The Legends of WealthTech with Len Reinhart and Jim Seuffert

Jack Sharry: Hello, all. Thanks for joining us for this very special edition of WealthTech on Deck. We’ve begun to record a new companion series of podcasts we’re calling Legends of Wealthtech. If you love our business, and especially if you love the history and the people who have been the pioneers in our industry, these are memorable podcasts, the WealthTech on Deck Legends, that go along with the 100 or so podcast episodes we’ve recorded over the past two years. Today’s show is our third Legends recording. And as we’ve done with our first two Legends podcasts, we’re focused on people and programs that changed our business for the better over the course of many years. Our first Legends conversation was with Lori Hardwick, Cheryl Nash, and Noreen Beaman, who were among the first women to achieve CEO titles in our industry. Their podcast quickly became one of our most popular shows. We then recorded John Thiel, Rich Aneser, and John Connors who shared their seminal work around a long standing and highly successful program called Total Merrill. In that episode, we discussed how Total Merrill changed how all advisors and firms do business. Today we will have a conversation with two longtime friends and colleagues, who are at the beginning of a sea change in how advisors work with clients. Len Reinhart and Jim Seuffert co founded Lockwood Advisors in 1996. Lockwood was the first investment advisory firm to provide a turnkey investment consulting platform to independent broker dealers, consultants, investment advisors, and financial planners. They were early stage developers and promoters of this newfangled way of doing business called managed accounts or managed money, now referred to as advisory. They were among the first folks who came up with the idea of charging an advisory fee rather than a commission. In 2003, Len and Jim and Lockwood joined forces with Pershing to form one of the industry’s largest providers of managed account solutions to financial organizations and registered investment advisors. For our discussion today, they’re going to tell us about how it all got started. They will also share their perspective on where managed money is today, where they see it headed. Len and Jim, thanks for leaving the golf course and your favorite surfing spot to join us on this edition of WealthTech on Deck. Welcome.

Len Reinhart: Good to see ya.

Jack Sharry: So Len, before we get into what you and Jim and so many colleagues did in creating Lockwood, please give us a background on your career and what led to you heading up the largest money business when you were the head of the Consulting Group at Smith Barney, let’s start there. And then Jim, give your backstory and then we’ll get into Lockwood, how it got started, how you guys made it happen.

Jim Seuffert: Thanks, Jack.

Len Reinhart: I’ll date myself, I graduated from the University of Rhode Island in 1977. Got highly recruited by GE for their financial management training program, my father said that’s the best thing you could do. He worked for AT&T all his life. I was there for nine months, hated it. Responded to an ad in the Wall Street Journal and joined EF Hutton as an analyst. And the job I got there, it was a little different than I thought. There were only six people in the division. It was consulting services division, and it was a group of basically three senior brokers who were consulting to large pension plans. And so I was the research department. They were starting to get competition from the SEIs and the Callans. And so they say we need some research. So I was the research guy. And that’s how I get into that. And this was when modern portfolio theory was truly modern. It had just come out. Risk return graph is something Jim and I worked on, literally with rulers and on graph paper, trying to come up with risk return graphs. So this goes way back. I’m dating myself, but Jim Lockwood, you talked about fee based business. This was 77 and 74. They changed the rules and they said institutional commissions could now be negotiated. And Jim Seuffert, who was a fabulously successful broker all his life, said, you know, the best advice I ever gave people was not to sell, and I didn’t get paid for that advice. And I only got paid if I told them to sell. So he had the concept. He’s… negotiate commissions, let’s negotiate them to zero and charge a fee. And that was beginning of the managed account industry. And we started out with very small accounts, $100,000 accounts for 3% fee. And we’d even dip under that, we had $25,000 accounts in there, but that was the beginning of the fee based concept of managed money.

Jack Sharry: That’s great. Jim, how do you get started? Sounds like you’re part of this story.

