Key Trends in Wealth and Investment Management with Chip Roame

Jack Sharry: Hello, everyone. Thanks for joining us on this edition of WealthTech on Deck. Each week on our podcast I speak with industry leaders about issues surrounding wealth management, retirement, financial advice, and technology. I talk with those who are leading the way as we seek to help advisors, clients, participants, and firms enjoy better financial outcomes all around the confluence of digital and human advice. I especially enjoy conversations with people who are thinkers and incisive observers of what goes on in our industry. Today we are gonna have just such a conversation with Chip Roame. Chip is the founder and managing partner of Tiburon strategic advisors and the Tiburon CEO Summits. He’s also a leading strategic advisor to CEOs and other senior executives, and boards of directors in the wealth and investment management, as well as the wealth tech space. So, Chip, welcome to WealthTech on Deck.

Chip Roame: Great. Thanks, Jack. Thanks for having me.

Jack Sharry: So, Chip, let’s start with you telling our audience about Tiburon. I can’t imagine they would miss what you all do, ’cause I know I’ve paid attention for a long time and we are members. But, how you got started with Tiburon and how you got started advising CEOs?

Chip Roame: Yep, you got it. Let’s see. So, Tiburon is 24 years old next week. So, 24th anniversary next week. By way of personal background, I went to business school and all that stuff. I was a McKinsey consultant in financial services out of business school. And then I worked at Schwab as the strategy guy 28 years ago or some odd number like that. And about 24 years ago started Tiburon. So my background was McKinsey strategy projects with financial services companies and Schwab strategy, discount brokerage and mutual funds supermarkets and RIAs and things like that. And we launched Tiburon in 1998. So, 24 years ago,

Jack Sharry: How’d you come up with the idea? Where did it come from? Obviously, you were doing… sounds like you were doing strategy at Schwab and maybe some other spots, but how did you decide to launch it? Because it’s kind of a unique program in our industry.

Chip Roame: Yeah. Yeah, for those aspiring entrepreneurs out there, I’m probably not your case study. I did not really try to launch Tiburon. I didn’t write a business plan. I didn’t think anything about this. I just was kind of done in corporate America and you know, hung out a shingle, did a few consulting projects for mutual fund companies, and this was kind of pre ETFs and, you know, so some mutual fund companies and some RIAs and I knew the, what was at Schwab, then the FAS business, Financial Advisor Services, the RIA custody business extremely well. I knew the mutual fund supermarket, OneSource and the mutual fund marketplace extremely well. I knew online trading extremely well. So actually, it didn’t even have a name. Tiburon didn’t have the name Tiburon Strategic Advisors, it was just me and I took my admin from Schwab and hired one analyst and, and that was the beginning of Tiburon. I think the inflection point, Jack, was about three years later. So that was 1998. About three years later, I had done 20 or 30 or 50 consulting projects and for about 20 different companies, and they all sounded different to me. So I’d come out of this Schwab centric world and I meet firms like EM Financial Group that do high end life insurance, and I’m like, “Huh, never heard of you.” You know? And I helped them and that was interesting to me. And then I do a project like the Bank of Hawaii and like, wow, this is a real retail, people really go in bank branches, huh? And so it just started putting it together. And that was the beginning of the Tiburon CEO Summit. So I stopped doing consulting projects probably 15 years ago. I haven’t done a consulting project in a long time. Launched the Tiburon CEO Summits. We write research, I sit on a bunch of boards, I guess I sit on seven or eight or nine company board of directors today, we invest in some fin tech companies. And so, Tiburon has taken on of kind of a different life. There’s no more consulting going on, more the CEO Summit. So then my personal board portfolio.

Jack Sharry: Gotcha. And talk, if you would, about the CEO Summits, because those are fascinating. Talk about the constraints on who can participate and how did that evolve? And I think it’s a masterstroke personally, but how did that all get started and talk a little bit about what it’s like today?

