Effectively Running a Models-Based Practice with Robert Pettman

Jack Sharry: Everyone, welcome to wealth tech on deck. Thanks for joining us. Each week I had the privilege of speaking with industry leaders about issues that we were industry forward around financial advice, wealth and asset management, retirement insurance and annuities, and technology. Our guests are working on strategies to help advisors investors, participants at firms enjoy better financial outcomes all around the confluence of digital and human advice. We tend to focus on the challenges and opportunities our guests are grappling with each day. what’s new and what’s exciting now and where the industry is headed. Today we’re speaking with Rob Pettman. Rob is executive vice president Wealth Management Solutions at LPL Financial Rob, welcome to Wealthtech on Deck.

Rob Pettman: Oh, thank you, Jack, happy to be here.

Jack Sharry: Terrific. So Rob, let’s start with you telling our audience about your role at LPL. As I understand you’ve recently taken on some more responsibility. So fill us in. Yeah, sure.

Rob Pettman: So I lead a group called wealth management solutions. So if you think about that, that would be inclusive of the advisory platforms and the brokerage platforms that the firm offers the investment products that we distribute the relationships with asset managers, insurance companies are the wealth providers and also wealth tech providers. By the way, that’s actually a new addition that we’ve added on there, given how important FinTech has really emerged into our industry. And then certainly last but not least, would be the research department as well, which be a new component that essentially completes the whole wealth management cycle, if you will.

Jack Sharry: And I’ve been watching the LPL make lots of moves of late, they all sound pretty smart. We’ll get into some more that I’m sure as we go along here, wanting to talk a little bit about your background, how you got started, truth be known, I knew you when you were first starting at LPL way back when you and I had a conversation in Boston, as I recall, I’m gonna say a long time, I’ll just won’t put yours to it. But it’s a decade or two at least. So why don’t you fill us in. How did you get started? How do you wind up doing what you’re doing now?

Rob Pettman: Sure. So I started actually, as a financial advisor. And I worked at a hybrid RAA before hybrid IRAs even existed or a thing. And I was in Florida at the time I went to undergrad in Florida. And you know, not the best time for me to to go out and explore financial services, it was in the wake of 911, we’re in a whole ton of folks hiring and I went door to door to these RAS to try to convince them to hire me. And I finally convinced one to go about doing that. So I ended up working in this hybrid RAA for about three, three and a half years, something like that. And that was just that was just the greatest experience I really had that was the foundation for my career. Because one of the things that I understood is just really how hard this job is. And you know, being able to relate to financial advisors and actually be able to speak like you know it and you’ve done it before, it means a lot, especially if you’ve sort of walked a mile in their shoes. So that was the beginning. And there was a point. You know, when I started as a financial advisor, I did what most people did you sort of answer the phone, and then I got into the sales process and what have you, and I was terrible at it. And I was really not having a great time, dialing for dollars. And it was about a year and a half. And it’s hard, right? It’s really hard. At the time I was telling my wife, you know, it’s like, Hey, I’m just, I’m just not good at this. She was gonna go to law school and said, hey, we’ll just look somewhere nice. I mean, we’re in Florida. But this isn’t a nice places, let’s just do something different. So she goes off, she applied, she plans to Colorado and San Diego. And sure enough, she gets a full scholarship to law school. I don’t even know those existed. But she got one. And then of course, by the time that this happens, she gets into school in San Diego, and I actually turned my business around and I actually start getting better. And I start getting clients and they start building a book of business. And I’m like, Well, I’ve actually, you know, figured this out. So we make the move I go over, you know, I tell my oSj you know, hey, we’re gonna move San Diego, she’s got a full scholarship. I’d like to start my own branch in San Diego, because I think I got this figured out now. So he said, Sure, go ahead. So I’m now in San Diego with no marketing money, no dialing for dollars out of a 900 square foot apartment putting my wife through law school. And lo and behold, I’m terrible again. support or infrastructure, or a name, and I’m 25 years old, and you know, all of the issues that come along with that. So I I went over to LPL, LPL was in San Diego, and they had just starting up a product desk. And that was my first entrance into the corporate world. They had a desk of eight folks that they pull from the service center and the whole job was to help advisors navigate the product shelves. Because it’s an independent broker dealer, you got a lot of choice. How do I help map you to the right solution for an investor’s? So great concept. I started on the team, but lo and behold they were all from the service center and I was the one financial advisor And we were all terrible. So if this is this consistent thing of not being good at jobs for me, I used to take home product prospectuses with me and study with my wife while she was in law school. And because I was just tired of us being so terrible. And as I was studying these prospectuses that create grids, and then ever tried to teach the rest of the crew about the product, so we could just be better at our jobs. And lo and behold, as you know, right, when you’re the teacher, you actually end up having a command over the subject matter. And sure enough, the company said, hey, you know, you kind of know this stuff. You know, why don’t you take over managing our product line. And so I did that. And you know, I got one and then got another and then I got all of it. In the end.