Jim Seuffert: In 1980, with a major in track and field and a minor in finance. And literally I was cutting lawns, painting houses. And my dad, who was a dentist took me to the Asbury Park in the Jersey Shore and pointed to New York City and said, you’re obviously not going to be a dentist cutting lawns, painting houses, and whatever else you’re doing, probably not a long term, viable prospect given your spending policies. So you know, with luck, again, Len hires me. And I think what was fortunate about the launch, if you will, is that, you know, like Cheryl Nash and Noreen Beaman and who you’ve… two fine, amazing individuals that you interviewed here recently, you know, we all started like Len did too, way, way in the plumbing, if you will. So I was a performance measurement person. And that’s, you know, going through bank statements and doing a lot of things by hand. And I think that was a major advantage. Because once you incrementally learn that, then you learn the next thing. And you begin to get comfortable with products. And I was part of the team that Len spearheaded and Len actually drove the whole thing. Very small team of us that created, under Len’s leadership, the first managed account rep fee using independent money managers, it was him. So I’m part of that team, and then going forward, Len gave me the green light to go and start selling. So I moved down to Atlanta in 1987. And back then probably, maybe not so much now, but back then the advisor put you in front of the investor. So what that meant is that I would sit in 10 prospect meetings a day. And the advantage to that is that you, A) you know, you learn how to sell, but you also learn what’s wrong with the, what you’re selling. I mean, right down to the paperwork. You know, Len and, Len and, I redid our paper, you’d be like, why am I asking these stupid questions about a scale of one to ten, how do you feel about… really? So those sort of learning over 16 years, by the way, before we launched Lockwood was very, very, very helpful. And then one event that sort of shaped me personally, lots of them, but one. So in ’87, October ’87, in one month, the market goes down 39%. EF Hutton, at the time, Len and I were working there, goes out of business. And my father dies. So I’m down in Atlanta, I’m 27 years old, I’m like you know, it’s, it’s me and me and me and me and me. And I think that was another floorboard, if you will, that kind of stuck, and helped me move forward.

Jack Sharry: That’s a great sort of backstory for both of you. Before we get into the Lockwood story, which is fascinating all by itself. And we have lots, lot of ground to cover. Talk about, as Hutton becomes and I forget the exact sequence but Smith Barney and later Morgan Stanley, and a bunch of different names that we all live through and know, you guys lived through it for sure. Talk a little bit about that, because Consulting Group became the place, the thing before you guys started Lockwood Advisors. So talk a little bit about that evolution, and I know Jim was right there, side by side as you were building that out.

Len Reinhart: Sure. The unusual part about Consulting Services, which became the Consulting Group was we were sitting inside a brokerage firm that was a commission based business. No one understood what we did. Over the years, when EF Hutton went out of business, we kept merging, merging, merging or getting bought. And every time we were bought, they’d look at this group, and they, it was getting bigger by this point, they’re going, “Jesus, these guys generate a ton of revenue, and they have no lawsuits.” But nobody knew what we were doing. No one understood what this fee based business was. In fact, for the 18 years, I was at the wirehouses, consulting group had 16 different bosses, due to the mergers, acquisitions, and then the changing heads at the different firms. No one really understood us. And it was finally when we’re at Smith Barney, I was working for an individual and Jamie said, you got to manage the guy. And basically the guy said, “He’s unmanageable.” And Jamie said, “Okay, he’s going to work for me directly.” So for 18 months, I worked for Jamie Diamond directly, which was an experience. He’s one of the brightest guys I’ve ever seen with numbers in my life. And he started to understand what we were doing.

Jack Sharry: What year is that, Len? When was that taking place? Just to give…

Len Reinhart: So that was like ’94.

Jack Sharry: Okay, gotcha.

Len Reinhart: Yeah. And at about that same time, and you may remember this guy’s name, I had a friend at Fidelity, who’s one of the, I think four or five presidents named Paul Hondros.

Jack Sharry: Sure.

Len Reinhart: And Paul, we were talking and he said, “You got to come down and spend a day and a half with me down here and see what we’re doing with this independent advisor marketplace.” And I did that. And I said, wow, this is a whole different world they’re dealing with. You know, we’re talking, dealing with brokers and everything. And they’re all out there with independent advisors. And at that time, I realized this business was getting big, but it could be much bigger if we could just expand who we were selling to. So we developed a business plan and took it to Jamie and said, “Look, we should really be removed from the brokerage firm that doesn’t really understand what we’re doing anyway. Put us a separate company reporting to the brokerage firm is fine. And we’ll start selling to insurance companies, CPA firms, you know the whole world… of this, beginnings of this independent advisory marketplace. And Jamie actually liked it. But when it got back into the executive management of Smith Barney, it was a no go, they thought it’d be too disruptive. And it was then in ’96, when I just fell in love with that idea. Our brokers were saying, hey, I’m, you know, it used to be “I’m up against Merrill Lynch, what should I do?” Now, they’re saying “I’m up against some CPA. What should I do?” And that’s when I said, okay, we gotta try this. So I left, resigned, and was able to find, with Jim’s help, he joined me within about a week.

Jim Seuffert: I made it.

Len Reinhart: Yeah, he quit. There was no money, no compensation. A perfect employee.

Jack Sharry: Didn’t know what he was doing.

Len Reinhart: Yeah. So we went out and we found some investors, some really cool investors, two individuals and got the funding to start Lockwood. That was a transition.

