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Penny Phillips

Practice Management > Building Your Business > Leadership

Penny Phillips: Want to Build a Lasting Business? Make Yourself Less Relevant

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If independent advisors want to build “an enduring business with enterprise value, they have to figure out how to build a business where they’re less relevant.”

So says Penny Phillips, president and co-founder of 16-month-old tuck-in Journey Strategic Wealth, in an interview with ThinkAdvisor.

The consequences of failing to do that will shorten the firm’s life span, at least, she says.

Indeed, the advisor “will get to a place where they run out of capacity and the business is no longer sustainable with them as the primary revenue generator,” she argues.

Phillips, best known for her career as an advisor coach and consultant, and owner of Thrivos Consulting, shifted focus in January 2021, when she launched Journey with partners Michael Brown and Brian Flynn. Damian LoBasso became a founding partner as well.

The RIA’s mission is to provide hands-on practice management support to successful advisors of all channels who are seeking independence, thus freeing them to “do what they do best.”

In the interview, Phillips discusses how being an effective leader means getting rid of “belief systems” such as “I’m a terrible manager.”

Noting that wirehouses and other large firms “aren’t moving fast enough to keep up with the evolving consumer,” she argues that sending LinkedIn direct messages to “hundreds of people a day to try to land an appointment” is “an archaic way of [trying to] build your business.

“It’s no different from what cold calling was decades ago,” she adds.

Working “behind the scenes,” as she puts it, Summit, New Jersey-based Journey operates as a tuck-in with a twist: Though partner advisors become W-2 employees, they have the option of keeping 100% of their business. The payout is 50%-65%.

Journey funds and manages the advisor’s business, providing comprehensive services ranging from compliance to marketing.

In addition to Journey, Phillips, 34, retains ownership of Thrivos, though the actual coaching is handled by four others.

Never a financial advisor, Phillips nevertheless made “a major decision” a few years back “to stop the consulting and instead build a firm that [she] thought advisors were looking for, and approached a couple of partners,” the industry speaker says.

Brown’s 40-year book of business became “the anchor firm,” Phillips says.

She has also written a number of practice management training programs on helping advisors prepare for working with wealthy next-generation clients.

ThinkAdvisor recently interviewed Phillips, who was speaking by phone from Whitestone, New York. She says the ideal for an independent advisory is that “collectively everybody is responsible for its success or failure.”

Here are highlights of our interview. 

THINKADVISOR: You’ve said that some best practices that have been around in the industry for years aren’t effective. Such as?

PENNY PHILLIPS: Advisors have been taught to build in a very hierarchical way: The advisor is the main person — the producer, the decision-maker. We’ve taught them to hire people underneath them to process paperwork. 

So when you [come] up in an enterprise and incentivized as an individual contributor, every success is all about you.

But when you’re running an enterprise, it has to be not about you. You can’t have sole responsibility for the business.

Why not?

You need other people to generate revenue and to be decision-makers because one day you’re going to retire and, theoretically, your business is going to endure.

[The idea is]: “I’m running an enterprise and collectively everybody is responsible for its success or failure.”

But what inevitably ends up happening is that [the advisor] will get to a place where they run out of capacity and the business is no longer sustainable with them as the primary revenue generator and decision-maker.

Then they have to figure out how to build a business where they’re less relevant, and that’s a very difficult concept and one that they have a lot of trouble being successful at.

If advisors want to build an enduring business with enterprise value, they have to think differently about how they build their team.

What’s another ineffective “best practice”?

There are so many concepts that are no longer relevant based on how the business has evolved — something as simple as cold calling or asking for referrals and introductions. 

You’re going to be far more successful if you’re doing things like speaking the language that the consumer speaks by understanding the psychographic profile of your client versus asking everybody for an introduction at the end of a review meeting.

Is social media an effective marketing tool?

Firms aren’t moving fast enough to keep up with the evolving consumer.

I’ve noticed that even some of the bigger firms are training their advisors to send LinkedIn direct messages to hundreds of people a day to try to land an appointment.

That’s such an archaic way of [trying to] build your business.

It’s highly impersonal. It’s clear that the message being sent is canned. We’re at a point now where these almost feel intrusive.

For a random person to say, “Hey, can I take you out for coffee because I want to see if you can benefit from my services” is no different from what cold calling was decades ago. It’s just a variation. 

What’s an updated, improved way?

Your effort is much better spent creating authentic content that’s reflective of the type of value you bring to people and putting that out [consistently] — whether it be via a blog or video — and allowing people to come to you at the moment they actually need your services.

You’ve said that as a leader, an advisor needs to evolve as a “thinker.” How do they become thinkers if they aren’t already thinkers?

