In our ongoing profiles of innovative, fast-growing wealth management firms combining human expertise, empathy and guidance with technology, data and tools, our "Special Feature" this week is my latest Wealth Management v2.0: The AdviceTech Revolution video podcast with Michael Nathanson, Chairman and CEO, The Colony Group, an $11bb HNW RIA that is a Focus Financial partner firm.
In our far-ranging conversation, we learn how they've grown from $600mm when Michael joined to over $11bb today, why he treats acquisitions as mergers and looks at each deal as an opportunity to become better than before. We talk about The Colony Group's clientele and their multi-dimensional approach to segmentation and how they strive to provide comprehensive wealth and business management, leveraging the combination of technology, data and team-based expertise to create more possibilities for their clients' lives.
We also talk about Rousseau's stag hunt, Nash equilibria and the Pareto optimum and their application to the wealth management business. And you find when you speak with Michael he can easily shift from that level right into specifics of CRM, financial planning, client portals, AI, portfolio optimization, client experience and acquisition strategies. Michael also shares why they recently launched "Curated by Colony", a concierge service to help clients access a select group of providers in the areas of health and wellness, career development, lifelong learning and security.
Michael shares his personal "Why" and his constant push to seek the extraordinary and in doing so, enable his people to do their best and most meaningful work on behalf of their clients.
• The Colony Group origin story [1:50]
• Growth Vision, Joining Focus Financial and M&A Philosophy [5:50]
• On stag hunts versus hare hunts and why teams are more successful [11:35]
• Client profile and how that drives The Colony Group's Advice Tech strategy [17:10]
• CRM, Business Intelligence and AI perspectives [25:00]
• The role of technology and digital engagement in the CX, building social capital [29:12]
• Focus on holistic advice delivery and the motivation to launch Curated by Colony [34:10]
• Gearing ratios and KPIs [44:45]
• Business development in the age of COVID-19 and virtual engagement [48:05]
• The future of the industry and Michael's focus on diversity, equity and inclusion and the importance of intentionality [50:55]
• What Gets Michael Up in the Morning and What Keeps Him Up at Night? [54:55]
Wealth Management v2.0: The AdviceTech Revolution, Episode 10
with Michael Nathanson, Chairman and CEO, The Colony Group
Gavin Spitzner (President, Wealth Consulting Partners, LLC):
Welcome to "The Wealth Management v2.0: The AdviceTech Revolution" podcast, where we are focused on the business of the business, the business of advice. And, specifically, we study and celebrate firms that are leveraging the combination of technology and humanity to deliver better advice to more people, and better outcomes for more people through that combination.
I'm joined today by Michael Nathanson, Chairman and CEO of The Colony Group, the $11 billion independent wealth management firm headquartered, I believe, in Boston, but with offices in key markets across the country. And we'll get into that. Michael is both the chief executive and a practitioner who can't resist staying involved to help clients with complex planning solutions.
You could say he wrote the book on "Personal Financial Planning for Executives and Entrepreneurs." No, he literally did write the book. I’ve got it right here. In fact, he's a prolific author of thought leadership within the wealth management business, very dialed in to the intersection of technology and advice delivery.
Reading a number of those things, Michael, there are so many things I want to dig in with you. So, without further ado, I'm thrilled to have you on, Michael. I'll start with you the way I start with everybody on this podcast, an origin story. And while I don't believe you were around at the very, very beginning of The Colony Group, you came on early when the firm was at -- I think -- $600 million. Now, you're over $11 billion and growing. So, take us back. Tell us about the firm's early days, when and how you hit the gas pedal and got to where you are now, and then we'll get into where you're heading. Michael, welcome, and please take it away.
Michael Nathanson (Chairman and CEO, The Colony Group):
Gavin, thank you so much for having me. Thank you for that very warm introduction. Very kind. It's great to be here. Yeah. Our origin story begins in 1986, in March of 1986 when a gentleman named Kirby Hamilton decided that he was looking for a company that would be able to do everything for him from a financial perspective but was also not sales-oriented but more advice-oriented and that would be fee-only. He felt that at the time, and this was 1986, he felt that that just didn't...There wasn't a lot of that out there, and hence the founding of The Colony Group. He had thought about using his name as part of the name for the company, and was with his wife at dinner and talking about what to name the company. The restaurant was called The Colony, and that's how we became The Colony Group.
