professional contrast is their technical ability. If they're living and dying by the performance sword and their stock selections, they're on a collision course with obsolescence. It's going to be very, very hard for them. Those that understand not what it is, not what AI is, but what it does, it liberates a financial advisor.
PSV: Hmm.
Duncan MacPherson: to go deeper into the things that make them fee worthy. The one thing AI will never have is EI. That's emotional intelligence, the bedside manner. Okay, so if it's harnessed properly, and Peter, you know this, I wrote a 51-page white paper on AI for the financial advisor. You know, it's funny. I was in ⁓ Denver recently talking to financial advisors about AI, and I said, just go into ChatGPT and say, how can I, as a financial advisor, AI to elevate the client experience, create more consistency and provide ⁓ and order to my life. That one prompt will lay out a complete incremental sequential approach to how to deploy it, to put more sand in your hourglass. So AI, it will serve you or hurt you, but I'm telling you, embrace it ⁓ it's going to be powerful. Volatility? A good financial advisor is at his or her highest level of referability and relevance and impact when there's volatility. So if they'll get out in front of that, ⁓ it can serve them incredibly well also. Now here's the thing. If a financial advisor's enterprise value is tied solely to their AUM recurring revenue EBITDA and EBOX, and the market drops by 50%, that's a pretty substantial haircut. If they've got other aspects built into their enterprise value and they can insulate themselves from some of these shocks based on the quality of the relationships and the measurable uptick in referability, they're insulated. And then the last thing regarding technology, the importance, and I write about this in the Blue Square Method, the importance of the tech stack is to create
PSV: Mm-hmm.
Duncan MacPherson: Consistency in the client experience people crave consistency Okay, so These are opportunities but it starts with a mindset Okay, the advisors got a mindset that every investment effort contributes to how I'm perceived and how I'm described by my clients and Coming back to getting out in front of evolving needs and positioning alternative investments Even if they're outside of the advisor's process If the client perceives the advisor through a lens of stewardship not salesmanship They don't think that the advisor is being opportunistic trying to put eyes on these other Holdings, know the the second home in Tahoe ⁓ The the biotech private placement deal they did with their brother or or you know precious metals or blockchain or whatever else they're sort of dabbling in The the client if there's a pure sense of fiduciary and stewardship Then the client feels predisposed and
PSV: Hmm.
Duncan MacPherson: to say, can I get your input on this? It's powerful, but it's engineered.
PSV: Yeah, and it's intentional, right? It's built into the way you think about your business and what you do. And you're so right on the tech stack. ⁓ I'm not sure if you went to future proof, I think in the spring down in Miami, but I love hearing ⁓ Michael Kitches talk about this, but there were two big ah-has from his talk on tech stacks. One is we're in a massive period of tech overwhelmed, not knowing what to do, which we all knew, right? That's no surprise to everybody. And navigating that with some help, like a Pareto, is mission critical. The other thing that was really interesting, he talked about ROI from your tech stack. And ⁓ this was eye opening, because what he talked about, Duncan, was that ROI and tech has way less to do with the tech or the software or the hardware. and has everything to do about implementation structure. So your staff, your infrastructure. So again, it comes down to this mindset. If I have a business, it's not so important what brand of software I choose, what I need to make sure. And he showed data on staff of, you know, one FT, two FT, three FT. And he showed the ROI going up significantly, the more staff you have to a point. and you all know what that means. But it was fascinating. So I think we're starting to get into this concept of, okay, all this is kind of changing around us. AI, we have to embrace it, lean into it. We have to use it ourselves. We've got to think like business owners. And we have to really start thinking about preparing ourselves, but most importantly, preparing our business. So let's get into that a little bit. So in your experience, Duncan, you know what? what leads to a premium exit? You've worked with us long enough to know ⁓ what we do to get a premium exit. But when we work with your clients, there are very intentional things that your clients do that make them kind of the top 10 % of value creation. You know, I know you went on chat and I know you have ideas yourself, but you know, give me the short list of small handful of things you say, hey, start here people and you'll be okay.
