Quantum Growth Podcast: Financing Acquisitions and Finding Deals

Speaker 1:

Welcome to the Quantum Growth Podcast, empowering financial advisors to build practices for the 21st century by providing insights and interviews on leadership, strategy and practice management. Now, here are your co-hosts Shenandoah Connor and Barron's Hall of Fame top advisor, Jonathan Kuttin.

Shennandoah:

Welcome everyone to the Quantum Growth for Financial Advisors Podcast. We are excited to be back once again with another great guest. Always with me as my co-host is Barron's Hall of Fame advisor, Jonathan Kuttin. Say hi, John.

Jon:

Hey, Shenandoah. Hey, everyone. Happy to be here today. It is a snowy day here in New York. I am super excited to have what's actually become a good personal friend. When I bring certain guests on, I just wonder how much we'll bicker on air here a little bit. So we'll see [inaudible 00:00:56], one of the formally introduce Scott Wetzel. Scott is with SkyView Partners and I'm really excited that he took some time out today to join us. So Scott I wanted to give you the opportunity to just introduce yourself and tell our audience a little bit about who you are and a little bit about what you do.

Scott:

Jon first, I am absolutely honored to be guest on the podcast today and sorry to hear about your snowy troubles. It's a challenging 65 degrees here in Southern California and being a Northern Minnesota native, I'm enjoying it. So let's get after it [inaudible 00:01:35], here today. So very briefly on SkyView and what we do, who we are. We own a listing company, which is the Advisory Practice Board of Exchange or more simply APBOE, which if you're not aware of it currently, APDOE is ... we've tried to create a [inaudible 00:01:54], like experience for sellers to list their practices throughout the country and then advisors as buyers go on for an absolutely no fee whatsoever, register as buyers and really compete for practices.

Scott:

In addition to that, we own an investment bank [inaudible 00:02:13], in Southern California. Very strategically obviously that right now, I think we're working on 12 sell side engagements all over the country. I think we have three right now in California alone as well as our primary source of revenue and where we're founded is around our credit facility in Minneapolis. And by the way, all three companies are solely based on the RIA marketplace. We don't finance accounting practices, insurance practices. So we don't invest in banking for any of those practices. We are solely focuses on the wealth management industry. It's all that we know, we know it well, we don't know anything else, so we're not comfortable providing an investment banking or financing services to anything outside of our industry.

Jon:

So you're not very busy, Scott, you don't have too much going on it sounds like?

Scott:

Yeah. It's been ... things have been good busy. So it's a good thing we were all quarantined and I've more than enough time to just work. Especially in LA you can't even leave your house. So it's great.

Jon:

No, and I'm teasing of course. I think it's interesting as I'm hearing you kind of explain the different facets of your business, it sounds like you have kind of all different aspects of anything succession planning kind of tied into the business. APBOE is kind of a listing platform, it sounds like. Zillow, like as you shared and then it sounds like from the investment banking perspective, you're involved in kind of putting deals together from the sell side, so to speak. And then lastly, it sounds like the founding of your business was actually helping advisors finance right transactions and I just wanted to clarify for my own purposes, you mentioned the RIA space. I'm assuming you help RIAs, independent financial advisors, anyone who really owns a practice that they've got equity in. Is that accurate?

Scott:

Yeah. That's correct. And it's just a signal that I've spent too much of my time talking to bankers and not advisors these days and they refer to us all as RIAs. So I try and keep it as simple as possible for our banks and we don't get into the nuances but absolutely. I'd say 80 plus percent of our clients have some type of hybrid model out there. Very few are true pure RIAs.

Jon:

Got you. Good. No, and that's what I figured. I just wanted to make sure I understood it correctly. So maybe we'll go on the order you mentioned things. So tell us a little bit more about APBOE and maybe again what it stands for but tell us a little bit about kind of what you guys do there.

Scott:

So as you pointed out our bread and butter is the finance biz at SkyView. Started the business around recognizing that Live Oak Bank is our number one competitor and they do a tremendous job but there was only really one provider in the marketplace and at the time only providing SBA loans. We came to the marketplace and provide conventional non SBA, which there are advantages to both programs but commonly, if you qualify for conventional, you don't need any government guaranteed product and we won't get into the nuances of the differences but in some cases we utilize an SBA product. But as we became more entrenched in the financing business, we felt that there were some holes in the M%A process as buyer and seller were making their way towards SkyView Finance.