In terms of my origin story relative to The Colony Group, I didn't join The Colony Group until 2004, so 16, sorry 18 years after its founding, I joined. I knew The Colony Group, though, before that because...I got to know The Colony Group because I was their outside lawyer. I'm a big firm lawyer by background, or I was a big firm lawyer by background. I worked at a company called...a law firm called Hale and Dorr, which is now WilmerHale today, a very large law firm. I was a tax partner and had a great gig going there. Loved doing what I did, specialized in income taxation, primarily did estate and gift tax as well, and worked with high net worth and ultra-high net worth clients, just in a different capacity. Got interested in the investment management space. They had invited me to come over. A lot of the people here are big baseball fans. I was a big baseball fan. Joined the fantasy baseball league. Got to just become friendly with people here. And they invited me to come over and do the unthinkable, to give up a very hard earned partnership. I had been striving for that partnership forever. I went to a great law school with lots of important people and I was really interested in that track. And ultimately, just decided that I wanted to give this a try. And I did. I was brought over to convert...You know, Gavin, I think of the evolution of organizations within our space, within the independent advisory space. I think of practices, which is what The Colony Group was in the '80s, collaborations where practices come together and start sharing resources and collaborating but they're not necessarily working together.
I would say that was more of the 1990s for The Colony Group. And I was brought on board to help now convert with the collaboration into a business and to begin to operate it more like a business. And you're right. We were at approximately $600 million under management. We were a smaller company, and we began to behave more business-like. And that worked really well for a while. We got interested in picking up the pace of our growth, and I remember, took 18 years to get to $600 million. By some standards, that's not all that fast. And I acknowledge that. And what we realized is that we had the ability to be better. We had the ability to make ourselves extraordinary. Our vision is to be the leading financial advisory company in the world for clients and employees who seek meaning and joy in their lives. How are we going to get to that vision?
And ultimately, what we realized is that we needed to come together with other firms. We needed to go to other firms, see if we could get like-minded people who had big vision come together and do something extraordinary together that we couldn't do separately. Tried to do a few mergers. Didn't work out all that well for a number of reasons, including around capital, but also including credibility in terms of doing deals.
And ultimately, that's when we joined Focus Financial. That was 2011. At that point, we were about $1.2 billion under management. So, we had doubled, which was nice, about 40 people. And we joined Focus, and within nine months, we did our first merger. We did a total of 12 strategic transactions, 10 mergers, and 2 strategic hires we've done so far. And today, we sit at about $12 billion under management. That is regulatory assets under management. It's an approximation. I don't know the exact amount. I want to be careful about that, and we have 15 offices and a little over 250 people and have grown ourselves now from a business to the next stage of evolution, and that's enterprise. And to me, an enterprise is a business that has become sustainable for generations to come. It's a business that relies in its people but has also transcended its people.
Gavin: Fascinating. That's a great way to look at it. So, talk about...through the acquisitions. Let's talk about culture a little bit and how you've learned along the way. You talked about some early partnerships or acquisitions that didn't pan out so well. So, what did you learn from those and how has that informed your strategy and coalescing with people you've brought on into a common vision and a common mission?
Michael: In terms of...So, we did do one acquisition, I would call it, a tiny, tiny acquisition before Focus, long before Focus, and that didn't go all that well. And, you know, we did learn from that. What we learned is that we frankly needed to set our sight a little bit higher, and we need to think more about why we were doing transactions. So, let me just speak to that. Our philosophy has been...Since the day we joined Focus and started truly doing transactions, our philosophy has been we will not do a transaction unless it makes us better than before, and unless it makes our merger partner better than before. We don't use the term acquisition anymore. We use merger as long as we can legally call it a merger because we believe that that is the respectful way to do a transaction, and also because we believe that it represents how we think about a transaction.
We do not think about The Colony Group acquiring another company and changing the way our merger partner operates and teaching them about The Colony way, but rather, every time we do a merger, we do it to become better than before. That's the term we use, better than before. And that's the standard that we adopt. If a transaction is just going to make us bigger, we're not interested. It's got to make us better. It's got to add something. Every transaction, and I'm not going to take you through 12 transactions, but every single transaction we've ever done has added something important to what we do, has made us better. We've learned from them.
Culturally, here's the secret to success. Everyone talks about, "Oh, what's your culture? It's not a cultural fit." Well, it's true. There can be transactions that are not a cultural fit. We happen to be a fee-only client-centric firm. I know that's a cliché. If a firm is a...It's really all about sales and, hey, let's maximize the amount of money we're making. And, that's not really going to be a cultural fit for us. But putting that aside, we have a singular company-wide culture. I would describe very simply as it's a superteams before a superstars culture, and it's a culture of consciousness, awareness around how we treat each other and how we show up every day. That being said, every firm that joins us has its own unique subculture, and we're not looking to destroy it. Rather, we acknowledge. Every office is, by definition, going to have its own culture. Every team is going to have its own culture, and anyone out there who's telling you that, "Well, this is our singular culture," that's a firm that's probably not at least a larger firm. It's not really being honest about its culture. We all are truly multicultural if we think about that. And our secret to success has been to accept. As long as subculture is consistent, then we embrace that subculture, we encourage it, we learn from it, and it makes us, I think, a stronger organization.