Chip Roame: Yeah, so again, a bit like the firm Tiburon, Tiburon CEO Summits were not a master plan. It was, I think the original maybe 10 of them, we’re on number 42, Jack. The one coming up in May will be number 42. And I think we had about 10 of them at the local Tiburon hotel, it’s called the Water’s Edge for the handful of people who even know where Tiburon is. We might have had 15 Tiburon member/client people sitting around a table, and then our law firm who is Paul Hastings in San Francisco, ponied up and said, “Hey, if you want to make this bigger, you can use our conference room.” And so we had maybe 10 of them at the Paul Hastings conference room and that sat about 75 people. And again, if you were at Tiburon, we didn’t call them “member” back then. If you were a Tiburon client, if you had hired us to do a consulting project, you were welcome to come and that grew to be about 75 or 100 people and then we are standing on top of each other at the Paul Hastings conference room. And a fellow, Skip Schweiss, who many of you may know who then was actually he wasn’t even at TD Ameritrade yet, he was still the old Fiserv at that point. The Fiserv custody business at that point said, “Hey, if you ever want to take this out and make this bigger, I’ll be your first sponsor.” And so we moved to the Ritz Carlton hotels, and that was in San Francisco. Then maybe the next year, we started doing our spring summit in New York. And so speed up the world, we’ve now done 20 or 30 of them between New York, San Francisco, then last fall we tried Dallas, it was a big hit. And coming up in May, we’re doing the Boston Four Seasons. And I think we have record attendance already. So you know, so on they go. So again, there was no master plan, in fairness, it was me gathering people who had different thoughts. Not so different, Jack, than what you’re doing on these podcasts. And you know, I was putting them around a physical table, you’re putting them on podcast, putting leaders in a room discussing, and it’s now taken on its own life, and we’ll probably deliver 300 CEOs to the Boston Summit. Now all of whom are Tiburon members, and the most junior person in the room is an EVP, executive vice president. So it’s truly a CEO Summit across a lot of different companies.

Jack Sharry: Having participated in a couple, I can tell you, as a participant, they’re fascinating because it’s the best and brightest in our business, the leaders of our industry are all there. You get to talk to people and it’s peer to peer and you get to learn a bunch and you get to share a bunch and that’s in the in the hallways. And then of course from the stage, Chip gives a great presentation, has some fabulous CEO guests. This past one in Dallas, which I attended, Walt Bettinger, who I read about, followed for a long time, but got to hear him in person, just a brilliant mind. And Chip does a masterful job of letting the CEO tell a story. And so you get to hear what that thought process.. it’s fascinating. Maybe expand on that, just in terms of what might be in store for Boston.

Chip Roame: Yeah, so there are about 55 or 58 speaking slots on the agenda. By definition, all speakers are a CEO or a president of a company. So I would tell you, that’s my hardest job all year, to deliver 58 new speakers every time. And we also have an internal policy of no speaker can come back any more often than once every two years. That’s every four Tiburon CEO Summits. So delivering 55 or 58 speakers, repetitively, not using the same is a big challenge. With the way we set it up generally is panels of four CEOs with a Tiburon facilitator. It seems to be a big hit. We ask them all the same question, which is tell us three interesting meaty, strategic issues you want to talk with the audience about and it just, it just flows. I think, Jack, it’s very McKinsey-esque. It’s very high level strategy, what’s going on in the industry? And then periodically, your referenced to Walt, we’ve given the Tiburon Award out maybe 12, maybe 13 or 14 times to just people in the industry. It’s voted on by the attendees. So Walt Bettinger won the Tiburon CEO Summit award a few years ago. I think the first winner was Chuck Schwab. And then Ned Johnson, who we just lost a few days ago, and Joe Mansueto from Morningstar, and Jack Bogle, who we lost, and Harry Markowitz, and Bill Sharpe, and you know, these are the names who have won the Tiburon CEO Summit Award. And when we have them back, and only when we have them back, do I do a fireside chat with each one of them. So coming up at the Tiburon Boston Summit, we have two award winners back, Bob Reynolds, who built the 401k business at Fidelity and then went on to run Putnam and other firms. And then Mark Casady, who built LPL Financial. So they’re prior Tiburon Award winners, and I’ll do a fireside chat with each one of them at the upcoming Tiburon Summit. So that’s what I did with Walt. And I agree with you, Walt’s a terrific speaker and a terrific, terrific proponent for the entire industry, not just his firm.