Jack Sharry: Bev is great, I love it. So from a financial advisor on both coasts, and to a product guru, one product at a time to now kind of overseeing all products. Tell us about what you’re doing now. What are you excited about what’s happening in your world LPL? I just give you my editorial comment? It’s just looks like it’s killing me on all fronts. So why don’t you talk a little bit about Phyllis, into what you’re doing now? And, and where you see things? We’ll talk about where things are going a little bit. But yeah, what are you working on now that you’re excited about?

Rob Pettman: Sure. So look, I think you’re seeing a huge movement towards model space practices. And that’s something that, you know, it gets me excited just in how we are able to create the capabilities, and the infrastructure to help enable advisors to to run their businesses more efficiently, and also create great outcomes for investors as well. And when I say models based practice, I don’t actually mean forcing advisors to outsource money management, what I really mean is just the practice of having a discrete set of models, whether the advisor created it themselves, whether their firm created it, whether using a third party doesn’t really matter. It’s just about having a process that gets you to a place to have that scalability, that closeness to the investments that you’re recommending, you’re having a narrowed down your diligence, you’re easily telling the story to investors about what’s happening and changing, and ultimately putting you in a better position to expand the level of advice that you’re offering beyond just asset allocation, and what have you to other sorts of financial planning concepts and other services. Alongside of that, so is working on that when facilitating models based practices, we’re doing them in two different ways. We’ve done it within our UMA, where, if you think about it, you amaze when they first came out, they’re almost productized. And people were just trying to sell a you ma right as a product. And I think that turned a lot of folks off. And we didn’t want to do it that way, we really have a principle about having this advisor driven innovation gene, and something that’s really trying to help people solve problems within their practice. So we actually went about it in a pragmatic way and said, Hey, what problems can we help you solve in helping you run a better business and creating these outcomes? And lo and behold, with our you, Ma, we started with a model marketplace. And that was great for a lot of people, right? They started with our research models, and we expanded it to a number of different third party providers that they could choose from. So you got over 200 Different models available on the platform. But not everybody wanted to give up running the money. So what problem can we solve? Well, they may not want to give up managing the money. But they certainly don’t like the trading aspect of it because nobody differentiates on trading. So we created this concept called advisor sleeve within our UMA that essentially allows a financial advisor to create their own menu of discrete models, and then outsource the trading to LPL to essentially give him that extra leverage horsepower operating efficiency to make that conversion to a model space practice. So we’ve done that within our UI main works, we’ve got a large roadmap and expanding of the versions of innovation we do it for we we have versions of advisors sleeve, that’s a firm sleeve, or you know a bank or a large RDA concrete models for, you know, the advisors in their office that streamlined into proposal generation new account opening and what have you. But that’s not the only place we’re doing it we’re also doing in our rep is pm platform. So if you remember, we acquired a company called Blaze, which is a trading technology that was built specifically for our EAS. And we love that because again, it’s purpose driven and built based around an RDA need and use case. It’s not one of those tools that was created by an institution to serve portfolio managers that’s tough to navigate. It’s built for RAs and built on the practical use case. And so we’re fully integrating that into our platforms today for our repas pm platform. And it’s really with the spirit of helping advisors run a model space practice more efficiently and effectively. And so we’re really keeping an eye on what those workflows look like how somebody puts a model together, making it as easy as possible to run a model themselves. And then we’ll also have the ability to have third party models in there as well just with that extra dynamic as you know, and iREP is pm platform. You get that review release workflow, right versus if you can One of the una where you’re essentially outsourcing the trade the trading component entirely. But it’s important to have that no matter how you want to structure your business, we’ve got options, that’s the motto of really how we’re trying to build out our capabilities and sell for them. So that’s a, that’s one thing really excited about. The second one is just when you look at the macro trends, you know, obviously, this is a big push from brokerage to advisory. But there’s some implications associated with that. And one of the things that we noticed was around, you know, obviously, there’s a regulatory requirement with advisory for advisors to meet with a client on an annual basis. And you know, having been an advisor, right, I can tell you exactly what that process is, because I’ve done it, you know, it clients coming into the office, I’m going through, I’m creating a, an agenda in one place. And then I’m going to the performance reporting tool that morning, because I want the closest performance reporting that I could find within the specific template that I have, right, and then I’m getting other sort of personal information from the CRM to help me understand, you know, other aspects of what’s going on with the client. And I’m trying to assemble all of that in advance of that client coming in. And then we’re going to have the meeting. Well, if you think about the amount of work that’s involved in, this gets considerable for either the support staff or a financial advisor. And we saw that as a real bottleneck in the overall adoption of the advisory business. So we created a tool called meeting Manager, which is, you know, is another part that gets me really excited because it’s just again, thinking about a problem for advisors and trying to help them solve for it. So what meeting manager does is it really connects all of those workflows, where it essentially says, Hey, tell me when your client annual meeting is now and then we’ve got the set date. And then on a set date, I’m going to go ahead, and I’m going to run the agenda for you. So the agenda, when you use your agenda template, put that together, and we’re going to run the performance report and your templates, attach that to the agenda. And you know, you’re going to have a lot of different customized features that you can put in there, that essentially has your packet ready for you when that meeting actually occurs. And then we’re going to automate the whole process that’s required to go about documenting that you had the meeting as well and stored in the LPL ecosystem. So really trying to streamline that process and support the advisory business overall. That probably number two is we think about workflows. And then last but not least, I’ll talk about products. I’m a product geek. Sure, sure. You know, certainly, you know, in the retirement business, there’s a ton of tailwinds within the retirement plan space. So certainly looking at the opportunities with pulled employer plans, and how we might help small businesses cover more Americans in the country. So that’s a really exciting and really noble cause that we’re excited about. Obviously, there’s a strong push in the level of adoption and things that can happen within the alternative investment space, you get a lot of innovation that’s occurring both in the product structure, and the investments. And if you start looking at different places, you’ve got to the, you know, certainly other things that you’d want to focus on. And then lastly, in the the annuity business, as well, certainly income and retirement incomes very important. You’ve got new and unique challenges coming certainly as you start looking at the advisory space. Personally, I think we talked about like what’s coming, but I think the standalone living benefit business isn’t done. I think that there’s a lot of runway there for that out into the future. And it can be a really interesting add to a lot of advisory platforms, particularly in a UMA context. So t
hose are, that’s a lot, Jack, we got, I’ve got more, but those are the probably the best.

