What Clients Really Want to Hear From Advisors: Ex-Merrill Exec

Thiel ran Merrill’s wealth management from 2011 to 2016, then shifted to vice chairman of Bank of America’s global wealth management and investment management business for a year.

In the interview, Thiel discusses the qualities he seeks in advisors — like intellectual curiosity — and how he intends to help veteran financial advisors grow and plan for smooth successions. He also reveals why he wanted “to take a permanent leave of absence” from Merrill.

Here are highlights of our conversation:

THINKADVISOR: Running your own RIA must be very different from working at Merrill Lynch for 27 years. Is it?

JOHN THIEL: Fundamentally, it’s not. It’s just that the structure is completely different. What we do for advisors and clients is the same.

What’s your firm’s structure?

A partnership of partners. The teams we attract will create their own businesses — an LLC — and own 100% of it. It will be their firm name supported by Indivisible Partners; they’ll have flexibility in how they portray that.

They’ll operate their company separately, but from a regulatory standpoint, we’ll provide the technology platform and benefits. They’ll pay for the direct costs.

What’s the payout?

We’ll have a payout, but I won’t go into details. The advisor gets the lion’s share of the economics, and we’ll split the profits with them at the end of the year.

So they’ll have two assets: their business and ownership in Indivisible Partners, which is a rollup of all the businesses that we will associate with.

What differentiates Indivisible Partners from other RIAs that help advisors?

Our uniqueness is that the advisors can create their own experience from a technology perspective with the custodian we chose, which is Fidelity Family Office.

Tell me more about your tech.

We integrated all of our solutions on our platform even though they’re provided by [several] different [companies].

But the advisor signs on only once to have access to all the capabilities.

Also, when you make a change to a record, it changes that record wherever it exists in the system.

I note that Woodring|LeRoy Capital Advisors joined you in January. Are they the first? 

We just started. We want to be very thoughtful about how we grow because those first and second experiences are critical to our reputation.

We’ll add more teams this year, but we’re not looking for hyper-growth.

Are you recruiting solo advisors as well as teams?

They can be a solo advisor with an assistant. But most advisors operate [within] a team now because of the demands and complexities of clients and of our business.

Your website emphasizes veteran advisors. Are you seeking those in particular?

The problem we want to help solve is that there isn’t a lot of organic growth in the industry. And a lot of advisors haven’t built a succession plan.

We want to help people later in their career to figure out how to grow and plan for a really smooth succession — not only for the advisor but for their clients.

Can advisors new to the business join you? 

We’ll put new advisors on existing teams. Part of our strategy will be to help teams identify younger talent they can place on a team.

How are you locating appropriate advisors?

They come to us, and we know a lot of people. Advisors who work at Merrill are at every corner of the marketplace.

We have friends, people I started with in the industry years ago.

Many [independent] advisors are tired of being the general manager. They just want to work with clients. So they can work with us, and we’ll take some of that burden away.

What attributes do you look for in an advisor?

First, being honest and ethical. One of the things that’s important is that they’re credentialed, whether a CFP or a CFA.

We want advisors that are focused on helping their clients achieve their desired outcomes. This goes way beyond beating a benchmark because that doesn’t guarantee anything.

I’m not saying that performance isn’t important. But it’s table stakes, not a differentiator.

How significant to clients is beating benchmarks?

From 2000 to 2011, the annual return of stocks averaged 1.5% a year. It was a lost decade.

While the industry was hyping that they were outperforming benchmarks, our clients were going, “That’s great. But my kid’s tuition went up 10% a year; my housing went up. I don’t care about benchmarks. I can’t retire or pay for my daughter’s wedding.”

I was running Merrill’s Private Bank and took over all of the wealth management business in 2011.

I realized we were whistling past the graveyard and that we had to focus on what clients really want from their money.

And what is that? 

What’s important is that a client has money to support what they want to do. You would get a pretty high grade from your client for that.

What else are you looking for in financial advisors?

I want advisors who are intellectually curious because with the way technology is changing, bringing productivity and efficiency, if [an advisor] isn’t open to new ideas, they’ll get passed over by those who are.

Or they’ll never reach their potential because they don’t have the curiosity to learn how something can make their business more efficient.

And a growth mindset is important because that’s how advisors increase the value of their business.

What’s the perfect advisor for your firm?

I’ll put that question on its head. Our goal is to redefine what advice means: Advice is the advisor’s ability to help with the quality of decisions that their clients make — which ultimately determines whether you’re successful or not.

Where does financial planning come in?

Advisors need to help clients not only with decisions about the immediate. What people forget is that you need to pull [clients] through the whole financial plan to see what the impact of those decisions will be not only today but 20 years from now.

How does that compare with what the typical advisor does in financial planning?

It tends to be episodic — they do it once a year and then talk about it. We want to integrate financial planning into every decision the client makes all year and support that with a lot of plain language so clients actually understand what we’re talking about.

Historically, we tried to make it complex so people felt like they had to rely on us. But that’s not an aligned interest. Clients that understand are much better off.

You led Merrill’s shift to goals-based wealth management. What’s the difference between goals-based advice and outcomes-based advice? The latter is what Indivisible Partners is focused on.

A goal is, for example, to lose 10 pounds this year. An outcome is: I’ve lost 10 pounds.

My own advisor would tell me how the benchmarks did. I was a busy man running Merrill Lynch. I told him, “Don’t leave the punchline till the end. Start your presentation with whether I have enough money to retire comfortably. That’s what I want to know on the first page.”

Did you enjoy being retired for six years?

I’ve been busy. It’s not like I sat around. But I haven’t had any full-time employment. I’m on a few boards, and I do some consulting.

Why did you retire?

It was time for me to find something else to do. I did what I needed to do, and I needed to rest.

The [financial] crisis was pretty exhausting; and obviously, we had a lot of work to integrate Bank of America and Merrill Lynch. That was exhausting.

So I said I’m going to take a permanent leave of absence. I’ll rest and then do something different. I’m a young 64!

What’s the future of wirehouses?

Wirehouses will be there; they play an important role. They’ll be there because of the integrated model of the investment bank and the fact that the advisors are comfortable there.

Their clients trust them. So wirehouses aren’t going away, not in my lifetime, anyway.