Scott:

First, is that we felt that sellers were coming to market and experiencing an adverse seller experience with the current mediums or platforms that were in the market that were more like a listing board service and less of a service that was more accommodating to those sellers. So we built APBOE with still not a very clear picture of how we're going to create any revenue around that entity but creating a neutral marketplace from buyers, sellers to participate, that anyone can list a practice on APBOE and anyone can become a buyer on APBOE and at no point, are they charged any fee whatsoever from SkyView. So I strongly recommend if you are in the business of acquiring more practices, I believe, I was looking today I think we have 14 engagements throughout the country roughly today on APBOE and register as a buyer by taking 15, 20 minutes to get registered, then we do assign a purchasing power score to each buyer. I think you're doing quite well in this category, not surprisingly. And in terms of that, we do also post a national ranking. Oh, you fell to number two in the country. So I hope that doesn't offend you too greatly.

Jon:

I saw that and I want to meet who number one is.

Scott:

I don't know who they are at all and candidly, I don't know, besides yourself, I think I could recognize two or three other names but that's the intent of the marketplace. I mean, these are not existing clients to SkyView Investment Bank or Finance, not all of them at any one point and this is just a programmatic scoring system that is extremely helpful to us. So when we get to the investment banking side, that when we've got 120 different firms expressing an indication of interest in a seller practice, the purchasing power score is a way for us to quickly in a very automated and programmatic fashion source the best buyers for each opportunity. So when we have a seller, we can literally say, "Hey, we can source 120, 150, 200 different prospective buyers very quickly utilizing that programmatic solution."

Shennandoah:

And maybe it might make sense to go in a little bit deeper about the purchasing power. What factors are impacting and so ... If a potential advisor is looking to get in the acquisition space and we know Jon, I'm sorry, Jon, that you're number two today but I'm sure you'll be back to number one soon. But what actually influences that score and how might advisors improve that score.

Scott:

So I believe there's 62 different data points that I've seen the spreadsheet that our credit team built and billing this out to and I'm not going to claim to fully understand it yet. I believe it is producing a representative scoring. I will warn everyone as well, that we were most concerned with grade inflation that not everyone's going to be A+. So a score in the 7s is exceptionally high on a range of 10 but we're looking at things, the size of the practice obviously, how long the advisor has been in business, have they done other acquisitions in the past, have they retained financing in the past, are they credit worthy? That's one of the options that you can do with the scoring is we can perform a soft credit poll to see if you're actually can retain bank financing.

Scott:

But as you go through, it's a lot of things around, do you have an investment philosophy? What's your service model philosophy? Do you have a team in place that's scalable to actually purchase another practice or you're a solo practitioner that would really kind of preclude you from acquiring a more ensemble practice? Unless of course you're willing to accommodate those employees in the overall practice, that builds that score out for each individual advisor or practice.

Jon:

Yeah. So I appreciate the clarity. And as you had mentioned, interestingly enough for the audience, I met Scott in working on an acquisition and looking for some financing and was extremely helpful in getting that all situated but Scott encouraged me. I didn't even know APBOE, tried to say that 10 times fast, actually existed but it's a really cool platform in that it's free, which is pretty cool and it's open to anyone and there's lots of listings on there. So I'm actually engaging as you know, Scott and a couple of the acquisition opportunities now that are on there was a marketplace and it seems like other folks who actually have businesses in the succession planning world list some of their practices maybe from time to time on there as well.

Jon:

So it really is kind of a cool idea and I love the concept of really this kind of ranking, if you will, of someone's ability to acquire certain size businesses, which if you're a seller looking to list your practice it really allows you to understand who you're dealing with. So you're not kind of dealing with a tire kicker that might not have the bandwidth to actually execute when you get to the finish line. So I think that's worth noting.

Scott:

Well, and that's where we heard the greatest amount of [anx 00:11:36], from prospective sellers is that they had placed their name on a listing board service and then they received 5,000 emails and they didn't know who was a good prospective buyer and who was not and trying to manage that process. And I will encourage all advisers to register as well. If you look, a lot of buyers or I'm sorry, sellers are interested in a buyer that's it close to them in proximity and I just pulled up Indiana as an example, we have two people on the leaderboard in Indiana. They've actually gone through the process.