Jack Sharry: Yeah, and a wonderful human being, which you can get by listening to just the way he delivers the thoughtfulness and, and what he talks about that’s not directly business related, but just culture and all that kind of stuff. He’s really a remarkable person. I really enjoyed that presentation in particular. So, Chip, you’re immersed in the data, given what your firm does, and also the daily conversations with what seems to be every C suite level person in our industry. What are some of the key issues you’re following now, some of the things you’re paying close attention to?

Chip Roame: There’s maybe a dozen. I was actually this morning, Jack, thinking about my own Tiburon presentation for May. And, you know, there’s probably I got about 10 big points. I’ll feature three or four of them in the interest of time. But…

Jack Sharry: Sure, sure.

Chip Roame: I think, starting at the beginning, I think one point that I think people overlook is I think the Gen X consumer is the big opportunity for the next 10 years. When you work your way through the data, you realize Gen X will save and invest more money than will baby boomers and millennials combined in the next 10 years. I think people overlook that. There’s a lot of buzz about boomers and the retirement and the wealth transfer. There’s a lot of buzz about millennials and how they’re so influential and all that, but in dollars and cents next 10 years is a lot about the Gen X investor. Then you get down to questions about, is it the high net worth or is it the mass affluent? Are there more women, more minority investors, etc? But I think one big point that listeners should think hard about is what generation of investors are your future right now. The second one’s probably around the product side, you know, my view is very much that active management’s on the decline, you know, exchange traded funds, and specifically index side, passive side of ETFs have taken a ton of share, everyone knows that. Index mutual funds continue to take asset or continue to take share, direct indexing is kind of the hot dot on the horizon now, personalized or direct indexing, we saw a whole bunch of mergers from snapping up Just Invest and Aperio, and all these, Parametric, all these firms. So I think it’s a big hot dot. You know, there’s still some alternatives as well. Krypto’s a buzz, obviously. Probably the real hot trend that people aren’t talking enough about, though, is the value added of financial planning and tax planning, specifically. We get all immersed in investment management and kind of stopped, we stopped being financial planners, and we start being investment planners. So I think there’s a whole thing around, a whole trend there around what is going on in investments. And is it really even about investments or is it about financial planning, that’s probably a second good one for all your listeners to think about.

Jack Sharry: So, Chip, one of the things I think you’ll find interesting, my colleague, Mark Hoffman, is one of the speakers at the upcoming Tiburon in Boston. I think you’ll be intrigued by what he has to say, because one of the things that, as you know, about LifeYield, we do tax optimization, and what’s become increasingly clear with all the different firms we work with, that it has to start with a financial plan. But financial plans don’t do tax planning, to a minor degree, but it’s not anywhere near what they might, and they’ve just not built it for that. That’s not how they were designed in the first place. That’s where, we’re doing increasing where we are attached to a financial plan to then try to implement a tax smart strategy across multiple accounts and, and holdings. And I think you’ll enjoy the presentation, because it really sort of gets at… We actually did an analysis of what financial planning can achieve, which we’re huge proponents of financial planning. But you really need to add that tax alpha aspect to it to pull it off. So I think you’ll be intrigued when you when you hear the presentation.

Chip Roame: And, honestly, if you look at any of the studies, so like, you know, Morningstar was out early with the study they called Gamma. You know, Schwab has a study. Envestnet has a study. Vanguard has a study. They try to prove what an advisor is worth, not what investment management is worth, but what’s the, what’s the value of an advisor. And they all come up to 2 or 3% or something like that. But when you dig into it, Jack, half of it is always taxes. You know, it’s, you know, some of it’s asset location and things like that. Some of it’s, you know, harvesting capital gains, whatever it is, but a lot of it leads back to taxes, is what, you know, what is financial planning, maybe it’s mostly tax planning, there’s probably some insurance planning, some other aspects that need to go in there, but a lot of it’s tax planning. Our phrase for it is, “Tax planning is the new alpha.” That’s the Tiburon one liner on it. Yeah.

