“We have one humongous arch-nemesis and the initials are DIY. The do it yourself-ers have ultimately decided to just try to go it on their own. A majority of advisors don’t choose a platform like ours, end up just doing everything themselves and here they are a year or two later, their hair is still on fire and they work until eight o’clock at night trying to catch up other things. It’s not a great life.”
— Jim Palumbo, Principal and Chief Development Officer at Dynamic Wealth Advisors
Jim Palumbo’s passion is to put the client first and help advisors adopt best practices to bring their end clients the very best experience possible. After 25 years in the industry, his family packed their lives into a motor home and travelled the country while Jim continued to run his business entirely from his laptop. Dynamic Wealth Advisors is an RIA and advisory practice development firm serving wealth and retirement plan advisors for nearly a decade.
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This episode of Wealth Management Today is brought to you by Ezra Group Consulting. If your firm is evaluating new technology or looking to improve your current wealth platform, you need to contact Ezra Group. Don’t spend another day using technology that doesn’t offer an elegant user experience. Your advisors and clients deserve better and you can deliver it to them with the help of Ezra Group.
Topics Covered in this Episode
- Onboarding at Dynamic Advisor Solutions
- Overlay & Integration
- Running a Business From Your Laptop
- Interesting Use of a TAMP Registration
- Underperforming Advisors
Companies & People Mentioned
- Cerulli Associates [33:57]
- Carson Wealth [39:45]
- Dynasty Financial Partners [39:44]
- eMoney Advisor [26:53]
- Fidelity Investments [29:56]
- Focus Financial Advisors [39:45]
- MoneyGuide [26:50]
- Morningstar Workstation [11:36]
- Orion Advisor Tech [10:58]
- Raymond James [29:59]
- Redtail [10:55]
- Salesforce [10:51]
- Schwab PortfolioCenter [11:39]
- TD Ameritrade [29:56]
- United Capital [39:46]
- Wealthbox CRM [11:46]
Craig: When Jim Palumbo ran his own RIA, they outsourced all the technology and back office processes which allowed him to run the entire firm by himself with just a laptop. He was so impressed by the experience that he now works for the vendor. I spoke to Jim about his journey from advisor to outsourcer and how his firm provides a differentiated solution for RIAs.
Craig: Welcome to this episode of Wealth Management Today. I’m pleased to have on the program Jim Palumbo, Principal and Chief Development Officer at Dynamic Advisor Solutions. Hey Jim.
Jim: Hey Craig, happy to be with you today.
Craig: Jim, I’m happy you are here. I’m so glad we finally got this coordinated. We were going back and forth and talking a lot on LinkedIn and it’s great that we finally got this call. All the timing worked out and we got you on the program.
Jim: It’s going to be fun.
Craig: Oh, definitely. Anything talking about the industry is fun for me. I know it’s fun for you too. And what I wanted to start off with if we could is can you just give me the 30-second elevator pitch for Dynamic Advisor Solutions?
Jim: Dynamic Advisor Solutions is a professional services organization supporting successful advisors, both IARs and RIAs who want to grow their practice, who are finding the capacity ceiling and looking to outsource a platform, technology, personnel and investment management. And that’s our sweet spot is the growing advisor, not necessarily the emerging advisor, but the growing advisor who is already finding that they’ve got capacity constraints.
Craig: And are you the principal or one of the principals?
Jim: My partner now, Jim Cannon, the founder of the company and I are the principals there and we have a couple dozen folks that support advisors across the country.
Craig: Excellent. So what made you want to get into this business? What did you see in the market that wasn’t there?