This is arguably the most important part of coaching: Practice management as a discipline is 85% behavioral change and 15% concept.

Oh, we can teach advisors how to be business owners with a paint-by-numbers approach. But the truth is, to be effective at leading and running an organization, you have to shift many belief systems that you’ve hung on to for a long time.

Like what? 

When I was coaching advisors, I’d hear things like “I didn’t get in the business to manage people. I’m a terrible manager.”

If you hold on to that belief system, you’ll look through that lens constantly, oftentimes in a negative way.

Tell me about your big shift from advisor coach and consultant to owning and operating your own RIA.

I parlayed coaching and consulting into running a $3 billion RIA. My entire career has been spent understanding the advisor psyche and the successful evolution from sales practitioner to business owner.

So I’m in a unique position to build a firm that provides advisors with what they need to be successful and [allow them to be] what they’re good at by outsourcing everything they’re not good at to people who specialize in that.

What’s the profile of the advisor you’re seeking to help?

When we launched the business, I anticipated our value proposition to be hands-on practice management support for the 40-something Gen X advisor in an independent firm or insurance BD firm, who is looking to gain scale and capacity and doesn’t want to continue to go it alone.

What I ended up finding is the concept of independence plus support has really resonated with advisors in the wirehouse channel as well with advisors running their own RIA.

What’s the ideal partner advisor for Journey?

An advisor who already has had success in their practice, are maybe generating $1 million in revenue and has come to realize, “I can really build this even bigger, but I probably can’t do it as a stand-alone practice anymore.”

In what stage of leaving their firms are the wirehouse advisors you mentioned?

They’re still with the firms but are embarking on a journey of finding a new home. They know they want to leave.

They think it doesn’t make sense to go to another wirehouse. 

They think, “I’m either going to launch my own RIA or go to an independent firm” — and then they find us. 

What have you found that advisors need help with the most?

Very few advisors are genuinely excited about operating as a COO, which is what happens when you build a business and have to manage teams.

If we can keep advisors in a leadership role, allow them to fill the majority of their time at what they’re good at and then help them run the business behind the scenes [as we do at Journey], not only will they grow at a faster rate, but their business will be more profitable because [we’re] the ones helping them manage their P&L.

Many advisors who want to go independent are focused on getting a higher payout. Please talk about that.

The payout is like the red, shiny object. They’re like, “I’m going to get 90-something percent payout. I’m getting 40% at a wire.” 

But what they don’t realize is that payout doesn’t mean anything because they still have to run a business. And at the end of the day, the net profit of independent advisory businesses is usually between 30% and 40%. 

They don’t realize that even if they’re keeping the majority of their revenue on the top, they still have to run a business, and they may not know how to do it super-profitably.

Our structure allows them to make more money and also have a higher valuation because they’re essentially tucked into our organization, which is larger than theirs.

How is your RIA structured, then?

We allow an advisor to maintain 100% equity ownership in their business. Our payouts are between 50% and 65%. 

The mission of the business is based on 80% or more of the advisor’s time [being] spent advising clients and on rainmaking, business development and engaging in financial planning discussions.

Where is your firm on the RIA spectrum?

On one end is having your own RIA where you have 100% responsibility for everything, including the risk associated with managing the business.

At the other end, is a firm like Mercer, which buys an advisory firm, it becomes part of their organization, and the advisory’s employees become their employees.

We’re in the middle of the spectrum — offering a payout and services to help advisors run their business.

Do advisors who join you become W-2 employees?

Yes, and they change the name of their practice to Journey Strategic Wealth.

What if an advisor feels that because they’ve built their business and franchise under their name, they don’t want to stop using it?

I would rather the advisor find happiness and lasting career fulfillment [that way] than join us.

So if a name and maintaining their brand is of the utmost importance to them, then we’re probably not the best fit.

Even though you’ve never been a financial advisor, do you have any recommendations for FAs when it comes to retirement planning?

Broadly, what we’ve noticed about the next generation of consumers and what we know statistically, is that they think very differently about success, retirement and long-term goals than clients of 20 or 30 years ago.

A millennial client of today — about 35 years old with a family and running a business — is very much oriented to living a fulfilling life today.

So retirement planning looks different depending on the demographics of the clients you’re working with.

I advise all advisors not to go into meetings with a preconceived notion about the outcomes that the client is trying for.

Rather, it’s about allowing the consumer to articulate the outcomes they want and not assuming that one thing is more meaningful to them than something else.

Any final advice for advisors?

If we want to do more of this work for more people, then we have to be open to delivering advice for a fee versus being paid on assets under management or an insurance policy that we sell.