Scott:

So if you're an advisor in Indiana, you're going to go to the top of the list really quick, just by registering with the site. Obviously New York's a lot more competitive, California is a lot more competitive but if your score's not posting on the national leaderboard and you're not in the top 50, we're still, a lot of our buyers want us to talk to somebody local and so I strongly recommend everybody to register. If you come up with a score that doesn't seem to make sense, we do have a buyer representative center that the individual will help you work on your score to get you the best possible score, given the metrics that you provide.

Shennandoah:

No. Excellent. Well, kind of along those lines. I mean, you've already touched briefly on some of you built this because of some things that you were seeing happening in M&A, what other trends or how else has M&A evolved over the last few years? Especially considering the pandemic and last year what happened.

Scott:

We certainly saw an increase in activity from applicants coming in, looking for financing as well as I think we saw an increased appetite from sellers coming to market and historically David [inaudible 00:13:17], Senior, who I consider the godfather of RIA or a wealth manager M%A, points out that only about 2% of independence in RIAs actually retire and experience a liquidity event at retirement, which from my standpoint, being a wealth management and working with the wirehouses regionals, everybody over the last 25 years, well, their [inaudible 00:13:39], peers all get to experience this great liquidity event when they sell their practice right back to [inaudible 00:13:44], at the end of their career. And we really need that number to change over time and with the entire marketplace needed to change and that 2% just seemed very odd to me and I think there was a couple of problems and we felt the number one problem is there was no financing available.

Scott:

That if you were an advisor and you want to sell your practice, you had a hundred million in AUM and [inaudible 00:14:07], bucks need that 2 million after you get it over a seller note over four to six years and so when we brought in bank financing, the option to get 100% bank financing at closing, maybe is subject to some hold back provisions, assuming the sale goes well, the conversion goes well, we felt that would bring more sellers to market and I believe that it has. And then over time also making it more more appealing process. And that's what we try to do through Apple, that they can list anonymously and also with a specialized investment bank that all we do is work with independent advisors and help them acquire practices but at the end of the day the demographics point towards a marketplace where we should see a lot more activity that we're not even seeing right now, even with the pandemic.

Scott:

And I have to point out, I think it's the fault of all of us, all of us looking to buy from sellers but we're not going in with the right messaging. Clearly Jon has some messaging down that's very successful but overall, the messaging that we hear from many buyers, they go on and say, "Well, I'll give you this and that." And then you go away and then forget about it and they forget to really talk to the seller and say like, "Hey, recognize you built this over the last 20, 30, 40 years. This is your baby. This is your identity." And it's look, this is sales. This is what advisors are good at and for whatever reason they decided not to utilize that charm and sales approach when they're talking to prospective sellers and just saying like, "Hey what are you planning on doing over what timeline?" And then, "What do you want your professional and personal life to look like post-transaction?"

Scott:

And instead of just going to sellers and saying, "Hey, I'm going to write you a check or you're going to finance this thing. You're going to go away." Well, most don't want that most don't want to be able to go the office and it's important to ask those questions and really get into listening to what the seller actually wants or that 2% number is not going to change.

Jon:

Yeah. Scott, I mean really well said. Kind of that's I guess the industry calls it, the selling [inaudible 00:16:20], now. Seems to be becoming a lot more prevalent and a lot of the transactions that we've done of late are acquiring advisors and retaining them just in a slightly different capacity but really able to do the work that they like to do. And it's interesting you say that I think so many advisors, we get the questions a lot around just why can't I find practices? When I do, I don't win them. And it's because they're in the weeds. They're focusing on the price and the terms and tripping over 5% in price or 10% in price, as opposed to seeing the big picture of actually how hard it was for that person selling their baby, as you said to build that thing over 20, 30, 40 years. So couldn't agree more.

Jon:

I just want to a quick shift of gears as I often do as we're talking together and you and I have talked a lot, I could share, I actually don't know exactly what you mean when you say you've got this investment banking division. So maybe you can just share what that means. What do you do if an advisor kind of engages that part of your organization? I think that would be helpful,

Scott:

Well, candidly, when I bought it, I didn't know either. So I've[inaudible 00:17:43], now. So from an investment banking standpoint, we only do a sell side engagements. So we're working with sellers and helping them with the process of identifying again, how they would like to sell their practice over what time period and for what price. And then after determining that we were building out a complete client pitch book and then we are sorting through prospective buyers through Apple, we've got about 2,500 registered today and then we post that listing on APBOE and at that point, then we will source prospective buyers, go through that list, then we have the three different screening stages for each, down to creating a finalist group that is determined by the seller if they want to talk to six prospective buyers or three or whatever the number it is and then verifying and validating all the information from those individuals and helping a seller negotiate the best possible transaction.