Jack Sharry: I was going to say, when do you sleep? Good, good for you. So wow, that is a lot. You got a lot on your plate. So my question is one, how do you juggle all those balls, because you got a lot to juggle there and you get some swords and some fire sticks and whatever that you’re juggling in between all that? How do you put all that together? And also, how do you convey that to the advisors, I know you’re very advisor centric, as a firm that’s really part of your mission is to really support the advisor fully. Sounds like you do have that. I guess my question is, how do you juggle all that? How do you make it available, and then something that the advisor can embrace? And I could be blown away by just all the choices and options and all that kind of stuff?

Rob Pettman: Yeah, that’s a great question. And I’ll probably break that up into a couple of different components. I think, first off, it starts with a great team, and great talent on the team. So you know, there’s a lot of different people that are involved in those elements of those initiatives that I mentioned. And, you know, it’s really important to have great talent that is creative, innovative, that’s client centric, that understands the issues that’s focused on solving problems for the clients, and essentially bringing forward those ideas to actually help propel the company in doing the best that it can in the end for its advisors. So that’s probably part one in the juggling just quality people make everything a lot easier. Yep. The second piece is around, I might categorize the part that you’re highlighting around advisor adoption, and how do you make that happen? We’ve done a lot of work on this. I think adoption overall is an issue that a lot of financial services firms struggle with across the industry. You don’t then isolated any parts Killer firm per se, the big issue across the industry. But we do like to think about the overall the workflows, the experience, how we roll things out. One of the latest challenges we’ve been thinking through is if we were to do a product launch, how do we go about scoring it on the relative level of complexity for adoption, and, and then based upon certain scores, that can actually dictate the level of training and communication that’s commensurate along with that. So that will be sort of one framework of actually how we think about rolling out products. And then another one, too, is to also envision a world where we don’t actually have a, you know, a telephone or a service center to call. How do you make something so easy to adopt, that nobody has to pick up the phone and call you on how to actually use it. So we try to challenge ourselves in those two different ways, as we think about adoption, and really trying to be the best that we can be to help advisors in their practices