Jim Seuffert: We did leave on the same day. We had a phone call with Jamie, who was trying to convince us to stay and Len said, “He’s on the phone.” And Jamie says “Well, you know, you guys signed a non compete.” Len’s comeback was, “We never did. We never sent them back.” Len was like, “Can we can we move this…” Len, you correct me if I’m wrong, but you said “Can we move this along? I’ve got… one of my kids has a baseball game.” And he said, “Is Seuffert going with you?” And I said “Yeah, I’m going.” So that ended not so nicely. But the next day, Len our stuff was down in the lobby of that bank. There was a pile of our stuff in the bank lobby.

Jack Sharry: Right. The boxes, like, get out of here.

Len Reinhart: Yeah.

Jim Seuffert: The boxes… can’t make that up.

Jack Sharry: So Jim, you’ve told me this story. As I recall, at least, probably gonna botch this a bit. But you guys get some office space. You’re in some godforsaken office park, I think was in Delaware.

Jim Seuffert: Philly.

Jack Sharry: Philly. Okay. Tell the story about how you started using those boxes to hold up doors that were your desks?

Jim Seuffert: Well, Len had the idea, and a brilliant one. Let’s hold out in our lawyers’ offices in Philly, you know, just in case we get any, you know, feedback, negative feedback, we need to respond to. So, Len, calm as can be always. First day, we’re at one desk, one office. Len’s across from me, and he looks at me straight in the face and he grabs this little pad of paper, he goes, “Okay, we need to figure out what to do, first day. So, number one thing we need to do is figure out who’s gonna buy us lunch?” That’s the way, that’s the way it was. That’s the way he is. And we just clicked along.

Jack Sharry: So talk a little bit more and then, Len, pick it up. And, Jim, talk a little bit more, what, what were those first days like? I mean, you jumped out with no compensation and maybe no clue where this thing was headed. And you thought was pretty good idea. So what were those early days, like, after you figured out who was gonna buy you lunch? I’m sure there was no one there to buy you lunch. What happened then?

Jim Seuffert: Well, I think, you know, I remember, Len, you chime in here, obviously, I remember we sort of split up and you make cold calls, Jack.

Jack Sharry: Yeah.

Jim Seuffert: So I made cold calls to my contacts from when I was down in Atlanta. So I got a hold of Charlie Brady, the founder of Invesco, told them verbally what was going on. And he said, I want you to meet with me in New York City, talk more about it. And this is just an example of many, and Len was doing the same thing. And I get in my little Volkswagen and drive to somewhere in New York City to sit down with, you know, one of the kingpins of the, of managed money, Charlie Brady, founder of Invesco, and he says, “I’m gonna put you guys in front of Chuck Schwab.” And he did. I mean, we just divvied up, here’s what we’re going to do today. And sometimes we went into separate offices and just made cold calls and Len was working on, you know, how are we going to get basis points for clearing, which was like, what? Everybody didn’t understand what we were talking about, you know, so Len, you know, took that route maybe and I took others and we just started going.

Jack Sharry: So, Len, who are you cold calling and who are some of your early folks you reached out to.

Len Reinhart: In all my changes of management, eventually they said you have to have an office in New York. And they put me in an office in New York with a bunch of people. One of them, you know, we shared a secretary, was an investment banker who was on his way out. He was working on one last deal for the firm, but then he was moving on. And that individual would hear my conversations about what, you know, we were doing. And he came in one day, took me to lunch and he said, I got some ideas for you. And he’s the one who actually then introduced us to Tony O’Reilly, who was chairman of Heinz Corporation and his brother in law, Peter Goulandris, of the Greek shipping family. And then we hit it off with them. They became our investors in the business and they were great. Absolutely great investors. Yeah, they didn’t really understand the business that well, they liked the concept, what we were trying to do, and they were willing to take the risk. And we learned a tremendous amount from them on how to do business that I still use when I’ve invested in other startups, I still use a lot of the stuff I’ve learned from them.

Jack Sharry: So talk a little bit about those first months, years that, ’til you became real, we will talk about becoming real. I love the story you guys have shared with me. Save that for a moment. What happened? How did you get… you ended up getting significant momentum? But what was that like, Jim? How did you kind of get it going? And what were some of the milestones or some of the achievements as you went along?

Jim Seuffert: Well, I think one of the things we didn’t waste any time on was selling. At the end of the day, we had a pretty tight approach in the beginning. So what I mean by that is, what’s the conversation? What’s the elevator pitch for what we’re trying to do here? So we very quickly got a number of money managers and said, you guys put us into business. I’ve known you for years and signing contracts, he had this stable of a manager. So that’s number one, I guess.

Jack Sharry: If you would, Jim, why don’t you share some names, just to give some context for younger audience members.