Scott:

The also added advantage that we have from an investment banking standpoint is our insight into bank financing. So key part of the process is we will pull in all the seller's financials and the first question we put to our credit team is how much bank financing is available for this practice alone prior to adding another balance sheet. And actually that came from a client we had a couple of years ago, she came in with wanting to sell her practice for two and a half million dollars in Ohio and she asked a really smart question and said, "Well, how much bank financing does my practice qualify for a loan? How many of my collateral [inaudible 00:19:26]?" And we said, "Well, it's a really good question. Let's figure that out." And we've done it ever since. And in that case, you were looking to sell for 2.5, we went in and did the credit analysis and found that her enterprise value and free cashflow accommodated 2.5 million of bank financing.

Scott:

So by adding an external buyer, whether they strong balance sheet, she actually ended up selling the practice for 3 million. So it's a crucial part of our process. We need to get a third-party valuation. That's important for LTV calculations but really at the end of the day, it's up to buyer and seller to determine that price, as long as the bank agrees with it. We've seen multiples increase quite discernibly by including bank financing and that's pretty intuitive. If you inject liquidity into a market and longer amortization periods, prices go up.

Shennandoah:

No. Excellent. And I think you touched on it twice now about the bank financing piece and I know we've talked about it in a previous podcast too but I still feel like a lot of advisors really don't understand the bank financing and how it works in acquisitions and what they need to do to prepare for that. They think that they can go to any lender or somebody in their networking group and they can get financing and they're also tend to be not prepared for all the things they have to bring to show that they're credit worthy. You mentioned that word earlier. So can you touch on that a little bit about what they need to look for and what they need to do to prepare? Because I think bank financing is definitely where a lot of acquisitions are going today.

Scott:

No. That's definitely the case that when we came into the marketplace, the billion dollar question for whether SkyView Finance would work was not for lack of demand from advisors, they're looking for financing, bank financing and they should be provided with financing but banks historically were very reluctant to provide financing to advisors because bankers are still stuck in the fact that they like tangible collateral and I can't tell you how many bank boardrooms that we've been thrown out of partially because of my personality but no, but we'd go in and we'd come out and we'd just joke and say the same thing every time, no tracker, there's no silos. We can get these advisors to buy some trackers and silos, they'd finance this deal because advisory practices have exceptional cashflow. We see the average EBOC, earnings before owner's comp about 48%. That's good business again and that's a lot of cash flow to service monthly debt payments but when we went to the industry, the experience of bankers and I don't want your listener to be offended here but I was offended.

Scott:

They said that financial advisors in their experience were very unorganized, which I thought was odd. They're dealing with Fred's Pizza Parlor, Jerry's Carwash and you're telling me that they're better at this. And we found out is that is in fact true but it's to no fault of the financial advisor, they just never been extended financing before so therefore of course they have no experience in this process. [inaudible 00:22:43], experienced their mortgage, maybe a commercial real estate deal but in limited instances and where our team really helps as SkyView is helps the advisor understand and get prepared to properly present your application, two, we have 32 network banks on a digitized lender marketplace to make sure we find the best bank for you.

Scott:

We do have the luxury today, as well as I think we only have two competitors, maybe three in the space, live up being most prominent and I can tell you, we have a great relationship. I couldn't have a better relationship with our top competitor, really great people. They look at credit very differently than we do and we send a lot of biz their way and vice versa but it's really about helping the advisor find the right solution and the thing we hear as advisor will say, "Well, I've got my local banker. I want to go talk to and I'll get back to you." And we say, "Okay. Best of luck with that." And no matter how great their relationship is with the local banker, banks, what advisors need to understand is your local bank, [inaudible 00:23:49], size would need to build out an entire credit policy and procedure and have that approved by sometimes the board of directors or the credit committee to do one loan.

Scott:

So are they interested in going through that entire process to approve one loan? Absolutely not. And why banks have been willing to partner with SkyView is that we have a neutral commitment, whether it's 25 million or 250 million of capacity they're interested in doing that makes it worth their while to build out that policy. So that's a really long answer, like usual after I've had too much coffee however that's where we help in the process and the best way to start APBOE go on, it'll kind of signal the things that you should have ready, that you should have prepared. And then we, at no point will collect documentation we need for the financing process but then we get into the financing process, we educate the buyer on the exact documents we need to prepare the best package for them or presentation to banks.