Jim: That’s a great question and it was totally accidental. So, I’ll tell you how Dynamic came to be and then my coming to be part of this team. I came as a client, and grew to love it so much that I wanted to be part of the team. But my partner, Jim Cannon, started the organization about 10 years ago, having come from a major broker dealer, actually a holding company that owned numerous broker dealers and RIAs. He was the president, working on consolidating all these companies. In 2008, that company went through a contraction. We took an early retirement, said, What do I want to do next, my next act for my career. And he said, I wonder if I can provide the same experience that the big corporate RIA and broker dealer gives its financial advisors. Can I provide that same level of support to the independent advisor? And quickly put his business plan together that included catering to fee-only financial advisors and those that were independent, and trying to provide a concierge level where they’re getting the technology, they’re getting support instead of having to hire people and wear all of these hats in their company and deal with what he calls the “administrivia” of the business. Wearing 10 different hats as a chief technology officer, chief compliance officer, human resource director, etc. And just focus on what they do best, which is strengthening and deepening client relationships and finding new ones. So he started it 10 years ago, quickly picked up speed. We’ve gained accolades in the last couple of years for growth and a position in the industry. So we’re really delighted that advisors in the industry are recognizing that that really fills the need. That’s the X factor. What’s the differentiator? It’s being able to find a solution that just does it all for you, right? The advisor doesn’t want to have to figure out how do you tie these two technologies together? How do I make my CRM and my portfolio management system talk to each other or exchange data? They don’t have time for that. Are they smart enough to do it? Yes. Do they have time to do it? No. Should they be doing it? And the answer for the growing advisor is no, they should not be doing it.
Jim: I came as a client. I had struggled, I started my RIA 25 years ago. Built it up quickly, over $100 million dollars in assets and realized I had run into that same ceiling. I couldn’t keep up with the business of the business. I couldn’t find enough talented people. I couldn’t make the technologies to each other. And I finally just threw my hands up in the air and, ended up turning to Dynamic, used them for outsourcing. It was so great that after I started working with them, I packed up my family into a motor home, traveled around the country for a year from the motor home and ran the business from a laptop. It was so perfectly integrated I had access to every digit of information in my business from that laptop anywhere in the country that I could run everything from there. So it was absolutely extraordinary. After a couple of years, I realized we had a lot in common ethnically, as well as our perspective on the future of the industry, and we ended up putting the companies together. And now taking the experience I had running my own RIA and being able to translate that into helping support others who are going through the same things, looking for the same solution.
Craig: That’s a great story. So with your platform, do you talk about how many advisors are on the platform?
Jim: I have to be careful with the number because sometimes I don’t get it right, but I believe there are 60-some. So I’ll say that as a round number 60-some advisors today, and that represents a combination of individual IARs tucked under our registration, but operating independently as well as RIA firms that are independent RIAs that outsource in the same way an RIA would they outsource everything to us, but they’re standalone self registered RIA.
Craig: Right. What are the assets on your platform currently?
Jim: Just heading toward two and a half billion of assets under administration today. And again, not all regulatory assets because we manage assets for some standalone RIAs.
Craig: Gotcha. And you seem to provide the entire package, everything from soup to nuts that an advisor needs. As you said, all you need is a laptop and you handle all the rest. So that seems like a big organization on your end, but you don’t seem to have that much of a staff. How do you build out your infrastructure to be able to scale up to support this?
Jim: Well, that’s a good question and kind of two parts. So the first part is jack of all trades, master of none. It’s difficult to try to provide a full suite of services to advisors. That growth has been slow at times, but now we think we’ve got it built. It’s sort of a build it and they will come. So I think we were top heavy in the early years, but now we’ve got the efficiencies and scalability that we can support those assets, support those advisors because everything is based on automation and workflow processes. We’re starting to experiment with machine learning with bots inside the system that are performing work. A lot of really cool cutting edge stuff that our tech officer would speak to better than me, but continually refining that process of managing assets to our two goals, Craig. One is efficiency for the advisor, right? What takes 12 clicks today should take 2 clicks tomorrow. There should be less data entry. Things should be automated. Things should be digital. It shouldn’t require a paper interface where you start your relationship with the client on paper and then it has to get transferred into the digital world, right? Trying to make that user experience both the advisor and client, elegant and smooth and efficient and take the least amount of time and effort possible. And it’s that scalability that allows us to be able to service that many advisors and we could double our assets today and really would not hurt. We wouldn’t be hurting that much if we doubled the advisors and assets today.
Onboarding at Dynamic Advisor Solutions
Craig: Sure. So let’s talk about onboarding. So advisor onboarding, huge issue. It’s the advisor’s first interaction with your firm. So how is that team structured? How big is that team and how important is that to your overall business model?