Duncan MacPherson: Well, the first thing I just want to comment back on the technology is the ultimate sweet spot. This is true north for an advisor is to land in that spot between high tech and high touch. This is absolutely critical because the more technology creeps into our lives, the more the human touch matters. It becomes a developing unmet need and gap, and it activates professional contrast because some people
PSV: Mm-hmm.
Duncan MacPherson: ⁓ are defaulting too much. It's the pendulum swinging too much technology and they're forgetting about this element of a client feeling like they're in safe hands, a belonging, the safe harbor element, especially. And people give me a hard time about being negative about market volatility. Peter, I read a book a long time ago that is etched and the book was called Only the Paranoid Survive. Okay, there's a
PSV: Mm-hmm. I read that book.
Duncan MacPherson: Very positive, yeah, very positive power that comes from negative thinking because it can balance and liberate you to be optimistic and look to the future with anticipation. It's a hedge, okay? It's like risk management. anyway, back to your question. As you know, we frame everything ⁓ being process driven. We drive everything with a solid philosophy of stewardship, but everything is framed with a process. Enterprise value the frame we use is top the acronym top be at the top of your game Okay, so top the acronym means tidy optimized and proprietary Okay, so tidy is self-evident and you guys are phenomenal at this no hair No skeletons in the closet Everything's transparent. It's like an open kitchen. Everything's addressed. It's like staging a home before you list it Right? Everything's addressed. There's no, there's nothing that can come up and be revealed that can undermine the buyer feeling compelled to want to take action. So there's an entire drill down on building a tidy business. And you've seen it all. We've seen it all. Sometimes an advisor needs to do this in 30 days. Some advisors are a little more methodical, not driven by a sense of urgency and they take three years. and we've seen everything in between. But it starts with being tidy. Optimize means just basically know your numbers, you know, in terms of ⁓ how deeply you've been embraced within the family tree, the quality and quantity ⁓ of introductions you're getting, client retention, you know, all sorts of quantitative, optimized, refined approaches to the business. And then lastly, and this is frankly my favorite because the values are being represented here is that's proprietary. Okay. So nothing of value resides in your head exclusively. If the advisors way, if their process is primarily in their heads or in the heads of their team members, their skills, they don't add value to the enterprise value. If they're documented, digitally, physically, standardized, optimized, professionalized in a playbook. It's no longer the Peter show. Now it's an actual enterprise. You can put it in the hands of somebody else. This elevates the client experience. It liberates the advisor. So the business serves their life, not the other way around. And it drives enterprise value. So I'm grossly oversimplifying that frame. We generally spend anywhere between six to 12 months helping an advisor and their team bring this to life. But that's the framework we use just as a kickstart.
PSV: Yeah, it's a great kickstart. I love that framework and I prefer it to be simple because the complexities and the execution, right? ⁓ But it's a good place to start and I don't have a ton to add other than some drivers that we see as a way to think about this. It's not about just top line growth. It's about earnings. It's about earnings growth and it's about quality of earnings. And I think that's kind of what your acronym represents. So it's about when firms look at you, they're looking for indications that if they invest in you or buy you, ⁓ that the earnings are going to grow faster through a partnership with them. And it'll be not just a creed of, but they can achieve an arbitrage of what they buy you for and what perhaps when somebody takes a bite of their apple, what that looks like. And there's a calculation.
Duncan MacPherson: Right.
PSV: To your point, the more a business depends on a principle, the principles, the less it's worth. And a great asset test that we tell clients, because we have a lot of clients, Duncan, as you know, that we kind of send back to you or send to you if they're not working with you. And that's more the case. It just aren't ready for an exit. And one of the things we tell them is get to the place where you can go take off 30, maybe 60 days. And not only do the wheels not fall off the bus, but you continue to grow your earnings fast and scale. And so that's a good way to kind of look at that. If you're like freaking out when I say that, and it's like no way I could do that now. If I was away for a week, things start to unravel. That's just a clue that you need to kind of engage or yourself do it or engage with Pareto to say, help me get to that place that I can do that because I've got systems and consistency. So that's part one. And then,
Duncan MacPherson: Pete, just have to say that is such a powerful proof of concept, a stress test. The paradox is when the advisor has made himself or herself obsolete, the business can run like a Swiss watch. They've depersonalized the business and it just hums along. It is so incredibly powerful. So I completely agree.