Jon:

Yeah. So Scott, really helpful. Sometimes doing these podcasts, the best part about it is I actually get to slow down for 45 minutes or so and you and I, like I said, have known each other for a little bit here. So it sounds like, just to kind of make it what I call a cut and simple, so I can understand it because I'm not the sharpest tool in the shed as you both probably know. From an investment banking perspective, you guys are outsourcing deals and sellers are coming to you hopefully or you're out there finding them saying, "Hey, we can actually help represent you as the seller and bring to you qualified advisors to kind of tee up that number one are capable to bring on your business that actually have the ability and bandwidth to serve more clients, which some advisors aren't prepared to actually acquire a business.

Jon:

And then secondarily, you've got this platform where you are not necessarily a bank lending money but you've got 32, I think you had said, lenders that you've got connectivity and relationships to, to be able to source the right bank or lending partner for the ultimate buyer. Is that a good synopsis of kind of what you guys do?

Scott:

You said it much better, more succinctly than I can. Thank you.

Jon:

Yeah. I wasn't going to say, man, why don't you just tell me what you did all these years? Geez, that'd be easy [inaudible 00:26:19].

Scott:

I don't know. I mean you get in the woods and all I see is trees every day. You'd probably feel the same way. I'm looking at trees every day and it's [crosstalk 00:26:30], the forest. Thank you. I got to write that down. I got to listen to this-

Shennandoah:

[crosstalk 00:26:36]. Just FYI. You will be able to listen to this again and then you can memorize your spiel for next time.

Jon:

Yeah. I could this into a script for you if you'd like, Scott.

Shennandoah:

[crosstalk 00:26:49], Jon.

Jon:

So no I'm teasing. Of course. I think I had most of the pieces but honestly, it's helpful to kind of connect the dots. I was probably embarrassed to ask you like, what do you mean investment banking? To me investment banking means something a little different but with that being said, so what are you seeing in the marketplace, Scott? So we've got COVID and stock market that's booming and interest rates that are low and at least 32 banks, I guess that you've identified that will lend to financial advisors. Are you seeing a lot of activity? Is it picking up? Is it slowing down, are valuations up, down, sideways? What is your crystal ball seeing or what has it seen and what are you seeing in the future?

Scott:

So we're certainly seeing a surge and M&A activity as a result of COVID, number one. We kind of were clearly very concerned in February. We actually post zero transactions, February 2020. Market pause, stopped. Everybody just said, "Well, what's going to happen?" Then we saw applications. I think we saw 600 million in originations last year alone. So a lot of advisors said, "Okay, I've had it. I don't want to go through another storm." And now we're seeing a similar surge due to perspectives tax proposals from the Biden administration and there certainly an urgency to get transactions completed prior to year end this year on both sides of the house. From a financing standpoint, we are seeing our banks continue to drive down the cost of capital as they become more familiar with this space. And I can tell you the billion dollar question that banks always ask us is, Well, this is great and it seems like Live Oaks portfolio has done well but we've never witnessed these borrowers through an adverse market.

Scott:

Well 2020 provided the opportunity for financial advisors to proves their veracity as borrowers and we experienced absolutely zero loan loss and not even in late loan payments, which is basically unheard of relative to other industries, as you can probably imagine. So the access to financing has increased. The cost of capital has gone down. The number of sellers coming to marketplace is increasing as well and we are certainly in a position where we are of the opinion that practices are currently undervalued and I know that people are actively engaged in buying. I'm not their favorite person but you got to keep in mind if you own a practice right now, I'm also telling you that's worth a lot more but as you add financing, it's like any market, if you're going door to door and asking people to sell their house on a contract for deed, well, it kind of mutes the price.

Scott:

Also, [inaudible 00:29:50], kind of with a 30 year mortgage, people are going to afford a lot more. If, I mean, I was just looking at a five-year mortgage and a 30 year mortgage, I'd be living in a totally different neighborhood right now. That's a bad analogy but it's close to the point that you inject liquidity into a marketplace and prices are going to rise and our average investment banking, engagement's priced at about a 3.5 multiple on revenue right now today. And we're closing those transactions. So prices are increasing. Last part of it is the PE community is we're very anti PE and PE backed consolidators and they promoted narrative out there that the practices are overvalued through the market, which is absolutely not the case. And give me one example of where PE is going in and buying up any other industry that's overvalued. I mean, these are smart people. They're not terribly entertaining or engaging but they're smart nerds and they buy up a lot of practices and televised [inaudible 00:30:51]. We believe the opposite.