Jack Sharry: I like it. I like it a lot. Actually, that was Mark’s presentation to a large degree. One of the things that we’ve been doing a lot of analysis around is we identified, and there’s arguable, a few more, a few less, but there’s five ways to improve tax alpha. One is asset location, that has far and away the biggest impact. There’s transitions or rebalancing. There’s tax loss harvesting, which, frankly, if you do asset location well, you don’t have to do as much tax loss harvesting down the road. There’s ways to mitigate that. We do that also, in terms of what we do. And then the other alpha is around income generation across multiple accounts. But all presume that you’re going to manage, you have to manage, look at all the accounts to do a wise tax strategy, you can’t do it account by account. You can, but you’re gonna have far more impact if you do it in combination and consider all those factors in concert.

Chip Roame: Just one plug for you guys. I think defining tax alpha as four or whether you said four or five things, you know, but I think that’s super helpful for audiences like Tiburon, because I think the term financial planning gets thrown around a lot, even the term tax planning or tax alpha gets thrown around. If you actually can say, hey, practically, that means do these three things or these seven things or whatever, that’s very, very helpful. So I bust through the one liners and try to get what the hell you actually telling me to do. So…

Jack Sharry: Yes. Actually, to Chip’s credit, in terms of when he asks his speakers to, for their thoughts, he really wants to kind of get to the heart of the matter, which is one of things I enjoy as an audience participant, audience member at the conferences is that I hear good stuff. I don’t hear the usual “blah, blah, blah,” it’s kind of getting at the heart of the matter, which you deserve a lot of credit for doing it that way.

Chip Roame: I think frankly, Jack, that’s me reacting to how I grew up. I grew up in an industry where I go to the the ICI mutual fund conference, and a bunch of people stood around telling them, telling each other how great mutual funds were… CFAs for lunch is what happened, but you know, they were still calling each other, you know. Or you go to the MMI and everyone’s talking about separately managed accounts, or you go to the insurance conference and insurance is the solution to everything. It’s all these conferences where they basically feed their own egos. Let’s get practical here.

Jack Sharry: I could not agree with you more.

Chip Roame: Okay, so third big trend category to me is what channels are winning. And again, I think we overlook this a lot as well. The discount broker/robo advisor channel, which I would include, like Fidelity retail and Vanguard retail in there, that channel is doing extraordinarily well. And I think people overlook that channel and they poopoo that channel and I just, I’m a proponent for the good work that those firms are doing and serving that validator consumer who needs a little help and a little advice. And I think people poopoo Robinhood, I think wrongly, I remember the days they talked down about Schwab and said, “Oh, you know, Schwab can have all those little accounts, you know, someday they’ll all come to fill in the blank, they’ll all come to Merrill Lynch or wherever.” And, well, that’s not what happened. They were wrong, you know. And I would say, you know, the Robin Hoods and the Acorns and the Stash and the Schwab retails, all these that are out there gathering tons of clients and serving lots of accounts, they’ll hang on to those clients, they will expand their offers and hang on to them. So one part of channels is that. The other part of channels is the great growth specifically in the RIA market. You know, people like to call it the independent advisor market, but it’s really not. It really is the RIA side of the independent market. You know, the independent BD market is not growing nearly as fast. It’s the fee-only RIAs, it’s the Mariners and Mercers and Edelmans and Captrusts, and you know, Allworths, and, fill in your favorite blank, you have a lot of them out there. But these firms are doing extraordinarily well. So I think, you know, the third big trend I’d get the listeners to focus on is which channels are serving, which channels are you in? Are you in the right channel? You know, the wire houses are frankly doing moderately well, I think people also talk down the wire houses, I think, who’s struggling, the, the bank channel, the insurance channel, the regional broker dealer channel, and to some degree, the independent broker dealer channel are all doing worse. You know, the leaders are the RIAs and the discount brokers and the wire houses are kind of holding their own. So that’s my view at channels. That’s kind of my third big point.