Gavin: I love that. Then I'd say the firms, the bigger national firms really have tried to have a singular culture. It tends to be not much of a culture. It tends to be very inwardly focused versus externally focused. I've mentioned you're a prolific writer. I love your different thought leadership writing. So, within this same context, you want to riff a little on stag hunts and Nash equilibria?
Michael: Oh, I love that. Did you read that article?
Michael: I love it. I love it. So, it's great. I'm glad someone did. So, it's an article that I wrote for "Financial Advisor" magazine, and actually, it has gotten some attention. And I really like it because I think it speaks well to our industry because it does use math and theory.
Michael: Here's the thing. So, imagine Rousseau's stag hunt. So, stag is a deer. Rousseau had this philosophical problem. He imagined, suppose you had a group of hunters and they're all hunting for a stag, a large deer, and they're in the woods and they need to hunt for food, and they find a stag and they've got the stag cornered. Now, all they have to do is work together, and as long as they work together, they will successfully hunt the stag and they'll have enough food for a week for each of the hunters.
Michael: Here's the problem. A group of hares comes by. And again, he used stag, hare, rabbits, bunch of hare combined. And each hunter now has a dilemma. They could successfully hunt the hares. It's easy to kill a hare. So, they could hunt the hares right there, and if they do that, they will have enough meat to feed their family for one day, or they can let the hares go and wait for the stag. The problem is, if any of the hunters goes for a hare, the stag is going to get scared off and is going to be gone, and no one is going to successfully hunt the stag. So, you have a decision, do I hunt the hare or do I hunt the stag? And again, if you're going to hunt the stag, you got to be reliant on everybody else. You got to hope that everyone is going to do the exact same thing, go for the team effort.
Well, it turns out that there's some math behind that. And if you've seen the movie "A Beautiful Mind," about Nash equilibria and the theory that John Nash won the Nobel Prize for, and what he ultimately realized was you could put math around this. And, in fact, it's a rational thing to do either, but really hunting for the hare is the guaranteed food and most will hunt for the hare. And that's the problem with our business generally. What you get is people who think about doing what's best for them, for their individual practice. And in our industry, if we can get everyone to hunt for stags and not for hares, we could accomplish so much more. And I think about that and I wrote extensively about that and I applied it to RIAs. When you think about RIAs and some of the decisions we make as independent advisors and thinking about what's best for ourselves versus what's best for the entire company, for example, around succession planning, it's fascinating when you start applying these Nash equilibria and, another...
So, if you think about that stag hunt, there's another term called a Pareto optimum, and the stag, in that case, is the Pareto optimum, which again, you are only going to achieve, again, if you work together. And there's one more mathematical or philosophical construct that I talk about in that article, and that's the theory of constraints. And the theory of constraints, which is not so much a mathematical concept but it is a business concept, and the theory of constraints is basically a form of the weakest link philosophy, that a chain is only so strong at its weakest link.
Or you could think of a garden hose. If a garden hose has a knot in it, then the output is going to be always constrained by that knot. You can do whatever you want to the rest of the hose. Until you deal with that knot, you're not going to get maximum output. And I think about our businesses and think again about the people you have, what you're doing, the way you are approaching service technology. I think about all these things, and none of us are ever going to be stronger than as allowed by the theory of constraints. In other words, we have to all look at the constraints in our organizations. We have to address those constraints. Sometimes those constraints are us. If we don't address the constraints, we will never maximize the output of our organizations.
Gavin: Yeah. That's true. Hard work. So, you mentioned technology. Let's pivot to that and maybe for context to get into, your thoughts around technology and how you've harnessed it to scale as an enterprise. Spend a minute on what your client profiles look like, their needs, and then based on that, how that's driven what you build in terms of your technology. And we'll get into then how your teams leverage that to support your business and your clients.
Michael: Sure. So, it is important. Thank you for asking that question the way you asked it because you're right. We have to understand who our clients are and how we serve them in order to talk about technology. Otherwise, putting technology first makes no sense at all. So, our clients are largely high net worth and ultra-high net worth individuals. We don't have much of a mass affluent or retail practice. We really do aim for wealthier individuals and families.
And we also have a substantial business management practice, and you can think of business management the way we think of family office to some extent. So, we have a multi-family office approach, which we use for our ultra-high net worth clients. We offer a family office experience for them, although more and more, we really think of ourselves as family office, even for some of our smaller clients. Business management, to some extent, is the suite of family office services for famous people, for actors, entertainers, professional athletes, which is a very growing portion of what we do. And that's a big part of what we do as well. We don't always provide asset management services for those clients, but we are providing the full suite of family office services and then some as well. So, we'll do, for example, royalty tracking and auditing, and we'll do tour accounting, services that are a little bit different. I can explain a little bit more when we talk about our overall services.
Gavin: There's probably a little less tour accounting right now.