Jon:

Yeah. No, well said. And I would say, that I hope my advisor hat on we probably have Shennandoah delete out the part where you talked about undervalue practices, edit that out but if I put on my consultant hat and the purpose of this podcast, I think you're spot on. And I would just phrase what you said is all the rationale. Why lots of advisors are really bad at becoming buyers of practices. It's a cashflow game really and when you really think about it, I think you put it really well, when you're thinking about a five-year mortgage versus a 30 year mortgage, it's just the cashflow game.

Jon:

So years ago, you're buying a business and there was a seller note over three years and that's how you created the value. You basically needed the cash flow and a three-year period to cover the costs. So if rates are low and duration is 7, 10 years in a lot of cases and I want you to confirm that that's where a lot of these deals are done for me. Then yeah, if you can make the thing create more cashflow, it just sounds like it makes sense that the value to the seller is higher because everything automatically when you put it on the spreadsheet works out. Is that where you were seeing a lot of your banking going? There's at 7 to 10 year notes? Are they longer shorter?

Scott:

So we have codified our terms and conditions to make it more scalable to all the banks that each deal's not different. So in every case, we're looking at a 7 year term and a 10 year amortization schedule for every possible transaction and kind of related but not related point interesting stat from last year that only 13% of our closings required any buyer equity infusion at all. And of that 13% the average was only 15% of buyer equity needed. And it is definitely advantageous to the credit process when we're talking about external acquisitions versus internal. Internals benefit from continuity of personnel and philosophy. Whereas when you're talking about an external acquirer, you're bringing two balance sheets together and those transactions typically to your point cash flow very, very well. And I always point out to buyers that your ability to acquire an obtain financing is only limited to your ability to find collateral and cash flow and practices to acquire.

Jon:

Yeah. No, it makes total sense. You referenced a client of yours that was a seller, who I think kind of asked you to do this and determine what her borrow power was from her own practice. And it just [inaudible 00:33:58], if you start thinking about it mathematically, if you have 7 years or a 10 year amortization to pay off something that you're giving in your words a minute ago, call it a three and a half times multiple, which is quite frankly higher than most of what I hear in the [inaudible 00:34:15], you just spreadsheet that, most advisors businesses are not that top heavy from a payroll and expense perspective. So these things are going to cashflow out over and over and over again which seems to be your thesis, correct me, if I'm wrong as to why they might be more valuable.

Scott:

Yep. You don't give yourself enough credit. You get this and really fully understand this well. And that's exactly how it works that this deal's absolutely cashflow and from buyer and seller standpoint, you get the seller that get some immediate liquidity. From buyer standpoint you're looking at [inaudible 00:34:51], period and you're probably in the black in year one when you're doing all this work, instead of a three-year seller note that you're in the red those first three years when you were going through all the pain and moving the practice and also you probably don't have a lot of sellers even interested in doing the contract for deed transaction.

Jon:

Yeah. No, totally agree and I think I heard compliment in there, so thank you. I don't get a lot of those from you. So I-

Scott:

It's not with you, it's challenging. It's not ...

Jon:

... Yes. But I [inaudible 00:35:24]. I heard it and I'm going to take it and now it's recorded. So that's a good thing.

Scott:

I forgot about that.

Jon:

Yeah.

Shennandoah:

Well, you won't be able to live it down now. Sorry.

Scott:

[crosstalk 00:35:35], anywhere, I'm good.

Jon:

[inaudible 00:35:37]. Shenandoah, transcribes all these as well. So yes, it'll be all over. Scott Wetzel thinks I'm great. I heard it. That's great. So let me ask you this, Scott. I mean you got a lot of stuff going on and I feel like you've really positioned yourself. Let me throw a compliment back at you. I guess. Here we go. Well, in that you're kind of swimming in the middle of where I think the industry is going. So you talk about red oceans and blue oceans. I feel like your position kind of in a blue ocean where there's lots of opportunity ahead. Where are you headed? What's next? It seems like you're an entrepreneurial guy. Share. Like, where do you see this thing going? What's your ultimate goal? Where you trying to take this business if you don't mind sharing?