Jim: So the average onboarding was you had four or five team members exclusively dedicated, and then other team members from other areas, right? Whether it’s technology, asset management, etc, that are practice management that are working with them. But a special dedicated team of folks that are helping them onboard. And same thing, we try to make everything automated. So as an example, our platform has Salesforce as the hub, but it allows Redtail overlay, and then Orion as the portfolio management accounting software side of it. An advisor that’s already successful in some other kind of a system. So we’ve done lots of integrations on how can we automatically digitally migrate that data from where the advisor has it today into our system. Our team does all of that work for the advisor. We don’t put that on them. We don’t lay it on them, to have to do that. Our team has done it before and they walk them through it, whether they’re coming from Morningstar Workstation what was PortfolioCenter, whatever they’re coming from, Wealthbox, whatever. There are either integrations that exist, or importable/exportable features, and we try to take advantage of those technologies and make that experience first digital, and then anything that’s not digital, our team does it rather than the advisor doing it. We want them to spend their time talking to their clients.
Overlay & Integration
Craig: Yeah that’s a good goal. So with Salesforce, you said you have Redtail overlay. What does that mean?
Jim: So it’s interesting and I personally learned more about that here just in the last couple of weeks. So Redtail has written a full API integration for Salesforce, which means that an advisor for Salesforce, which is our core system. I don’t want to get to technical because that’s not my area, but they’ll talk to each other. That data has an interface from Salesforce to Redtail so that an advisor might not have to give up Redtail, or if it’s just features they like, such as the ease of building workflows in Redtail, that they can continue to use that. So in reality, they could end up having both or one connected to the other.
Craig: Right. That’s awesome. Because most small firms with only a couple advisors, Salesforce is overkill for them.
Jim: I think that’s a good point you bring up Craig, that again, this is just my perspective and I’m the business development guy, not the tech guy, but Redtail seems a good fit for the emerging advisor, between 30 and 50 million. It appears you can outgrow that. Maybe it’s a little higher than that, but you can outgrow it. We see it really important to help incubated advisors growth. And so if something like that is easy for them in the early stage, we want to help position them for the future. So anything we can do to grease the skids for them to go from that emerging phase to enterprise phase, we want to do that. And I love the sound of this integration. We haven’t done one yet, but I spent some time with the engineer at Redtail, just in the last 10 days, and it was a really interesting scenario that he laid out about the integration.
Craig: Oh, so it’s not actually running anywhere. It’s just something you’re planning on offering.
Jim: It’s running somewhere, but we’re not running it today.
Craig: Gotcha. All your 60 advisors are using Salesforce?
Craig: Alright. So none of them are currently using Redtail?
Jim: No. So nobody on our platform is on that one today. What’s interesting about Salesforce is we customize it. It’s about 50% the Salesforce platform out of the box, and the rest of it is what we have customized to fit the model investment advisor practice. We’ve got the fields of data and the integrations with Orion, are all designed to make everything smooth, elegant, and not time consuming for the advisor. So for example, Orion and Salesforce is completely integrated as far as data. So there’s no need to move data from one platform to the other. They’re sharing the data between each other. So all of the Orion positions, performance, flows through into what we call wealth 360, or in Salesforce. The CRM flows into that household record. So the experience that we’re creating the advisor, whether they’re on their phone, iPad or laptop, they go to a single screen and every digit of information related to that client is on a single screen. Full contact, information, history, activities, transactions, positions, email documents, everything on one page.
Craig: That is interesting. So advisors can use something else or do they have to use Salesforce?
Jim: They don’t have to use it. So we always tell them, we like to be what we’d call open architecture. We like to be flexible. We want advisors to do what they want, what makes them happy. Salesforce is our interface with the advisor. So they’ll put in service requests, communicate a lot of information through that portal, but they’re not required to use it as a CRM. One of the things that I’ll share with the advisors who are listening. Why do people get hung up, as I did years ago? Sort of getting into the tech debate, right? This CRM is better than that CRM. This portfolio system is better. This trading system, this financial planning software. In the end, the top tier packages are all pretty good. Ultimately, my personal belief is it’s not material to your success. If you have one of the top two, you’re going to succeed. That shouldn’t be a decision point for an advisor as they’re formulating their business. So if an advisory firm has reached $200 million, they cannot keep up with the growth, and they’re on Wealthbox or some other CRM today and coming to a firm like ours means going to Salesforce, so what? Right? They all work. Well, if you have a platform that somebody is running for you and it takes you zero minutes per week to manage that platform, why not? It’s the advantages of the other manufacturer’s CRM are not significant enough for you to not make a strategic move towards success. And for us, and for many advisors, that means outsourcing in order to achieve your real goals. Because your real goal isn’t, I’m going to build my firm for the glory of juncture, right? The goal is to provide the best deliverable to your client that you possibly can.