Michael: That is absolutely right. Good observation. That's absolutely right. We really are doing no tour accounting right now, but our entertainers, though, are resilient and they find other ways to keep themselves busy. Yeah. Right. These are the most creative people in the planet. And we also have segments of clients. We believe in segmentation a little bit differently than others. Most people think of segmentation by size of the client. I think that's a mistake. I think size is relevant, but the type of client is much more important.
So, we think of segmentation in terms of business owners, or corporate executives, or professionals, or athletes, or entertainers. We think of it more in the context of the specific needs of client segments. And we have specialists around those different client segments. Now, coming back to technology...Oh, I should say also we do have an institutional practice as well. And it's rather a significant institutional practice, primarily foundations and endowments. Now, coming back to technology. So, the backbone of our client service technology is we use eMoney. We private labeled it. We call it Colony 360 here, but we use eMoney. It's powered by eMoney. And we're heavy eMoney users. That is probably the most widely used software that we have.
Gavin: And is that both on the planning side and the client portal side?
Michael: It is. So, we have a client portal that is a planning-based portal and that's powered by eMoney, and then on the portfolio management side, we have a portal that's powered by Tamarac, which is our portfolio management software, reporting, and rebalancing software. And I should say, by the way, we also have exposure to some other companies such as SS&C Advent because we have firms that merge with us and we don't immediately eliminate their technology. We're very, very careful and methodical about how we integrate the technologies.
Our CRM -- we use Salesforce. And our CRM, I would say, is...eMoney is the most widely used software that we have...our CRM is in a state of evolution. It's evolving from the operational use that we've thought about our CRM for in the past and onboarding to much more of an experiential approach where we think about it in terms of the client experience. We're using it more and more to understand, okay, how long has been since we spoke with that client? What did we last speak about? Time to talk to that client again, got to make sure that we're following up on what we talked about, which is, I think, really the best way to be using a CRM.
We, of course, use it for business development as well. We use...In terms of, again, more technology, when we do prospecting for clients and onboarding, again, we use...eMoney is a big part of that. I walk by conference rooms and CEO advisors, meeting with prospective clients, and I'm very used to seeing a big eMoney display, and I think client that really...It really reaches clients.
But in addition, we have a number of our people use mind mapping software, and Gavin, you and I have talked about this in the past. We believe that wealth management is what we are good at, and we are in business management, and we stick to wealth and business management. And yet, we understand that wealth management from our perspective requires much more than being good wealth managers. That is, we need to understand everything about our clients. And we use mind mapping software to understand all their relationships and understand what's important to them, what are their hobbies? We want to know everything about our clients. So, that's an important part of how we do that. We use HiddenLevers. HiddenLevers has many potential uses. We use HiddenLevers primarily for prospecting, for doing proposals.
We're increasingly moving in that direction in terms of our IPS formats, and for onboarding. We're using DocuSign a lot more. I would say it is not completely taken root here, but more and more we're using DocuSign. Of course, we've been forced to use it during the pandemic. You know, we use Zoom. We use LastPass for password security. On the investment side, we use Morningstar, we use FactSet. We're big SharePoint users. We have our own intranet powered by SharePoint. Yeah. That's a pretty good landscape. I'll tell you the one thing we don't have which we need to have. The one thing that we have not yet done, which I think is a next year initiative is we need a better document management system. And my experience is that most independent advisors don't use a document management system and rather use internal drives, which is what we do. And that is something that we now need to take on, especially with all these firms merging with us.
Gavin: Right. I got a couple of ideas for you in that, but I'll talk to you offline. I'm not sure...
Michael: We should talk about that.
Gavin: You mentioned CRM and mind mapping…so, how do those come together? And where are you on that journey? Everyone with Salesforce, you know, it's a journey…it's the gift that keeps on giving because there's so much to it. You're never done, but in terms of feeding it with data, and maybe that's also a jumping-off point to your views on AI, whether you consider that artificial intelligence or augmented intelligence, but getting to the point where you're leveraging your understanding of the clients based on what you hear from them and what the data shows you to be prescriptive and anticipatory around what their needs might be.
Michael: I think the CRM is becoming more and it should become more and more central to everything that we do. We've had some challenge integrating all of the firms that have joined us into a single CRM. As is often the case, everyone thinks they have all the answers. They think that what they've been doing is the right thing, and we tried to have a best of all worlds' kind of approach. But we are very much on the Salesforce journey. And we are increasingly all on the same page. We are looking to that for everything including on the business development side where we're building pipelines off of it, including on the experiential side. Again, I would call it more of an evolution from operational to ultimately experiential. And I do think that's the best use for the CRM.
Love your question about artificial intelligence versus augmented intelligence. I don't believe artificial intelligence exists. That's a cliché that's out there and gets everyone all excited about it. When there is truly artificial intelligence, everything is going to change. What we're seeing now is something that looks like artificial intelligence, but it's not intelligence. We're very much interested in it.