Scott:

I promised our bank that I wouldn't acquire any more businesses this year, starting new ones and that's going to be a challenge for me. Well, I mean, we're two months in and I don't think I'm going to make it. I mean, I don't think it's possible. I mean, as soon as we get this investment bank streamline and get processes and procedures done here I can't help myself. From the M&A standpoint I think we're in a good spot but at the end of the day, it's still frustrating. We're not seeing enough transactions relative to demographics. We're just not seeing it. And that's all of our responsibility that we have a lot of people out there giving the correct messaging to prospective sellers that they can ... I'm talking about a couple of prospective big sellers this afternoon.

Scott:

I still tell them the same thing every time. Just tell me who you want to sell to at what price, what kind of horizon and if you'd like us to help? And it's that simple and they're in charge and I'll say this, that if you put yourself in their position and help identify that at some point, Jon, you and I don't like recognize this but we'll be in a position to sell our businesses and I know from working with you and from my standpoint, I'll be a terrible client. I'm going to be emotional. I mean, I don't have a life outside of this and I kind of doubt you too and this is everything I do. I mean what am I going to do? So you got to identify with the seller that this is a very emotional transaction.

Scott:

And then where are we going from here? We just need volume of transactions to increase. So we need these practices to stop being kind of like faded and dwindled down to nothing over time. And we talked to a total of 74 year old advisor this week about selling and fortunately he just didn't have enough left there to make it a viable transaction for anyone and had he come to us 5, 10 years earlier, he had a great practice but at this point it's really not it ... candidly, which is not something we accepted as an investment banking client because there really wasn't, it wasn't a very enticing opportunity for us or a prospective buyer but I will tell you when I finally can get things going, we are working on a private label banking solution that we are going to be providing a platform for financial advisors to compete with the wirehouses.

Scott:

You ask the questions. I got to tell you if this is where we're headed. I do have a call today around this, which is SkyView plus, which will be a platform that doesn't have our name on it. We'll be cutting the wealth management if you so decide to be a part of the platform enable you to offer cash spending accounts, credit cards and four or five different offerings, lending in the form of personal student mortgage, auto insurance in the form of auto life, you name it and all in a private label experience through an app and online that you'll be able to successfully compete with the wirehouse advisor in a comprehensive approach to financial advice and not just investment and financial planning but also banking advice, which I actually went and looked up and the Edgar database on banking advice and no one has ever trademarked it. Why? Because no one offers it.

Scott:

Banks just offer their own proprietary [inaudible 00:39:49], they give you. Well, we have the luxury of knowing which banks are good at mortgage, which ones are good at lines of credit, which ones are good at S block, bringing them all together in a marketplace for advisors to offer their clients and offer kind of like an Amazon of banking but it'll all private label with your name on it. So, yeah, I got a lot of work to do.

Jon:

Yeah. That's a cool idea. So as an independent advisor, let's say you've got your own RIA. One of the concerns to go, maybe leave that wirehouse, is how do I provide all these ancillary benefits that the wirehouse or bank in most cases actually provide? So what you were saying is you're going to go out, bundle that together and then allow Acme Wealth Management to private label that to their clientele and you're kind of behind the scenes operating it.

Scott:

Absolutely. We're basically just providing the API infrastructure and I'll tell you, I don't know how to power off and on my iPhone successfully nor log onto a Zoom meeting with a lot of hiccups each time. So as we venture into starting a FinTech, it's challenging but what I'm learning is the FinTech community is really just like Legos, where you put together these different APIs that provide Clad for one service, Galileo for another service and you're kind of these building blocks of different APIs and you just get them all to work together, to provide the best solution and then marketplace technology for each loan sector vertical that really provide a super competitive offering for the independent advisor to really say like, "Hey, we're not just offering [inaudible 00:41:31], products. We go out and source this in the marketplace if you're looking for remodeling loan. We will have 10 different banks to choose from in a real time competing for that business."

Scott:

And the number one reason why wirehouse advisors don't go independent is they're concerned about losing the banking business with their clients because that makes for a very sticky client. And also for the financial advisor, you want more transparency and there the complete financial picture of your client, this will truly provide that, that you'll have view only access to that entire portal from the client and essentially act almost as if the financial ... your office can serve as almost like a bank branch [inaudible 00:42:15].

Jon:

Love it. I'm getting your shtick, Scott. You actually play dumb and you're really, really smart. I got it.