PSV: Yes, yes. That's right. Yeah, you know it is and thanks for saying that. you the end of the day, the only thing I'd add to this part is that ⁓ a way to think about this is to even think larger in terms of the evolution phases of a practice and to be self aware enough to identify where you're at and where you want to be. I love your statement and I use it all the time Duncan of begin with the end in mind and then reverse engineer your practice, which Now we want you to think of as a business. So there's four kind of phases of growth and this will kind of lead us into the mindset. But I'll start by kicking it off by saying, hey, ⁓ first of all, did you survive? We need to survive. A lot of people don't survive ⁓ in this. And what Duncan feels, I feel too, I'm fairly optimistic and not even cautiously optimistic that there was a very bright future. ⁓ for advisors in the next 10 years, for example, and possibly especially because of AI, right? ⁓ However, there are some, my fear is that advisors are gonna miss the window on two things. They're gonna miss this window that exists to say, hey, ⁓ we have an ⁓ &A window here that supply and demand are starting to shift. For the first time, there's more sellers than buyers in the marketplace. Last five years, It's been just the opposite. So as we predicted, when the average age is 62 and people are popping up talking to JBTD, our phone is ringing off the hook because you people saying, now I've got to take some chips off the table. So there's more sellers entering and a lot of this cash is getting deployed. But my fear is that advisors are not going to be urgent and self-aware enough to say, I need to poke my head up and talk to Duncan and Velarde. firms to say, what should I know about this and what's it mean to me? And that's why we're trying to do podcasts like this. ⁓ As for some, a reinforcement, if you're already in that game for others, a wake up call. ⁓ it's very important right now to kind of poke your head up. ⁓ But it starts out with surviving. ⁓ you say, all right, I've survived. Now I want to grow. Grow, you're not really thinking yet. You're thinking still as a practitioner, as a financial advisor. ⁓ But at some point you say, wait a minute, I see my friends scaling. That's the third phase where that's the phase where you create valuation. So part of the mindset shift is if you're still in growth mode and excited about 10, 20 % growth, maybe with market, maybe net a market, you're growing, but you're not scaling. The firms that are scaling are doing it intentionally. They're starting to explore things like, So far, it's been all organic growth. Now I need to maybe add an element of inorganic growth and build an acquisition machine. If I don't have the expertise or capital to do it, maybe I should bring in a partner to help me do that. And then the last part is exit, but exit is very misunderstood. Again, exit could be monetized just to have a partner. We have a lot of firms coming to us, principals in their 40s and 50s. They got 15, 20 plus years left, but they are working with us to find the right and last strategic partner because they want to grow faster. They want to scale and they want to leverage the infrastructure of their firm to increase client value and to start playing Pacman doing acquisitions as opposed to trying to invest millions themselves and try to create competency quickly. ⁓ So that's kind of the mindset shift. I think we've talked a lot about so far what kind of leads to evaluation, but let's ⁓ close with kind of this mindset and you're a thinker and I love the way you talk to people about this space, but you know why in your brain Duncan is starting with mindset to make this shift so important to an advisor.
Duncan MacPherson: Well, OK, I'll answer that, but I also will dovetail it to something you said earlier, because there is a spectrum around the stage of readiness. Yeah, sometimes advisors aren't fully ready because you're thinking I don't want you to leave chips on the table and have any unintended consequences from your exit all the way across to anti climax that can come from the exit. You we've all seen there are two types of exits. are examples. Perfect. And then there's warnings, not great. Okay. And you're not involved in the warnings, but you still have that contrast. So this is something I say to advisors on an ongoing basis. You're well aware of caveat emptor. Buyer beware. You understand due diligence as a buyer. I want you to now look at it in terms of caveat venditor. Seller beware. And I'll say this because
PSV: Mmm.