Craig: Isn’t that the glory of Rome?
Jim: The glory of whatever software company is your favorite tool.
Running A Business From Your Laptop
Craig: Whatever’s your favorite. Okay. So, you mentioned outsourcing. You guys don’t just provide technology, you also said that you can run your business with a laptop. There’s gotta be people behind that. Can you explain how that works? How do you outsource apparently everything back, middle and front office?
Jim: Literally everything, and it really starts with that value proposition, Craig, and maybe I’m going to hurt some feelings today. But for the advisor that’s past emerging, wherever you think that number is, measured by number of households are measured by AUM, is it 20, 30, 50, 80 million, at some point you go from a solo practice to a real business to enterprise. And as you’re moving in that direction, a lot of people see an advertisement, they read an article, and the promise of technology is what’s going to save you time. It’s going to make your life easier. It’s going to provide efficiency. There are a lot of promises implied in the technology discussion, whether it’s their advertisement or the white paper or whatever you’re going to look at, there’s a lot of promises. We believe at Dynamic that the promise of the tech alone is a hollow promise because if you’re a $50, $100, $150, $200 million advisory firm, and you think buying a piece of tech is going to make life simpler, it’s not at that stage. You have to hire somebody to run that piece as well, right? If you buy a complex trading or a complex portfolio management system, you might have to hire one or two people just to get the data in, to maintain it, to reconcile it, to aggregate positions, to deal with multiple custodians. That that is not something that runs on autopilot. And that’s not something that the individual advisors should be doing on their own. They should be spending our time with the client. They should be spending their time making better relationships, and looking for new clients, or thinking strategically about their business. These are the things and the places where the advisors should be spending their time, not trying to integrate the CRM and the portfolio management software.
Craig: Yeah, you’d think they wouldn’t want to do that but some are still trying to do it.
Jim: Well, it’s less expensive, right? You can spend a couple of thousand dollars and buy a piece of tack and bolt it onto your system versus a little bit more of a commitment to fully outsource. But then you can be free. And I can’t emphasize this enough, Craig, I believe you can separate advisors into two camps. You have advisors who are looking for clients and those often fall into the emerging category. And then you have advisors who are looking for time. They need more time, they need capacity, they need the ability to think about their business, to spend time with clients, to build relationships, to improve deliverables. And they’re not able to do that because they’re running the business of the business. They’re spending 20, 30, 40, 50, 80% of their time messing around with entering data, technology, human resources, any of these types of things. They can’t be doing that if they’re going to succeed. So to build the model practice for the 21st century that’s growing, that’s taking advantage of this fantastic environment that we find ourselves in today where there’s consolidation, there’s growth, there’s money moving, there’s capital coming into our industry, the individual advisor, in San Diego or Miami, they need to be thinking about how they are going to deploy their resources. The most valuable resource they have is time and spending it on tinkering with a widget or entering data is not the best use of that.
Craig: I would agree 100%. Go back to your platform. You said you have a client portal and a mobile app. Can you explain what vendors provide those tools and how do they integrate?
Jim: Without being too technical, we use a variation. A customized variation of the Salesforce mobile app. And the reason that it works for everything is you have this nice, super easy to use mobile app on your phone. But then on top of it, we have been integrating feeding all of the mechanical or data from the portfolio management, the Orion side of it, into Salesforce. So you have everything feeding into it and then you have click throughs. If you need super deep dives, the window opens up inside Salesforce for Orion. So you have your basic information, values, transactions, client data performance, all there just visually available in Salesforce. If you need deep dives into analytics, you just click a button and on the phone or iPad or laptop, you are taken inside the Orion system for your deeper analytics. And all from one app, single sign on. I heard some of our competitors, big competitors just announcing in the last six months they finally achieved single sign on. We’ve been single sign on for almost 10 years because that’s where it all starts, right? The advisor doesn’t want to go log in over here, log into the custodian and log in to the CRM, log into the trading, log into research. You have nine different windows open. We have one log in, single sign on, you log into one window and everything is there or one or two clicks from that first page.