Jack Sharry: Smart. I’ve not heard of characterize that way. But that sounds like my version of that. For what it’s worth. Is that really to build in the into the technology of anything that you do something where it’s as easy as the rest of technology in our lives where we don’t have to? We don’t have to call someone to figure out how to get it done some very smart.

Rob Pettman: Yeah, that’s right. There’s a lot of things around this. My other favorite one is training is a design flaw.

Jack Sharry: We are singing from the same hymn. Totally. Yeah, no, I couldn’t agree more in terms of what you’re saying. It’s just how do you make it so simple that anyone can do it? That’s what the objective is, right? Yeah. That’s the case, then you can share with the client, you can you know, as an advisor, you can feel fully comfortable in explaining what you’re talking about, because it’s all right there. Yep, that’s right. Terrific. lot on your plate. A lot of accomplishments, we haven’t identified all the accomplishments. But if you read the news, you’ve heard and will hear more. LPL seems to be putting it out on a regular basis, and not that you’re not doing what you’re doing every day. But you’re also thinking ahead next three to five years. What does that look like? What do you see coming down the pike?

Rob Pettman: Yeah, and, you know, I’ve seen a couple of your podcasts. So I want to make sure that I’m not repeating a lot of the things that are being said, I think, you know, initially, there’s this buzzword when somebody asked that question where the first thing somebody says is personalization. Yeah,

Jack Sharry: Yeah, I’ve heard of that. We ought to do that, do you think?

Rob Pettman: It will be nice, I might categorize it a different way, though. Good, good. I wrote an article this year, and Aaron’s just highlighting some of the big trends. And one of the ones that are highlighted, just probably at a more macro level is this idea that technology is attacking the product wrapper. So if you think about it, a product really exists as a vehicle of convenience, because to be the most efficient way to deliver or put something in the hands of either an advisor and end investor. And it so happens that with the evolution of technology, we’re actually getting to a place where that’s not actually the most efficient and effective way to deliver solutions. And as you look at the difference now between packaged products that are not personal, to even think about the proliferation of the SMA business, which can be a lot more personal and personal, either through tax management, either through Rob’s and financial services, and probably doesn’t need any more in his life. So we’re going to cut some of that back, right. There’s a whole host of possibilities here, but somatically, that’s what’s really occurring. And it’s bringing forward, you know, these extra unique benefits that you didn’t have in the Legacy product menu. So I think that one, that trend will continue out into the future, and you’ll see it in a host of different places. I think next to that, I think the client engagement is going to evolve and change. And I hate for a lot of this to be sort of technology themed. But there’s this role that technology can play with, essentially helping to strengthen the bond between advisors and investors, we don’t necessarily view the world as being something where technology takes over and does everything for everybody in this robo type fashion, or hypothesis is mostly oriented around human centered advice. And this concept of wrapping an advisor with technology to actually help them and help investors in you know, scalable fashions in a way that creates better outcomes and personalization and other things. So we’ve learned a lot of lessons on you know, communication and technology and the role that it plays. We took some from the robos. And if you think about the robos, when they started, they had some innovation by accident, they had what I categorizes as digital servicing, and they did it out of necessity, because they didn’t have anyone to pick up the phone if somebody called Sure. So the byproducts of that was was that they actually ended up removing the low quality conversations that an investor might call about, but preserving the high quality ones right? And so it’s instead of like what happened in the market today, they’ve got a digital interface is telling people about that right? But when the question is, hey, my life changed. I’ve got an inheritance or you know, something happened in the family. You know, they have that outlet for support there. So I do think clients engagement continues to evolve, and how advisors are able to stay in front of them with, you know, their thoughts and their level of support to help them as they think about their financial future. And then speaking of financial future, probably the last piece is around this concept of the expansion of the advice model. And we see that today with the proliferation of financial planning, and the sort of host of services that are delivered the trend of advisers moving beyond the equity side of the balance sheet to the debt side of the balance sheet to thinking through benefits. And a host of things I am particularly passionate around, I’ll just give you another story around estate planning, I think that that’s an area that has a whole ton of potential, particularly, it’s probably the next one in the FinTech space, because I’d highlight a couple of different issues. First one being that, you know, if you work with an estate planning attorney, and you know, advisors will often be frustrated by the transactional nature of it, because they all have this sort of ongoing fiduciary relationship with a client, they’ll go to a state planning attorney, they’ll get their estate plan documents done, but it’s transactional. Three years later, their life has changed as no one’s calling them back saying, hey, what else can I change for you and your estate plan, right, but the advisor is left holding the back there. So there’s some interesting companies that have been started up in this theme of thinking through how we might make the estate planning process workflow service a little bit better in the context of the wealth management space. And next to that is also the evolution of you know, our daily lives and the things that we do. And if you think about how the digital world is progressing, you might also think about how sometimes we don’t realize it, or that we might not be prepared for it. And the best example I can give is, I was at a trustee conference, the the corporate trustees conference, and it you know, there was this group discussion, and nobody wanted to be named the executor of an estate. And the reason why was because back in the day, you could sit by the mailbox for 90 days, and you’d have a pretty good picture of what was going on. And today, you’re lucky if you get 10% of that. So we’ve got all of these now unique issues that arise because you know, who’s planning for, you probably have friends that they know may have passed away or on Facebook forever, right? How do you think about your social media legacy? How do you think about crypto, what happens to crypto assets, that’s a whole other thing. This company started up around that. And looking even as like a lot of the Silicon Valley companies, they’re only now just releasing some things that actually considered death, because a lot of them didn’t like to think about it interesting. If you think about email, and again, the social media places, there’s a whole host of other issues, usually think about the digital aspects of people’s lives that folks have initially planned around for. And there’s a ton of opportunity for advisors to layer in provide education and value there.