Duncan MacPherson: You're either going to be a steady burner. This is going to be awesome. Or it's a shooting star. It just fizzles out. And it's interesting. You talk about demography. It's not just financial services. I know people who have taken chips off the table and de-risk in other sectors because private equity is buying optometrists. They're buying dentists. They're buying HVAC. They're buying veterinarians. They're buying cashflow with all their overhang. Now, here's what's interesting.
PSV: Mm-hmm. Mm. Always.
Duncan MacPherson: The people who are not fully prepared and just reach for the money. In a sell and stay dynamic, for example, they shift from their role being a calling to now it's a job. And a job means I got to hit my numbers and incrementally a little bit of remorse sets in. It's not how much we earn, it's who we become from these events. You know, I know of dentists.
PSV: Mm-hmm.
Duncan MacPherson: who used to be phenomenal at what they do. They sold their practice. They had to stick around for a couple of years and they're mailing it in. And that's now their legacy. So A, it's gotta be a good fit in terms of if you're gonna sell and stay, who you're going to align with. It better be a good fit. And there's, as you know, a process to establish that fit. We follow PSP. It's a great framework. But you also have to be thinking in terms of your clients.
PSV: Mm-hmm. Mm-hmm.
Duncan MacPherson: your legacy. And you know, it's interesting. I talked to an advisor recently and I told him to shift his mindset from winding down. to growing down. Peter, here is a phenomenal insight on this conversation I had with this advisor.
PSV: Hmm.
Duncan MacPherson: Because he was talking about things that he's lacking in his life and things that he doesn't like doing and winding down to basically get out. And I said to him, I said, ⁓ let's talk about your purpose. Let's talk about things that give you fulfillment. And I said, after this conversation, I said, let's shift from winding down to growing down. So you can end on your terms. This guy, great business, very valuable 350 clients. said, why don't you entertain a partial book sale and with a component that says you will probably fully exit in the next five years.
PSV: Hmm.
Duncan MacPherson: But let's make these next five years the best five years of your life. So we grew down to 50 clients and he was primarily responsible for, and something happened. Because I said to him, I said, what do you crave? Do you crave freedom or do you crave to be needed? What do you crave? Because he was micromanaging, he was getting involved. I said, let it go. Disassociate respectfully.
PSV: Mmm. Great.
Duncan MacPherson: allocate it, grow down to 50 clients, position it properly to those 50, activate professional scarcity, grow up market, grow down, zoom out, be more strategic about where your life is going, and level up all the things you've been putting off in terms of your own life, vacations, wellness, ⁓ all of it. So the philosophy, the mindset coupled with a process That's how you knock this thing out of the park on your terms. So fit trajectory, directionally, where is this going? And never lose sight of your calling. So there's no anticlimax or unintended consequences. This is where this role that we're in becomes so incredibly complex and fulfilling. So there.