Jack Sharry: I’d like to get your thoughts. As we record this at the end of March, there was this announcement with Goldman Sachs and Next Capital, and then not too long ago was United Capital, and somewhere in between was Folio Investing. And they’re actually going to serve not only their wealth management business through their Goldman Sachs private bank, or whatever they call it and Ayco and all that, but also they’re going out to the RIA market, that’s where they intend to go as well. So and then you see Morgan Stanley with E-Trade and with Solium and building out a retirement business, doing deals, distribution mostly deals with Empower and Vestwell. You see them packaging up capability that goes beyond the traditional wealth management. JP Morgan is making a lot of noise, hiring a lot of people, buying up… they just bought global shares, they bought 55ip before. Talk, if you would, I’m not sure where that fits in the channel context. But clearly, the big players are going, going all in. They’re putting all their chips in. It’s all around technology. It’s all around getting assets. So, if you would, talk about where your thoughts are on that old trend?

Chip Roame: I think there’s actually two different trends buried in the examples you gave there. One trend is actually a product trend, and it’s these firms getting into direct indexing and other products like that. So when you look at BlackRock’s acquisitions, or you look at Vanguard’s acquisitions, or, or even JP Morgan’s, I think some of those are more to be a bigger product player, whereas the other guys are going after the RIA channel and whether they’re gonna be RIAs or be custodians to RIAs, I think those are the two opportunities there. So I think at the end of the day, if you boil down everyone’s strategy, and I find it funny, people can’t say this out loud, is a lot of these firms have just discovered the RIA market is what’s happened. They’re discovering how fast it’s growing. And then they’re doing one of three things. They’re either going to be the RIA, so that’s Goldman Sachs buys United Capital, they’re going to be a custodian to the RIA. So that’s buying Folio Fn, right. Or they’re going to be a bigger product provider to the RIA. So you buy some direct indexing firm. So at the end of the day, wow, we discovered the RIA market. Should we be one or should we serve them somehow? To me, that’s what’s going on. Legacy financial services firms, and I would say you’re mentioning the savvy ones, so let’s call out loud that Goldman and JP Morgan and others are the savvy ones of the legacy firms. They figured this out. Now, in fairness, they’re 20 years behind. So firms like Schwab and Fidelity and TD Ameritrade and Vanguard, DFA, figured out the you know, the RIA market 20 years ago and had been way down that path for a long time. So these firms are now jumping in. I think these firms are smart, and they have a lot of good people, and they have a lot of capital to buy things. So they’ll be players too, but I don’t think they all have the same strategy. I think they all see the growth of the RIA channel and are trying to play in it somehow.

Jack Sharry: Yep, couldn’t agree more. So, proceed, any other key points that you want to highlight?

Chip Roame: Yeah. The fourth one, I would just say is organic growth is the critical thing in this RIA channel. Frankly, it is in any channel. But when you actually parse through the PE multiples, and you parse through whether you’re in the private market and it’s what are the PE, private equity, firms paying or whether you’re in the public multiples and you look at Schwab’s multiple versus Morgan Stanley’s, or Schwab’s versus Focus, or CI Financial versus Focus. So if you really think through what is the market telling you, who’s getting the big PE multiples, it’s all about organic growth, right? If you’re in Edelman Financial Engines and you’re growing or you’re at Captrust and you’re growing, you get a way higher multiple than a firm that is not growing. And I think people overlook that. There’s, secondly, a size multiple, which means I, as a large acquirer, can buy you as a small firm at a lower multiple. And as soon as I own you, I pick up some multiple left on your, on your profits there. And that’s a really good thing. But I get to be the buyer, I get to be the consolidator if I can drive the highest PE. So firms like Schwab have these super high PEs, that’s really cool. You know, I’m on a whole bunch of boards in the industry, like, you know, Edelman Financial Engines is a private company that will probably go public someday. This is an organic growth story. This is super cool. You know, the market’s gonna love this thing. I’m on the Facet Wealth board, this is an organic growth story, this is super cool. Things like this are gonna get high multiples in the public market. So when you think about what gets you a high multiple, it’s all about lead generation. Are you growing? Can you generate leads? Right? Can you serve them efficiently? What we’re doing right now, virtual service is a big part of that, right? So there are firms like, again, Facet Wealth, is five years old now, has 11,000 or 12,000 clients, doesn’t own an office, you know, every single client is only virtual, right? That’s a pretty powerful thing. And that drives a level of service, that drives a higher profit margin, and that drives a higher PE. So I think this fourth bucket I’d have, aside from my prior points about consumer wealth, about products, about channels is all about organic growth and getting the highest PE. To me, that’s about lead gen and efficient service and driving high margin.