People talk to me about Robo-advisors and are we going to adopt a Robo-advisor? And how can we use artificial intelligence better? Will we use technology better? In my opinion, when there truly is artificial intelligence, that's going to be a game-changer for the entire industry. And, in fact, I don't know what's going to happen to the industry at that point when there truly is artificial intelligence. I don't think we're even close to artificial intelligence. What we have now is technology that looks like it's intuitive, and we like to say it's intuitive, but it really looks like it's mimicking intuition and it looks like it's intuitive. And it's great. We're looking at it. We're watching it. I think we all have to watch it. I just don't think we have it yet.
Gavin: Yeah. A lot of it is...
Michael: Yeah. I'll say one more thing, Gavin...
Michael: ...which is that we are also building our own business intelligence tool, and that will get fed from the CRM, but it will get fed from everything. It should get fed from our portfolio management system, it should get fed from our financial planning systems, from our business management systems, data faction, and other technology that we're using there. And, for me, we've had a renaissance of new technologies, Fintech. You know all about this. And we've seen all these great new technologies come out. What we don't have is great integration of those technologies. What we still have is people using...And I read a study about this recently. You may have seen the same one where you see people just using multiple technologies that are doing a good job talking to each other and that are still manual in terms of how you interact with those technologies. And I think our business intelligence tool, which will be powered...We do intend to use a third-party vendor to power that, but we want it to be fed by all of our technologies, and we think of that as a way of integrating these technologies better.
Gavin: Right. To be able to pull out the parts and pieces that can actually help you run the business, advise clients. And in terms of the...Let's bring it back to the client now. So, ultimately, your goal is to guide clients to better outcomes and optimize and maximize their assets. So, from a technology standpoint, from a data standpoint, from a practice management standpoint, how do you think about those parts coming together to actually deliver advice, highly personalized advice that's consumable in a way that the clients actually act upon the advice? And so we used to live in this world of kind of there were complete delegators and there were complete do it yourself, self-directed. In my view, those worlds are...they’ve really coalesced and we're all those things at different times, and there's parts of things we want to do ourselves digitally, and there's other things we're obviously going to rely on folks like you for deep specialized expertise. So, I threw out a lot. I guess the real point in there is delivering advice in ways that your clients can receive it, understand it, buy into it, and then act upon it. Can you speak about that?
Michael: I can. I believe technology has a very important role to play. And as I said, our clients value...I think they value. We've certainly talked to our clients, surveyed our clients, and they've indicated that they value our technology. So, they value our use of eMoney. They value Tamarac. They value being able to see their financial picture in front of them. They value, for example, our mind mapping. And yet, my sense is that many advisors are over-relying on technology, which I think is a dangerous thing to do. In terms of delivering the client experience, we still believe that there's no substitute for delivery through human interaction. We intentionally limit the number of clients that any of our advisors can have. We want our advisors regularly interacting with our clients. Now, will they use technology? Of course. Our clients demand that technology.
And yet, at the same time, this may sound old fashioned, but I don't think it is. I think that our advantage is being able to continue to interact, continue to know our clients as humans and not as an algorithm, and for them to understand us as humans who understand them specifically and not be an algorithm to them. So, I think it's a combination of utilizing good technology, investing in good technology, but at the same time, it's continuing to interact. The reality is that picking up a phone and saying, "How is everything going? How are you doing? How are the kids? How's your wife? How's your husband?" These are important parts of what we do, and I think it makes us better advisors understanding our clients and having them understand and get comfortable with us.
I frequently talk about the concept of social capital, Gavin. And this came from a TED Talk that I adore, and it's called "Forget the Pecking Order at Work" by Margaret Heffernan. And what she talks about is this concept of social capital. Social capital are if you and I are working together, we're both bricks but social capital is the mortar that holds us together. It's the relationships that we build, and that social capital allows us to interact more efficiently and effectively. It also means that you're not going to go to some other company because you want to work with me because we've developed these bonds. And it's the same thing when we interact with clients. We have to have social capital with our clients because that's what facilitates communication. That's what facilitates the kind of comfort where an advisor can speak candidly and not just say what a client wants them to say, and where a client can really confide in the advisor so that they can get the best potential wealth management or business management experience from us. That only happens when you work together. And, by the way, in terms of COVID, that's one of my fears. One of my fears is that it's great that we're all communicating by Zoom. It's great that you and I are communicating, but the reality is that unless we are all finding ways to be together physically, we are not going to experience the same kind of social capital building.
Gavin: No doubt. No doubt. So, I'm going to pick up on a couple of things that you talked about there. And you alluded to this. Well, some firms are generally sticking to their knitting around a pure investment management focus or financial planning, but still in a confine, it seems like you're pushing the boundaries around the scope of providing holistic advice, looking at ways that, in your words, you can enrich your client's lives. In fact, in a recent Barron's piece, you authored just recently, I really enjoyed about holistic advice.
Michael: Thank you.