Jim Seuffert: Sure. So you know, Oppenheimer Capital, obviously mentioned Invesco. Along the way, Madison on the fixed income side, Lazard jumped on early. So these were by 20, 30, 40 managers right away. These were back to the, you know, relationship days where, you know, kind of our name, and what we did, you know, in the past meant a lot. And in fact, that’s what Tony O’Reilly Sr. said, when he gave us the 20 million bucks to, for the startup. He said he was going to lunch, we had a meeting, he’s about to go to lunch, he goes, I never read your business plan. I’ve been following you guys, you know, Len’s reputation. Me, you know, doing my thing with Len. And you’ve got $20 million. And I’ve got to go off to meet Nelson Mandela. Right now. So I gotta go. Good luck. Talk to you later. That’s, that’s how it happened.

Jack Sharry: Yeah.

Jim Seuffert: So those early days were just like that. Let’s, let’s get the stable of managers, let’s start selling. And the sale was these independent advisors didn’t have access to the menu, we didn’t have to right off the bat get all fancy with a lot of different things. We had to get fancy with taking blocks of money that were in mutual fund accounts, and putting them into separately managed accounts for the tax benefit purposes of that particular vehicle. So that’s what I remember is the early, early, early, go get some revenue days.

Jack Sharry: Sure, sure.

Jim Seuffert: I’m sure Len can chime in and add to that.

Jack Sharry: So Len, I got a question for you. But I just want to set the stage here a little bit. Len is not pounding his chest here, but I will. Not literally. But Len was at this point when he was at Consulting Services later Consulting Group it was called at Smith Barney, the clear leader in managed money, which was emerging, it was, it was, it was getting hot. So by the time he went off to become independent, I remember reading the articles like, this guy’s crazy, is that that really gonna work? So it was crazy. And it worked. Both. So, and it wasn’t so crazy, obviously. But talk a little bit because you needed to have people, not just you guys selling them, but them selling to their clients. Talk a little bit about and then I love the story at a certain point where you guys were growing and things were working out. And then you looked at Jim and shared a, an observation at a certain point. But please talk about what that was like to build up and get advisors and later firms that were signing on to what you were doing.

Len Reinhart: Yeah, I think, you know, we started out with the industry and the people we knew, we went after brokers, and we actually created a broker dealer, hired some guys to run it from the industry, friends of ours. So we had our own broker dealer. It was very hard finding any firm that would clear for fees rather than commissions. But we finally found a smaller clearing firm to do that. And we went after brokers and that was like it was today. It’s tough. They you know, they liked what we’re doing. But you know, what about you guys are brand new, do you really have this stuff? The software didn’t really work, but yet it’s coming. You’re dealing with all that and then one day somebody called up and said, “Hey, I’ve been hearing what you’re doing at InvestmentNews and the rags and I’m gonna be in Philadelphia, I’d like to talk to you.” So he comes in and it’s an RIA, and he does… we do our dog and pony show for him and at the end of the meeting…

Jack Sharry: By the way, Len if I could interrupt, RIA, people didn’t know how to spell RIA back then, right? I mean, this is a kind of a new… why don’t you explain that a little bit.

Len Reinhart: Okay, he was a certified financial planner who became an advisor. And he heard about what we were doing and how we had sort of developed a specialty for having managers who could run money after tax. And so we were putting that in place. He heard about that. So he comes in, he listened to our dog and pony show. And he goes, Okay, I want to open an account. And we’re like, what do you mean, you want to open up an account? You know, we’re used to recruiting and clandestine meetings on you know, three day weekends and all this crap, they open up and he’s saying, just give me the paperwork, I’m going to see a client in Philadelphia, I’m gonna have him sign it. I remember Jim and I go, “Oh, my God, we’re in the wrong business.” You know, we shouldn’t be recruiting brokers, we should be going after these advisors. So that was, you know, you say sort of the ups and downs when you do something like this, you know. We were learning how hard it was to recruit brokers, and we didn’t have money we could give them you know, so yeah, and all of a sudden, here’s a guy, he spends an hour and a half with us and is ready to open an account. So we really changed the way we’re starting to do, you know, targeting, who we were targeting, and switched to these independent advisors, who it was so much easier to do business with. You didn’t get big chunks of money at all at once. But if you gained their confidence, you got more and more of their book of business. So that was one of the big sort of things, you know, we learned was, you have to keep adapting to what’s in front of you and the feedback you get. And you have to stay focused, because in those early days, everybody’s coming to us, why don’t you do this? You should do this too. You should do that. And we’d sit down, I said, we’re not doing anything. But this we can’t take all these other things on, we got to do one thing exceedingly well, and that became running after people who wanted, had a big chunk, which is a high net worth of taxable money, we could manage it, get it managed more efficiently than they were doing now. So we sort of become to the mass affluent, like the family office that the really wealthy people had with accountants and tax people and everything else doing the business we could, we could enter, supply that to the mass affluent.