Jack Sharry: Yep. Yep. Talk a little bit, if you would about, you talk about PE but sort of underlying or sort of a fundamental is just plain old assets. I mean, all these firms, not all, but many firms reported significant increases in net new assets, I think largely driven by the fact that people are retiring and consolidating. But I’d love your comments on, on that, as that seems to be the driver ultimately, is how do I have more assets? And how do I maintain my fee structure?

Chip Roame: When you look at new assets, I mean, granted, only public companies really review it and reveal net new asset flows, and not even all of them reveal net new asset flows. But you generally see Schwab and Fidelity out in front, you know, with $400 or $500 billion per year of net flows. The wire houses, two of the four wire houses revealed their flows, sometimes they’re way down around 100. Sometimes they’re up in the 200 or 300 zone, but you think about you know, 15,000 or 20,000 Merrill Lynch brokers versus Schwab and Schwab has higher flows, right? Wow, what’s that telling you? That’s telling you that someone’s voting for the discount broker channel and/or the RIA channel for which they custody, but one or both of those channels must be growing. And if you just look at the net flows every year and Schwab, Fidelity on the channel side, and on the product side, you know, it’s Vanguard, it’s BlackRock, you know, the flows are going to the inexpensive index products. So I think DFA has got a great franchise you know, I think there’s just you know, certain firms have, you know, have all the growth and I think, and we sit around and pontificate about a million different theories but if you actually really look at the data, I don’t know how you conclude, you can’t really conclude much other than you know, Schwab, Fidelity on the distribution side, BlackRock, DFA, Vanguard on the product side just are getting all the flows.

Jack Sharry: That’s great. Very cool. What haven’t we covered that you’re paying attention to? This has been fascinating.

Chip Roame: I think the end game, I think, is interesting is I think you’re gonna see a flood of RIA channel IPOs maybe five ish years from today. So you know the way we play this out is we watch the I guess, let’s, let’s just call out, already public would be CI Financial and Focus Financial are already public, maybe someone else I’m forgetting about, but they’re already out in the public market. But you have this lineup now. Of Captrust and Edelman Financial Engines and Wealth Enhancement Group and Creative Planning and Mariner and Mercer and Allworth and you know, pick your favorite dozen of them. I mean, there might be 30, 40, 50 of these firms now that now measure their assets in the tens or maybe hundreds of billions of dollars. I think you’ll see them consolidate, we jokingly call that the consolidation of the consolidators. So you know, those that rolled up some firms will now marry each other, and you’ll see the consolidation of consolidators. Not so different than what the wirehouses did. Like, you think through you know, what is, what is UBS? Well, it’s mostly Paine Webber. Morgan Stanley was Dean Witter and a bunch of other firms. Or Wells Fargo was Wachovia Securities and AG Edwards and a whole bunch of other firms. You know, that’s how they got there. They consolidate over time. And so I think you’re gonna see these firms continue to consolidate, buy in the, you know, $300 and $500 million RIAs, buying the $1 and $2 and $5 billion RIAs. And then you’ll see these firms that are hundreds of billions start merging with each other, then there’ll be several hundred billion dollars, and they’ll be in the public market. So maybe about five years out now, I think you’ll see a lineup at the door, it’d be a good time to be an investment banker, you know, if you’re like, taking companies public, your Goldman Sachs or FD Partners or one of these firms that takes firms public, probably pretty exciting time for you. RIA channel about, you know, maybe three, certainly five years from today.

Jack Sharry: That’s great. So this has been fascinating, Chip, and we try to keep our podcasts under half an hour and our time grows short. So what are three key takeaways you’d leave with our audiences? We’ve covered a lot of ground, but what would you identify as three key takeaways?