Gavin: And I actually wrote this down because I liked it so much. You said, "Clients are increasingly seeking fulfillment, peace of mind, purpose, enjoyment, meaningful experiences, and the ability to build their own legacies. They want financial security and strength, but also want better, fuller lives for themselves and their loved ones. In short, they want financial enrichment, but they also want life enrichment. Clients increasingly want wellness services like concierge medicine, dependent care services, fitness consulting, nutritional programs, even mindfulness coaching." So, that is...Actually, in your piece, you didn't talk about Curated by Colony, but I'm going to bring it up because it intrigues me so much and it feels like that's a natural tie-in too, based on that vision of what clients are looking for and what The Colony Group, what you want to deliver, seems like that was what led to Curated by Colony. So, maybe speak about that mindset and Curated by Colony.
Michael: Thank you for that. Thank you for noting the article. And you're correct. I intentionally did not talk about Curated by Colony because that was a piece that was intended to be for the industry and not about promoting The Colony Group, which, to me, is an important distinction. I think that we, as leaders in our industry, have an obligation to push the industry forward and not necessarily think only about our own companies. So, I believe in...I really like the Fidelity advice value stack that they came up with. And what Fidelity imagined was a pyramid. And as you move up the pyramid, you're providing increasing value to clients, an increasingly differentiated value to clients. At the bottom of that pyramid is asset management services. It's not to say it's not important. It's actually fundamental. It's the base of the pyramid, but everyone is providing asset management services in our industry, and we all talk about the ways that we might do it a bit differently. The reality is that you've got 30,000 independent advisors doing things all differently, but in the end, I think many clients hear that as noise. And again, it's not to diminish with that. It's critical. It's just not that differentiated. As you move up the pyramid, the next level up is financial planning. Fidelity calls it achieving goals. It's financial planning, wealth management, and that is more differentiated. If you're an asset manager and that's all you are, I would suggest that you should revisit that strategy because I'm not sure how sustainable that strategy is. If you are building financial planning, wealth management into the practice, you become more differentiated, more sustainable, but again, that's what pretty much everybody is doing or at least claiming to be doing. What's really interesting is the next two levels above that in the pyramid.
The next one up is providing peace of mind to clients. And the one above that is about creating a fulfilling experience, a fulfilling life for clients. Fulfillment. When we can get into those two highest levels of the advice value stack, that's when we're providing the most differentiated experience. Our mission...I told you what our vision was earlier. Our mission is to provide peace of mind to our clients and empower their visions of tomorrow. How can you have a mission like that and only think that peace of mind comes from asset management and wealth management? And we built a strategic plan around that. Our strategic plan goes on for pages, but it's pretty simple. It's elevator people in the center, and then we have different prongs that come off that center.
We want to activate the full potential of our organic growth. We want to strategically grow inorganically, and then we want to optimize our platforms, processes, and procedures, which we just talked about, and we want to innovate our services, and all that innovation is about achieving this peace of mind for clients and operating fulfillment, offering them fulfillment. So, what does that mean? Well, we surveyed our clients, and we've done a lot of reading about what people are looking for these days. And what we discovered is that sure, everyone cares about asset management, and performance, and things like that, but what people are looking for is they're looking for enriched lives. What they're looking for is they want to be healthier. They want to be well. Some want to practice mindfulness. Some are really obsessed with philanthropy. Some like me are thinking about what's my legacy going to be? What will I have stood for in the world? What will I leave behind?
And I want to...to me, for example, philanthropy is a big part of my personal goals for legacy, and I want help understanding how I can maximize my impact because I get fulfillment from that. People want better experiences in life. So, for example, today, as we speak, we have one of our Curated by Colony providers doing a webinar on travel experiences. It's a little bit difficult timing-wise for that, but how can we offer clients more meaningful experiences seeing the world? How can we approach our clients on areas like cybersecurity? That's peace of mind. Clients want to know...I'm a LifeLock user. I believe in LifeLock. We can do much more, though, for our clients on the cybersecurity side. And then there's medicine, concierge medicine, and there are different types of concierge medicine.
What we've learned is that our clients really want these services as well. Now, your listeners or viewers are probably right now thinking, "Oh, great. There's another firm that's trying to be everything to everybody." We are not trying to do that. We know that we're none of those things. We know we're not doctors. We know we're not travel experts. We're not home concierge experts. We get all that, but what we can do is go and build a platform that different vendors negotiate with them around pricing and build a super cool platform for our clients to use that enables them to get all these life enrichment services. You know, advisors already are partnering with lawyers, accountants, insurance people. Why can't we go beyond that and partner with people who are focused on helping people live richer and better lives? That's what Curated by Colony is all about.
Gavin: Fantastic. There's no higher value that an advisor can provide than to help a client really understand their purpose and be purpose-driven, which I think of more than goal-driven. Goals can be so generic at high-level and they don't encompass all that really matters. And if you can be the one to help unlock and give permission to do these things and to use their wealth for these things in more personal ways, that to me is...once you're at that level connecting with somebody, if you underperformed at benchmark last quarter, that's not going to be the reason that they leave you. You're on a whole 'nother plane at that point.