Jack Sharry: So Rob, this has been great. I’ve really enjoyed the conversation, you got to you got a huge spectrum of products, solutions, opportunities. Now you’re executing well, LPL is on a roll. So congratulations on all that good work. As we look to wrap up, what are three key takeaways you’d like to share with our audiences, what we’ve covered so far today?

Rob Pettman: First, that theme of technology attacking the product wrapper, and it’s not something that’s scary, it’s something to be embraced. And that can provide extra features and benefits for advisors and investors. Second, sort of coinciding along with that there’s this opportunity for the way in which we communicate and keep investors abreast of what’s happening with their portfolios with their financial plan. And their their course, throughout their livelihood. I think that evolves and continues to get better and helps advisors really strengthen that connection. And then certainly last but not least, the scope of services that have been delivered, continue to evolve, continue to get more robust, and thinking through the entire financial life of an end investor, versus only segments of it.

Jack Sharry: So Rob, thanks for the update on the three key takeaways. All very interesting and engaging. One of my favorite questions, as we’ve discussed, as we do each week with our podcast guests, is to talk about something that people might find interesting or unique that you do outside of work, that it’s kind of fun, or surprising or worthy of sharing. So please tell

Rob Pettman: I’ll give you interesting and surprising. So what is interesting is that I was born and raised in England, I’ll be I do not have an accent. Because when I went into the financial advice business, and I was cold calling, I had to get rid of it. Because if people don’t understand what you said in the first 30 seconds, I gotta hang up on you. Interesting surprising is this is a little off the beaten path. I can actually do flips on a whiteboard, there was a moment in time where I participated in some small competitions, which a lot of people find surprising given them. Six, three probably look like Arabic bird out there, but I can actually do that.

Jack Sharry: For those that may not know what a wakeboard is when he just explained.

Rob Pettman: Think of it like instead of waterskiing, it’s like a snowboard, behind the boat. And the objective is to jump awake and perform tricks.

Jack Sharry: Cool. By the way, this is why it’s my favorite question. You always hear something like really an accent both guns but the British accent as well. Is the wakeboard. So that’s great. Thank you. That’s great. This has been really enjoyable. I had high expectations, you’ve exceeded these. Thanks for great conversation for audience. If you’ve enjoyed our podcast, please review, subscribe, and share what we’re doing here on wealthtech. On Deck, we’re available wherever you get your podcasts. Thanks again, Rob. This has been a great pleasure. Thank you.