Jack Sharry: So, Jim, talk a little bit about, because you’re on the frontlines, obviously with, with Len on all this stuff, talk about how the momentum picked up. Because you’re talking RIAs, by the way, no one talked about RIAs back then. Today, it’s a fundamental part of the business. But back then it was sort of a, wasn’t a big part of the business. It was wirehouses and regional firms and what have you, and you guys kind of broke that new ground. So talk about how you emerged and that ultimately became, got to the point, we’ll talk about Pershing buying Lockwood in a little bit. But leading up to that, because you generated significant momentum, you really picked up and got attention across the board.

Jim Seuffert: Yeah, that’s… thanks for that question. That’s a good one. And it just kind of popped in my head just now what the answer would be to that. So Len mentioned the one advisor at a time. Next thing, you’ll get a, you get an advisor had a book of business, we’d literally evaluate every single client, what a transition would look like, and offer to fly there and actually fill out their paperwork, you’re sort of knuckle dragging your way through to get the momentum. So then once we got a number of I remember this, Len, like it was yesterday. We had a number of advisors, that were beginning to pick up the pace and putting their every next new account with us. And we decided, and we did at the Desmond Hotel, Let’s jam them all into a room and just have them talked to each other. And then the frenzy began. When you get advisors, the same is true today, it’s just on a much larger scale. When you get advisors, if you’re doing the right thing for the client, and you’re being, you’re being you know, as honest and transparent as possible, then you start opening up the kimono a little bit and bringing them in and said, help us. And they’d love to talk to you too. We came up with the you know, this… your awards, your this, your that. And next thing you knew we had, we marched away on to towards, you know, training with hundreds and hundreds of advisors at a time.

Jack Sharry: Yep.

Jim Seuffert: But there is no silver bullet answer to it. It was just getting up early and just doing the heavy lifting every single day. I wish there was some some magic to it, but there’s not.

Jack Sharry: So, Len, talk a little bit about that if you would, because for I’m thinking of our younger members of the audience, as far as they know, the business was always done as fee based managed money type business, and it wasn’t. You guys are, you’re in the mid 90s, I think. I’m assuming in terms of where we are on that. I forget when you guys sold to Pershing, I want to hear about that too. But basically you were creating an industry. Is that fair to say?

Len Reinhart: Yeah, it was something, the fee based concept. As I said most the people we worked for didn’t understand our business. It was so different than the commission business, but all of a sudden, it was extremely profitable. We didn’t have lawsuits. And so our management started to feed us. You know, meaning, it wasn’t hard, we were growing to 25% a year. So you know, it was easier to, for us to get funding from the mother companies we were working for at any given time. So that really became a key as and then like, just like when all the fast food restaurants are on the same street, they all do more business. The same thing happened, as all the other firms were watching this, we got to be in the fee based business. You know, we’re thinking, oh, that stinks. It’s gonna be awful. And now we got to compete with all these people, actually, that’s when the business exploded. When everybody else condoned what we were doing, you know, that’s when our management would say, “Okay, we’re gonna give you twice as much money as we gave you last year.” And we had to explain you don’t, you don’t understand everything in managed money is a year delayed, you know, yeah, we can add more salespeople, but it’s gonna take us a year to get them up to speed before they bring in accounts and advisors. So it’s a very slow process in managed money, unlike doing a hot deal in the commission business. You know, it takes a long time. I remember one point we were owned by American Express and the CEO was Jonathan Linen. And he got me up there. And I was actually helping him with his own personal assets. And we were starting to manage it. And he said, okay, Len, this is so phenomenal, let’s raise your budget two or three times. And I kept saying, you’re gonna be disappointed in the first year. Yeah, we’re gonna do 25% this year, if you give us that or not. Now, if you give us that, year or two, after that, three, you’re gonna see that accelerate from 25 to 30, maybe even 40%. But it’s, you’re gonna be, there’s no immediate reaction to more money for us. And that was a difficult thing for people to get.

Jack Sharry: So you made it happen. You guys are now growing and 25% sounds pretty, pretty good clip to me. How did that result in Pershing? As I recall you, I think there was a bit of an auction that went on.