Craig: So is Salesforce also your client portal?
Jim: No, actually Orion. So we use the Orion client portal, because it’s so robust and they have lots of terrific integrations, right? So the MoneyGuidePro user, the eMoney user, the advisor which Orion has now bought, all of those are integrated with Orion. Again, you don’t have this duplication of data entry. For example, the MoneyGuidePro integration is so robust that it’s bi-directional. So information that’s in a riot is flowing into MoneyGuidePro and the results and conclusions of the financial plan are flowing back into Orion, and especially populating into the portal. So think about the user experience for the end client, this is what you’re wanting to achieve, this better deliverable, this better user experience for your end client. They go into their portal. Not only do they have the standard, the pie chart, the performance reporting, the transactions, the balance sheet. Now all of their MoneyGuidePro financial planning info is there as well.
Craig: That’s excellent. Is MoneyGuidePro the main option? Do you allow the advisors to use any tool for financial planning?
Jim: Any tool they want. Same like say we try to be as open architecture as we can. It really is up to the financial planning software architects themselves that are responsible for those integrations. So for example, MoneyGuidePro has terrific integration built in. The APIs, and the other things that they do to make that data both available and able to pull in to the system is really their work. The folks at MoneyGuidePro have really done their homework to make that integration available. Other financial planning softwares to different degrees offer that. I’m using MoneyGuidePro because they’ve nailed it, pretty comprehensively.
Craig: You don’t require advisors to use a specific tool, but do you integrate better with MoneyGuidePro than the other ones?
Jim: Well they integrate better if I could blame it on them. So we will take any integration that’s available with an open API. But MoneyGuidePro has written the best ones so far. My understanding is, and again, I don’t want to speak for them, that eMoney is continuing to improve that every quarter. But MoneyGuidePro is pretty slick in how easily it works.
An Interesting Use of TAMP Registration
Craig: And which custodians do you guys support?
Jim: So we represent four big and then multiple smaller trust companies and other types of record keepers and custodians and that type of thing. But the four main ones of course, are Schwab, TD Ameritrade, Fidelity, and Raymond James. On the Schwab and TD platform we’re looking at as an outsource agent. So it’s not, the RIA doesn’t have to tuck in under us. The custodians recognize a third party outsource agent for services. With Fidelity our arrangement is both that they recognize us in their universe as a TAMP and advisors or RIAs can come to us and work through us, gain access to Fidelity without meeting the minimums. They still have to meet the ethical and qualitative requirements of Fidelity, but not necessarily the AUM minimums.
Craig: That’s an interesting way to do that. Interesting use of the TAMP registration.
Jim: Yeah, and in light of the thesis that we’ve been talking about, Craig, what is Fidelity doing? In a sense, it’s kind of smart because they’re saying, We don’t want the minimum lot of small advisors because they’re better served by working through a third party that interfaces with the custodian that provides some platform. They don’t have to go through the basics, how do I fill out this app and what button do I click to make a training? They’re sort of pushing that off to firms like ours who are able to provide all of that for the advisor and they don’t have to mess with it. They get to move on and do the things that matter most. Do the financial planning, do the holistic wealth management with their client rather than messing around on the screen with, with buttons and clicks and data entry.
Craig: Well, so you our a TAMP, so do you offer these solutions yourself? On your website it says you have a, a SMAs and custom portfolios. Are those yours or are you reselling another TAMP’s products?