Michael: And that's important too. I mean, just to be clear, I don't mean to minimize that. That's always going to be important and we know what we are. I'm going to put it in a different way for you, Gavin. I actually think this is about survival. You know, I've written about this as well. The firms that are not able to evolve with the times, that are not able to evolve with changing demands by consumers, what we call clients, those firms are doomed. They're going to become extinct. And, the example that I like to use is Nokia. And Nokia was the best cell phone manufacturer in the world. They had almost 50% of the cell phone market globally. I'm a big fan of "The Matrix" movies. Those super cool phones that Morpheus and Neo and Trinity had, those were all Nokia phones. And now Nokia is gone and they're gone because Google with their Android system and Apple with their iPhone system came in and gave consumers really what they wanted, and by the time Nokia figured that out, it was too late for them.
There are already disruptors entering into our industry, and if we are not being proactive about evolving, if we are not able to go beyond what we've been doing for the last 30 years, we're not going to see a very favorable future. We need to evolve. And this, to me, is a form of evolution. Technology is not. Technology helps us. It helps our current state, and I think it's important. It's an advancement. I don't think of technology as an evolution, though.
Gavin: Yeah. Technology back to where we started. It's an enabler of an experience that you want to deliver, and it helps with process and engagement, but firms or advisors get excited about technology as a thing unto itself and a silver bullet. That's not the way, and to your point, it is survival because back to AI and tech and what's going on in the Fintech landscape, advisors that see their value in those narrower ways lower down that pyramid, they will be put out of business by those providers. You have to move up the pyramid. Let's go lightning round because we're running out of time but there's so many more things I want to ask, though.
One quick thing you touched on earlier on around, you've got...being clearly very data-driven. It doesn't surprise me that you've got these gearing ratios. So, you talked about you've got specific numbers of clients or households that your client-facing advisors can adequately manage to deliver the experience and go deep. Can you share a little bit about that, what numbers you look at?
Michael: Yeah, sure. So, on that point, I think that once an advisor has 60 clients, that's probably as much as they can handle. Now, we have some advisors that work a little bit differently from others and will handle more than that, some less. It depends on the intensity of those relationships. It's a little bit different on the business management side than on the wealth management side, but that's what I'm talking about. So, whereas in a wirehouse you might have a broker with 300 clients, here most of our wealth management advisors, they may be looking at 60 or so clients, and that's a pretty good number. But sure, the metrics that we're looking at as we think about our own dashboarding, for example, when we look at our company, we think about client retention. And for us, again, anything that's 95% or under is not good. We should have 100% or maybe 99% client retention. We have thousands of clients and given our business model, which also includes doing taxes for many of...we do thousands of tax returns a year. Given our business model, there's no excuse. Our clients should all be staying with us. Sometimes clients die and there can be other things that happen, but we should have great retention. That's the first thing.
We look at net new asset growth. People talk about growth and they conveniently leave out the market forces. I look at net new asset growth. I want to know new clients, contributions from existing clients less terminations less withdrawals. So, that's a big metric for us as well. We look at revenue per client. We want to make sure that that's a healthy number for us. I look at average client AUM, certainly revenue, profitability. I look at headcount. That's very important for us as well. I'm going to intentionally put AUM last. I know everyone talks about AUM because it's so public, but, AUM is important assets under management, but frankly, it's overblown, it's deceptive. People rely on it, and they frankly shouldn't. There are firms that have probably the same $12 billion of AUM that we have that might have 25% of our revenue and 25% of our workforce. It doesn't really tell the whole story.
Gavin: Right. Yeah, especially for a business, the way you do it, that you've got other revenue streams, which we could get into a whole hour discussion about evolving pricing models and all of that.
Gavin: We touched on COVID slowing down the tour accounting, but obviously, doing other services around business management. But speaking of COVID and your points about face-to-face social capital, so how have you adapted? Any examples, especially in terms of business development? How do you build those relationships and grow new clients? What are your key metrics in a remote and virtual world?
Michael: Yeah. So, we launched something called Project Catalyst here this year, and we have some big ambition around business development and around specifically organic growth. This is a year that we've done a number of mergers. We decided to take this year off, just integrate. We decided that before COVID, and we have been upping our efforts in terms of organic growth, and part of that is rolling up Curated by Colony and utilizing that as a differentiator. Part of it has been training our people in terms of new ways of thinking about business development. We are users of CEG. You may have heard of them before. They are very much in favor of utilizing, for example, the discovery process, so changing the way we think about presenting ourselves to a client and speaking a lot less about ourselves and spending much of the first meeting just learning about the client and doing the whole commercial after that, maybe even at a separate meeting. And not everyone is doing that here. We have people who have been very successful using the old way of doing things, but for those that are open to it, we've been rolling this out and doing a whole training session around that.