Len Reinhart: Yeah, we were talking about the brokerage firm. Okay, then we do, Lockwood. And for five years, we got up to the $11-12 billion. And I, you know, one of the things I remember was, you know, did we make it? And it was really about a billion dollars when we were independent, where we said, yeah, we’re for real. Yeah, doesn’t sound like a lot of money now. But I’ll never forget Jamie Dimon, we did a little thing and one of the rags thanking the advisors for giving us this money. And Jamie Dimon tore it out, send it to me with a congratulatory note. And so that’s what I said, hey, we made it. But then we continue to grow the business. And what we did was, and our investors were very good. They were never that, you know, they wanted the business be profitable. But we were a growth business. So we basically ran it as broke, breakeven. Anytime we had money. We hired more salespeople and more technology. And we did that for five years. And then what you’re talking about what happened was, okay, now, the industry is starting to see, hey, this after tax management is really something. And so all of a sudden, one bank came to us and said, “Hey, we’re gonna get into this business. We can either buy you, or develop our own.” So we hired an investment banker at that point, and ended up with three people, three big banks, bidding on us. And you know, the magnitude of these banks were such that to do an acquisition of us, they didn’t even have to go to the board. We were barely, maybe a footnote in their annual report. So we were able to negotiate a deal that was much better than what our financials deserved. To put it that way. So there was a huge premium for the bank to get into the business quickly, rather than spending years trying to develop what we were already doing. So we jumped on that and that, that was Bank of New York and great management people. And then they came to me, we were only there like three months. We were still using the small clearing firm. We were about to convert it to Bank of New York’s clearing, which was also small at the time, and the CEO of Bank of New York called me up and he said, “Hey, Len, we’re thinking of buying Pershing, but we don’t really know much about the brokerage business. Can you come up and tell us, talk to us about the brokerage business?” You know, and I was like, a tiny kid in a candy store. Wait a minute, you’re gonna buy the biggest independent broker dealer in the country, supplying all these other firms. And you know, we could market to that so, you know, I think I said, the greatest deal in the world. It was the greatest deal for Jim and I. I’m not sure it was for them. They bought… Yeah, they bought Pershing. And then we went to management and said, look, the person we’re working for at Bank of New York is awesome. But we should really be part of Pershing. So then we flipped over and became part of Pershing and then the growth was incredible at that point.

Jack Sharry: So, Jim, talk about that growth. It’s sort of the cherry on top as you guys built this thing from nothing to something. I, your earlier comment, Jamie Dimon writing you a note, by your billion dollar, first billion dollars, I’ve always found the first billion is the toughest billion. But, Jim, talk a little bit about, if you would, about you guys enjoyed explosive growth, as you connected with Pershing. Why don’t you talk a little bit about that.

Jim Seuffert: So keep in mind, it’s the largest custodian, independent custodian like on the planet. So the money’s already there. So it’s sitting there. So part of the challenge Len and I had was the oh, we got to get people to change custodian and it’s all new paperwork. And you can walk into Pershing and say, oh, my goodness, it’s all sitting right here. All the broker dealers and Len and I can rattle them all off, all the big players are there. And they have an army of relationship managers that could get a piece of the action by offering us part of their bonus pool. I mean, let’s face it, the annuity stream behind a managed account is far greater than anything else they had in their toolkit. So suddenly, we are getting calls. Can you be here? Can you do this? Can you be, you know, we’re the subject matter experts. And you’re closing very, very large deals where you’re literally transferring accounts, which by the way, did not require people to sign paperwork. So we figured out ways to assume you know, the statement of objectives, what we had to do to get the money over. And just you take them over in big, in huge tranches. So we were kids in a candy store, just trying to hang on to the funhouse, as we were growing like crazy. That’s the way it went.

Jack Sharry: Yep, yep.

Len Reinhart: Yeah, our biggest problem became we couldn’t handle the growth. And we had an earn out deal that was based on profits. So we didn’t want to spend that much more. So we had to go back to Bank of New York and say, look, the deal we had, we can do it, but we can’t take all the business that Pershing can give us. So we negotiated, basically got rid of that settlement, where they could now fund us, and we could try to keep up with the growth that Pershing was showing us, which was still difficult. It was still hard.

Jim Seuffert: So one thing to kind of correct here, because Len always says “we, we, we,” it was him. You know, he never gives himself enough credit. So all of these milestones, first wrap fee, you know, products, it was Len. It was nobody else. We were this small little team of, you know, whatever you want to dub us that supported whatever came out of his mouth. You know, doing the earnouts, you know, selling, you know, selling the Bank of New York, you know, the investment bankers, no offense to them. Len was the investment banker while he was doing his day job. So it’s just the facts. But you’ll never hear it from him.

Jack Sharry: Yeah, I hear you. So Len, and Jim, what do you guys most proud of? We could talk about the end stories. These guys sailed off into the sunset, Lockwood is a key player, the rest of world copied them, we don’t need to… Everybody knows the rest of the story, so to speak. What are you most proud of, Len?

Len Reinhart: The team we built. It was a team that started, that we built at brokerage firms. A number of them joined us, Jim included. And Jim was the best hire ever made. I’ll tell you that story since he was talking about me. You know, I’m brand new. And I’ve been there 18 months and I asked for another person, that gets approved. Lady calls me up on Friday and says I got the perfect guy for you. I said fine. You know, have him come in Monday I’ll talk to him. She goes no, we need to hire him today. I said well I haven’t even met him. She goes, we really need to hire him today. I said why do we need to hire him today? She goes because there’s this big Wall Street marathon run. I forget what it was a 5k or 10k or something. Down here. She goes we’ve lost to Merrill Lynch like 12 straight years. This guy is a world class runner. Fine, we hired Jim and you beat everybody by like 10 minutes or more. And he had to wait at intersections because he wasn’t sure which way to turn. And that’s the best hire I ever made and I never even met him.