Chip Roame: I’ll give you three that conflict with one another. So that your audience… Number one, to me, it’s all about organic growth, right? The market is efficient, you know, those that have organic growth will grow the fastest. That’s the first point, right? So if you’re Mercer and you figured out the Schwab referral program, or your Edelman and you figured out radio leads, or if you’re Morgan Stanley, and you buy Solium Capital to hand leads to your advisors, you buy E-Trade retail to deliver leads, they get it. Those firms are all doing things to drive organic flow to their advisors. Right. So point one is you gotta have an organic growth strategy. Buy leads from SmartAsset or WiserAdvisor or NerdWallet, but somehow you got to figure out organic growth.

Jack Sharry: Yep.

Chip Roame: Number two is I think that consolidation, it hasn’t even got started. Like, everyone who talks about RIAs, have done all these acquisitions and all, when you look at the data, Jack, it’s de minimis, right. You know, depending on what you count as an independent advisor, it’s tens or hundreds of thousands of them, and we can count under 1000 transactions every year. So that’s certainly not a lot of consolidation yet. I think it will be a lot of consolidation, but not yet. So I think that consolidation play is still on the horizon. This is the one I’ll say for the other side. I do not believe in the demise of the small advisor. The common wisdom says, if you’re, therefore since there’s all this consolidation, if you’re not ginormous, tomorrow, you’re gonna be out of business. I think that’s hogwash. I don’t, there’s no basis for that to me.

Jack Sharry: Yep.

Chip Roame: If you’re a, if you’re a $50 million RIA, or maybe $100 million, but a $50 million RIA, and you’re, I live in San Francisco, not the greatest place to pick if you’re going to be a small firm. But if you’ve got a $50 million RIA firm, you charge 1% a year, your revenues are $500,000. Maybe you serve 80 or 100 clients, the chance that you’re going to have to face a lot of competition is pretty darn low. The chance that you have good technology and can have a high profit margin is pretty high. If you’re making 500k of revenues and maybe pocketing 300 or 350 of it every year, that is a pretty good life in 90% of the world.

Jack Sharry: Sure, absolutely.

Chip Roame: So I don’t think small advisors are really as threatened as everyone says they are. I do believe in the consolidation. I don’t believe in the, “therefore, small advisors are in trouble.” So, that’s one I’d put on the other side of the, on the line, people can chew on it.

Jack Sharry: I couldn’t agree more. One last question, Chip, as we do each week with our podcasts as we bring our session to a close, can you tell us something interesting or unique you do outside of work that people may not know about you or would find interesting?

Chip Roame: Okay, here, so I’ll give you two. So I do two social things that I do on an annual basis that your listeners are all welcome to participate in. One, I lead the Tiburon Impact Adventures with a guy named Scott Hanson, who’s the CEO of Allworth Financial, and a guy Craig Wietz, who’s a president of First Rate. And we take a group of 50 or 100 people to Mexico. We just did this a couple weeks ago, just south of Tijuana, Mexico, and we build houses for underprivileged families. So we do that every year, end of February, takes us two days to build a house. About 15 people on one house can build a house in two days. We were there just a few weeks ago, we took 50 people, and we built three houses. So it’s called the Tiburon Impact Adventures, I welcome your listeners into that. Separately, every summer I lead something that we jokingly call the Chip and Skip Excellent Adventures, which is an outdoor hiking group, and we pick a national park or resort every year. Last year, we went to Montana, the Glacier National Park and we go on a whole bunch of beautiful hikes there. It’s a bunch of industry people just hanging out. We had, we had 60 people last summer, and this summer, we’re gonna go to Lake Tahoe in California. I think that’s the beginning of August and again, your listeners are all welcome to jump in on that one too. So that’s two things I do when I’m, when I’m not working.

Jack Sharry: Gotcha. That’s terrific. Thanks, Chip. So, Chip, I really enjoyed our conversation. I had high expectations, you’ve exceeded them. I look forward to our next conversation which is probably gonna be in Boston in a few weeks and we’ll see you at that Tiburon conference there. 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 are available wherever you get your podcasts. Thank you again, Chip. It’s been a real pleasure.

Chip Roame: Great. Thanks for having me, Jack.