Jim: All of that is a proprietary. The model portfolios are all our portfolios and they fall into four main categories, a passive, active, factor based, and alternative. And quite frankly, a lot of our folks are on dimensional type factor based portfolios. They seem to have had a really great track record, there’s a lot of uptake by advisors in that arena. We have a lot of DFA advisors that come to us just for that reason. But we’re represented in all those areas. Those model portfolios are by design. And another interesting point to add there, Craig, we’re not claiming to bring anything that the active managers do. We’re not talking about original research. We think we can pick better stocks, we can better pick better funds. We can guess the direction of the market. We believe the real value that we bring to advisors and advisors should bring to their clients is recognizing the efficiency of the markets and delivering disciplined systematic processes to investments, merging the financial planning process and the investment management process together and delivering that in an extremely cost efficient and deliberate disciplined way, quarter after quarter after quarter. And that’s the alpha that the advisor brings to the relationship with the client. It is not picking funds, stocks, bonds or anything else. Matter of fact, I read a study, a foreign study. They said that the average advisor underperformed the benchmarks by 500 basis points. The Cerulli study, somebody pointed out the other day, showed that the average advisor in his local community that’s doing their own asset management is underperforming benchmarks dramatically and consistently. If you’re an advisor listening to this podcast, you’re sitting in a suburb of Chicago or LA or San Francisco, you’re in your office, you’ve got 40, 50, 60 client relationships. You’re not adding value by picking stocks, right? It’s the systems. It’s the systematic disciplined approach to allocation and delivery to that client’s goals. That is the alpha that you add in an order to do that efficiently and inexpensively. that’s where the technology comes in.
Craig: Oh yeah. I mean, I wrote about that on my blog years ago, that Cerulli report, it was 300 basis points.
Jim: That’s crazy.
Craig: And they still do. They didn’t want to stop. So, we’re running out of time. I want to ask a couple more quick questions. So who are your biggest competitors in the market? Who are you going up against and who are you obviously beating?
Jim: So we have one humongous, arch-nemesis competitor and the initials are DIY. That is our number one competitor, the do it yourself-ers. So in the end, I’ve been in the development part of our company for a couple of years. I think maybe we’ve lost one prospective advisor that we’ve been talking with to a competitor, all of the rest of the RIA firms and IARs have ultimately decided to just try to go it on their own. And quite frankly, they can, they’re smart enough to do it. If they choose to dedicate 20 or 30 hours a week to it, they can do it, but it’s not going to help them grow. So, it’s a good question and to me the answer as it evolved over the last couple of years was shocking, that the majority of advisors that don’t choose a platform like ours end up doing everything themselves. And maybe here they are, a year or two later, hair is still on fire and they’re working until eight o’clock at night trying to catch up other things. It’s not a great life.
Craig: Well, I can see how that would be a big competitor. But what about the other RIA networks that are out there, independent broker dealers like where Ron came from?
Jim: Yeah. So that would be the other thing when we talk about competitors the other people that are precisely in our space, I know people are going there. We’re not actually losing very many contests to those that provide them. A lot of them are offering very different value propositions. You’re going to share revenue with them, you’re going to give up an equity stake to those companies. They’re much more concerned about taking a position or ownership in your business than just straight up providing services. I would say some of the straight service providers are a little bit smaller and they’re getting gobbled up too. There have been things in the news about private equity coming into some of those firms just in the last few days. So a lot of them are getting scarfed up by private equity as well. The broker dealer world is interesting. For those that are hybrid, dual registered advisors, it appears to us that a great many, if not the majority of those are making lateral moves. They come out of the wirehouse, and move to a firm that gives them a big incentive and they remain dual registered and don’t really move all the way into that independent fee based space, which is the area that we occupy. We have zero dual registered advisors.
Craig: That’s good to know what your business is and who your clients are and who your clients aren’t. So I think we are just about out of time. Where can the advisors who are listening find your company?
Jim: DynamicAdvisorSolutions.com. Easy to find. A lot of good information there. Got some articles on some of these topics in the blog if you want to learn more. Or just pick up the phone, give a call, phone numbers there, on the website. I love talking to advisors, giving advice and answering questions.
Craig: Super. Jim, thank you for being so open and taking the time to speak with me and answer all my questions. I really appreciate it, I think a lot of people who are listening are going to get a lot out of it.
Jim: Craig, thanks so much for having me. It was a lot of fun.
Craig: Hey, it’s Craig again. I just want to do a quick recap of what we learned from Jim Palumbo at Dynamic Advisor Solutions. They’re an outsourced RIA platform. They have a full tech stack. They have people to help you with your middle, back, front office. they can handle everything, as Jim said. So you can run your firm with just a laptop. Their competitors, he didn’t want to say, are Dynasties, the Focuses, Carson Group, United Capital, all these different companies that are offering different solutions for advisors to be able to bring their firms on, in different modes. And everyone’s got a little bit of a different take on things. So, I like how Jim’s firm is doing it a little bit differently and we should look into it. I hope you enjoyed this episode and I’ll talk to you soon.