We've been doing pipelines now. We have regular pipeline meetings for each of our service teams where we talk about opportunities to better service and do more for existing clients and also opportunities to go out and engage with new clients. And that's become a much more collaborative process. Gavin, you know what I would say, ultimately? What we're doing a lot more of is measuring, and putting that out in front of people, and being transparent. There's a great book called "The Great Game of Business" that I read last year and brought it out to our company. And what it talks about is that when you want to have a successful company, you need to think of your company as a fish tank and it's got to be completely transparent. Everyone sees what goes into the tank. Everyone sees what comes out of the tank. And increasingly, that's the way we operate The Colony Group as a fish tank so that everyone can see exactly what's going. Sharing these metrics, sharing specific goals, sharing specific results, I think makes a big difference.
Gavin: Love it. Let's talk about the future of the industry as we wrap up. There's been a great deal of needed focus, very needed focus on making the advice industry more inclusive both in terms of the clients we serve and the composition of our firms. Millions of those who need financial advice the most have historically not had easy or any access to it. Any perspectives you can share? And, I'm not specifically asking about The Colony Group, in particular, but just as a thought leader in the business, thoughts around those areas?
Michael: Yeah. So, you're referencing diversity, equity, and inclusion. And I will reference The Colony Group as well. That is something that we should all be thinking much more about. I go to conferences and I look around and probably have the same experience you do too, Gavin, at least when I used to go to conferences, given that it's COVID. You look around and it's quite predominantly a white and male collection of people there, and all trying to do good for the industry, but we suffer from not enough diversity in our industry. And there's some great information that the Center for Financial Planning has put out there on the actual demographics within our industry, and those are numbers, and those are undeniable. I think about The Colony Group and I look at those numbers and say, "Well, we compare favorably to those numbers," especially in terms of gender diversity. You know, we have I think done better than most others in terms of gender diversity at all levels of our company, including our C-suite, which I think is mostly women. And yet, as I think about that, I think that that, to some extent, is a deflection of other forms of inclusion and diversity.
And I will tell you that The Colony Group has engaged a consultant, and we are going to quite soon begin a new journey toward even more intentionality around diversity, equity, and inclusion. And what I mean by that is we have a vision to do more not just in terms of hiring, which is what people think about, but also just in terms of the way we interact internally and the way we interact externally. So, for example, we've recently added diversity to all of our third-party questionnaires. When we're vetting a vendor, a research provider, anyone, we want to understand how they're approaching diversity, equity, and inclusion. And, this year has been a wake-up call for companies, and those companies that choose to be defensive, or those companies that choose to make excuses such as, "Well, we don't get enough diverse candidates," those are the companies, the very companies that need to step up and become part of the solution. It starts with us, and the solution has to come from all of us. So, The Colony will be at the head of that. We will be a leader in this movement.
Gavin: I love that. It's all...You used the word intentionality. It just takes that mindset of being intentional and it unlocks all kinds of possibilities.
Michael: But you know what, though, Gavin? I actually didn't...That's not a term that I made up. That's a term that came from our becoming better educated speaking to a variety of consultants before we finally hired our diversity, equity, and inclusion consultant. And I was educated about that. I was educated about different ways to become intentional, and I think we all need to open our minds to some learning on this important topic.
Gavin: 100% percent. I'll wrap up with what I ask my guests generally. So, you're a pretty young guy. You've accomplished a tremendous amount, your whole law career, and then this. You probably could have retired by now, but obviously, I can tell by your passion and energy that's not in the foreseeable future. So, what keeps you going? What keeps you engaged? What gets you up in the morning, and also what keeps you up at night?
Michael: So, I look around at our industry and what I see are lots of firms doing good work for clients, but they all look pretty similar to me. And what keeps me going is the notion that it's possible for us to achieve something truly not ordinary. Let's call it extraordinary. What we often say here at The Colony Group is that we see ourselves as a ship sailing in a sea of the ordinary, a sea of sameness seeking the extraordinary. And, in fact, we use that kind of graphic as we chart out our goals on our intranet. And what keeps me going is the search for the extraordinary.
What keeps me going is understanding that there is something bigger than all of us, that we have the ability to evolve into something truly different, truly special, truly extraordinary, and the way to do that is to bring people together, which is one of my favorite things to do. It's one of the great joys of my job as the CEO of The Colony Group. It's bringing people together that wouldn't otherwise come together, and only by bringing them together, enabling them to do their best work and their most meaningful work. What keeps me going is a search for extraordinary, a search for meaning, a search for joy.
Gavin: Well, that is inspiring. We will be watching that journey. We'll watch you as you keep searching for that and pushing that vision and that mission. Michael, thank you so much for the time. I really enjoyed it, and we'll talk again soon.
Michael: Gavin, thank you so much for having me.