Scott:

I think I'm better plan dumb though. I'm good at that and I have my moments. I mean, that's how I'm typecast.

Jon:

I love it, man. No, listen, you are ... certainly one of the things I've always respected about you is you're an entrepreneur helping entrepreneurs and I think you'd get you know, as someone who buys businesses, like you mentioned before, not necessarily wealth management firms but in your own kind of industry there, you get what it's like to be a buyer and certainly are a super successful entrepreneur. So I'm looking forward to seeing what's next, Scott. We haven't known each other for all that long but I've been really impressed with everything that you're doing, so congrats on all your success. So before we wrap things up here I found today to be super intriguing, anything that we didn't ask that maybe you were hoping we did or anything that you wanted to share and I know Shennandoah will certainly kind of wrap things up with how to kind of find you and APBOE and all of the organizations that you or anything that we missed perhaps?

Scott:

I don't think so. I think the main thing for people and if you ask [inaudible 00:43:42], advisors, who's a buyer, it doesn't matter their age or the position then 99% will raise their hand as a prospective buyer. I'd say that the next step is actually take action. We're not asking for a thousand dollars a year in subscription fees and join APBOE, just go out, join the marketplace, learn what to do to get prepared. So if you do find an opportunity or we source an opportunity for you that you're actually prepared to do so and that process will help you get prepared and I guess everything we've built is trying to create greater efficiencies in the M&A process for the independent community between the listing, investment banking and financing. We built as much technology and processes and procedures to make that as efficient a marketplace as possible from beginning to end, we just need more participants.

Jon:

Yeah, I'll give you my little shameless selling for you. There's so many advisors out there that either are thinking about selling their business or looking to buy businesses that just complain that they can't find a number, there's no buyer for me or whatever it may be. You've made it turnkey. So it'd be kind of be foolish for free, not to actually have a listing and bet your business and be in that ecosystem. So I would highly recommend it as well. So Scott, with that thank you very much for joining. It was fun teasing you a little bit and I guess you were on my show, so you didn't tease back the way you normally do which you could but-

Scott:

There's a lot of material there.

Shennandoah:

[crosstalk 00:45:17]. Everybody likes to take at least one shot at Jon in each podcast. They think it's this part of our stick now. You got to do it.

Jon:

... Yeah. I bring it on but with that, we've muted Scott out for the rest of the podcast here. So Shennandoah-

Scott:

[crosstalk 00:45:28]. I was wondering when you're going to do that.

Shennandoah:

Actually really quick before we do that. Scott, if people wanted to find out more and get in contact with you or with SkyView, where would they go to do that?

Scott:

It's just skyview.com. And then you'll find all the links to APBOE and that provides you with insight into all of our three services between listing investment banking and financing. As well as my new corporate headshot that Jon relentlessly gives me a hard time about just because I lost weight for about a one month period, then gain it all back but I got a picture in during that time. [crosstalk 00:46:05], to get an ulcer too.

Jon:

... I just thought it could have been maybe a younger brother of yours. That's all. And quite frankly, I'm jealous of a really good head of hair that you have there.

Scott:

Photoshop is an amazing tool. I don't know how to use it but somebody does my staff.

Shennandoah:

Well, and a lot of people these days are still trying to use those college pictures on their LinkedIn and things like that. So, I mean, nobody ever really looks like they look in their picture in real life. So especially, I think a lot of people are figuring that out now during COVID with all the Zooms that nobody really is using an updated picture. So I think we're all [inaudible 00:46:44].

Shennandoah:

Well, thanks again, Scott, for joining us, this has been a great topic. I think we've learned a lot. You brought up some great points in that we will definitely be highlighting them in the future and I do feel we'll probably be speaking with you again in the near future as things evolve. Thank you once again, everyone for listening, if you know someone that you think would be a great guest for the podcast or you yourself would like to submit yourself please go to the website, fill out the form. We are always looking for great guests, either financial advisors who have a proven system for growing a practice or have done something really creative to grow their practice as well as experts and consultants and other providers who help support advisors looking to grow. And don't forget to subscribe like and share the podcast as well if you found it useful and tune in next week as we bring another great guest onto the show. Thank you everyone.

Speaker 1:

Thank you for listening to today's episode. You can find the episode show notes and subscribe for updates by visiting kuttinconsulting group.com/podcast. Make sure to subscribe and download the episodes on your favorite podcast app and we'll see you next week.