Jack Sharry: That is… I have not heard that one.

Jim Seuffert: That’s pretty true.

Len Reinhart: Yes.

Jack Sharry: Go, go with what you got.

Len Reinhart: Yeah. You said what I’m most proud of, it really was the team of people. Because the great thing about the team of people and Jim and I was people knew their strengths and weaknesses. We had a lawyer or John Lor. And everybody stayed in their lane. You know, we’d make a decision about what we were gonna do. And everybody went off and executed. You know, and that’s rare. And that’s yeah, it was a something, there was no infighting, no backbiting. You know, everybody knew what their channel was. I didn’t try to tell Jim to do what he was gonna do. He didn’t try to tell me to do what I was doing there. Or John Lor or David Coy. All these people? You know, they just did it. They just executed.

Jack Sharry: How about you, Jim? What are you most proud of for this whole experience?

Jim Seuffert: 1,000% echo what Len just said. Maybe one other little tidbit is that the name Lockwood is still alive and well.

Jack Sharry: Yeah.

Jim Seuffert: That’s pretty cool.

Len Reinhart: Yeah.

Jack Sharry: Why don’t you explain that to our audience?

Jim Seuffert: Some people would say, well, who’s, what’s a Lockwood? What, is it a thing or, well, that’s a person? And we probably don’t give enough credit to Jim for mentoring, mentoring the both of us. But there is a, there’s a gentleman that would put you out there and size you up and then say, okay, I’m… he’s ready to go. So this gentleman, Jim Lockwood, was, was really one special individual. And, you know, through through the passage of time, you know, the Bank of New York, kept the brand and kept his name. So there’s somebody that maybe the industry should you know, he’s passed on, obviously, maybe not obviously, but he has, maybe do a more study on this gentleman, because he was, he was one special individual, for sure.

Jack Sharry: Gotcha. So, guys, as we look to wrap up here, you’re still students of the business, even though you’re both retired and not as active as you once were. But what’s your observation on where it is today, where it’s going, any advice for future leaders, I’d love to get your thoughts on where we are and where we’re going.

Len Reinhart: Yeah, as I’ve said before, in this business, it’s a slow process to make major changes. And we’ve seen the change from fees, from transactions to fees, to managed money, to bringing, you know, financial planning into managed money to move away from the risk based questionnaire to a true sort of goals and objectives through financial planning. And I think the last piece that’s missing, as we’ve known for 40 some years, the biggest hurdle to investing is taxes. But taxes, you know, when you were at a brokerage firm, where it was taboo to give tax advice. And now with firms like yours, you’re starting to see taxes become front and center, you know, in the investment process, and, and that’s the last key component, I think, of really creating a family office for everyone. You know, not just the billionaires… who have their own staff of people doing everything for him. But it’s doing that. And as far as the direction in the future, I think you’re gonna continue to see it, move to a more outcome based process, where the investing piece and the intricacies of that are really buried far back in the process. You know, so that was when we started in this business, it was the investment stuff, it was absolutely upfront. And now I think you’re moving to something where people can understand it, where what are you really trying to achieve? What’s your goals? Okay, let’s look at this. Let’s look at your taxes. Let’s look at everything. And let’s come up with a plan to do that. And then given that, we’ll invest it to give us the highest probability of achievement.

Jack Sharry: That’s great. How about you, Jim?

Jim Seuffert: Thanks, Jack. My answer is gonna be totally different than Len’s. Because Len, talked about talent, I was very proud to have, you know, developed, Envestnet Institute On Campus to help young people, hopefully get into our space, if you will. And I still do a lot of mentoring for these individuals weekly. And what I’ve been telling them is the following: If everyone looks at LinkedIn, if you looked at LinkedIn, call it a year and a half ago, congratulations to so and so. Just started a new position. Happy to be blah, blah, blah, starting at blah, blah, blah. That was a momentous shift. So what, you got the COVID, post COVID, COVID hangover, whatever you want to call it. That happened. Well, guess what? You’re not seeing that so much anymore. So a lot of these new positions, new players, the chess board got shuffled people are in different slots. Having said that, what’s not being talked about is that now people are being laid off. Truth. So and it’s not just in the rank and file, you’re seeing major management shifts of people that have been in this business a long, long time being let go. So my advice for that younger crowd, the up and coming crowd, is that there’s an opportunity here, it’s right in front of their faces and it won’t last and, Len, I’d love you to comment on this. It’s not gonna, it’s a trend. It may go on for a little while, it’s not gonna go on forever. Where if you stick your nose out there, you may get, be able to see the chess game a little bit better. But you’ve got to take a risk and go do it. And I don’t think you can do it by being remote. I think you got to do it by showing up and asking and sticking your nose into things and raising your hand for things that may be uncomfortable.