PSV: Yeah, no, I think that's beautifully said and you apply that to what you do, adding value to other people and therefore you achieve that for yourself and we're the same way. It kind of reminds me of, I'm not sure where I got this and you may know about this, but early on in my career and in my 20s, I heard a speaker that talked about the expanded three types of wealth and it stuck with me and I've shared it to ⁓ thousands if not millions of advisors over the years. ⁓ I talked about those three types of wealth. There's the financial wealth that everybody talks about. That's kind of the scorecard. That's the enabler. It's just a tool to help you achieve what you want. But the other two parts are generally more meaningful to people. The second is social wealth, where it's all about how you make an impact on others, the impact of your success. So everything from ⁓ You become wealthy and you set up a family foundation and make a difference that way or because you've got knowledge and skill you add value with communities, mentoring people. So that is generally more important once you hit your number than financial wealth. And then what you said was so interesting. The third one ends up being the by far winner and that's what's called personal wealth. And that's basically who you become along the way and is it aligned with where you want to end your journey? Because we all have this thought about, know, people come to your funeral, they're speaking about you, what are they saying? And what we all crave, to use your word, is some version of that. So message to you from both of us is no matter where you poke your head up to get some support and some help, what's most important is start to think this way. This is the mindset shift. Because to the degree you as a financial advisor become the steward to help people achieve all three types of wealth, you will be not obsolete. You will be not only relevant, but you will be the preferred resource for people above and beyond anybody else. If you can help people achieve those three things with your firm, with your business, not just you. And then second is to be open to and self-awareness and say, where am I on that? Am I like a 10 on all three of those? And if you're not, you've got this unique opportunity in this space right now with this window open to achieve all three of those pretty quickly with the right partners in crime like Duncan and us to help you guide those things. So ⁓ I'll stop there for today. Duncan, anything else you'd like to add before we talk about next steps?
Duncan MacPherson: balance.
PSV: Kin and Yang, man, right?
Duncan MacPherson: how much we earn and who we become. I mean, we are mercenaries about monetizing to the fullest, but it's like Zig Ziglar said, money's not everything, but it ranks up there with oxygen. Like it's important. But who we become is so incredibly powerful. I'm talking to advisors about finishing strong. The Japanese have a word, Peter, it's called Oma Tenashi.
PSV: Mm-hmm.
Duncan MacPherson: It's their form of karma and value added. Like it's only value added if it's something people value. Omitanashi means you bring value without expectation of reciprocity, recognition, or any return. You're just doing it because it's the right thing to do. If you can find that sweet spot, how much you're worth, how much are you earning? What are you getting with who you're becoming here? And you have immense gratitude for this entire
PSV: That's right.
Duncan MacPherson: process and journey, you'll be in an elite level of accomplishment in this space. And it's such a phenomenal space. And I do agree with what you said. I think the next five to 10 years are going to be the greatest time to be a financial advisor, maybe the greatest time to be alive. If you trust the plan and you stick to the process with consistency and enlightened philosophy and a methodical process deployed and executed flawlessly, I'm telling you, how high is high? It's gonna be incredible.
PSV: Yeah, well, I can't think of a ⁓ better place to end it. So two action steps for everybody. This has been great. ⁓ Really value you being here with me, Duncan, to ⁓ share what we've shared and share what we've learned from others. two action steps. One is you can go to, for anything advisory, ⁓ &A, to both prepare and to exit or at least explore it. You can go to www. sellyouraum.com that will get you to our website which is also jptdpartners.com. Lots of fun stuff there, one of which on the very front. ⁓ We will do a market valuation of your business for free and give you a sense of where you'd land if in fact you work with a firm like us, and us specifically. There's also offers that you can see in the top that we get for our clients, we're totally. transparent about everything. And if you want to have a conversation with us, simply go and click on the button for that. And one of the partners will be talking to you about you mostly, and then sharing what's going on or whether there could be a fit and help you with your timing of all of this. ⁓ And I know Duncan, you've got this podcast always on. What's the best way for people to engage in that and with you?
Duncan MacPherson: ⁓ Yeah, I mean, go to our website, ParetoSystems.com. You can get to know us a little bit better and access all of our resources. We throw the kitchen sink at people in terms of actionable content without an expectation that it goes anywhere beyond that. I'm also very active on LinkedIn, just Duncan McPherson. I should pop right up and we're sharing actionable proven strategies on LinkedIn pretty much every business day. So, love to hear from everybody.
PSV: Wonderful. And you can find me on LinkedIn as well, S. Velardi, because my son is on there already and he's got the same name. ⁓ So feel free to connect with me if you're not already. Duncan, always fun to hang with you, man. It was a great ⁓ dialogue and really value your presence and your insights.
Duncan MacPherson: Likewise. Thanks, Pete.
PSV: You bet. You all take care. Have a great day.