Jack Sharry: Len, anything to add there?

Len Reinhart: Yeah, I mean, I agree with that. It’s you got to be willing to take the risk. You know, when Jim and I did Lockwood, I had four kids, he had three kids, mine are gearing up, you know, high school, middle school, getting ready for college. And you know, you were making very nice income. And you have to have the support. And I’ll never forget, my wife said to me, she goes, “I could tell you never really enjoyed vacations. Your mind was always someplace else.” And the last couple of years, when I was working for the big firm, she said, you’re starting to plan the vacations now. She goes, you don’t like it as much, you know, so do it. We’ll take the risk we can always live off of less, we can figure it out. Yeah, so you had to have that support also, to say yeah, your whole family situation, okay, this, this could change us dramatically. The wrong way, if it doesn’t go well. But then I tell you what, when it starts to go well, I hated to see Fridays come. I hated weekends. It was so exciting. I just wanted to keep it… And and that was infectious. I’d go in, you know, stop in Saturday, just to do something, and Jim would be there and there’d be 10 other people you know, working. And no one asked them to do it. You know, became an infectious thing when it starts really humming, it’s so exciting.

Jack Sharry: So a way in with my observation of Lockwood back in the day is the period that Len’s describing, I was jealous. I was looking over there and we’ve had some conversations at the time around working together and so on. But boy I thought, what a great place to work, Lockwood, they’re just smart and willing to take smart risk and doing cool stuff and breaking new ground. So just as an observer, competitor, I don’t think really competed. But just as somewhat of an observer of the business it was, it was fun to watch. So, gents, this has been fabulous. So we’re gonna need to wind up here. We try to keep these to a half an hour. This one’s going to be double that. So, but I think all, all worthwhile. All good. So one last question. What do you guys do outside of work…? Oh, that’s right. I’m sorry. You guys don’t. What do you guys do in retirement that you’re excited or passionate about that people might find interesting or surprising. Jim, you want to kick it off?

Jim Seuffert: Sure. Thanks. Thanks, Jack. So I am doing some giveback work. One of the things that I’m having some fun with is working with veterans, I consult as an advisor to Warrior Surf Foundation. So they help our vets, men and women with post traumatic stress. And part of it is surfing, therapy, consulting work with them, yoga, which is kind of fun. So I’m sort of the money guy, we have a, we have a fundraiser tonight. And I’m gonna go there and hopefully raise some dough. The other thing I’m doing is helping young people start new businesses. And that’s a long story but it’s a lot of fun. It’s you know, it’s not particularly wealth management down here. It’s you know, I’m starting a fitness, I’m leaving my, my place of business and my boyfriend and I are going to be fitness trainers example. Young lady starting a catering business, young, young man starting coffee shop catering business, just kind of figure out a way to scale that and help more of these young people, you know, have fun and do what, you know what Len and I did, which is start something on your own. So that’s what I’m doing. And having fun.

Jack Sharry: That’s great. Len?

Len Reinhart: Yeah, I remember after I retired you… I said I was going on vacation. And you said how the hell do you go on vacation when you’re retired? I mean, what’s the difference? I remember that stopped me in my tracks. I said, well, basically I do the same thing I do now but a different location was all the difference. But the one thing you know, in our career and you’ve experienced in financial services, it takes very long to build something and it’s sort of intangible. I got into building stuff. I’ve always like building stuff, if it’s a business or not. I have a remote property up in the Pocono Mountains and I got into building some tables and stuff and now I’ve expanded to, I bought a wood mizer, chopped down 60 trees and I’m building a log cabin on top of the mountains. I think I’ve watched too many of those survival shows. So, you know a lot of my free time I do play golf. And one thing you also got to do when you retire is, you got to spend a couple of years finding out what you don’t want to do. Yeah, and you go through that process, but the one thing that sticks with me is building things.

Jack Sharry: That’s great. I didn’t know that. We talk often, but I didn’t know that part. That’s great. Wonderful. So gentlemen, thank you. This has been a very important walk down memory lane. Really good stuff. Thanks so much for sharing, as you are wont to do, you do that so well. So for our audience, if you’ve enjoyed our podcast, please rate, review, subscribe, and share what we’re doing here at WealthTech on Deck. We’re available wherever you get your podcasts. Thank you again, Len and Jim. It’s been a real pleasure. I’ve really enjoyed it.

Len Reinhart: Thank you. It’s been a lot of fun.

Jim Seuffert: Thanks, guys. Great seeing you guys.