Max Winthrop: 'Quirkiness Matters' | Next Gen
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Core value one is if it ain't broke, make it better.

Welcome to Barron's Advisor, The Way Forward, Next Generation, a special series spotlighting the emerging leaders shaping the future of financial advice. Twice a month, we'll be digging into the strategies, insights, and game-changing moves that will help you take your practice to the next level. I'm Allison Tucci, and my special guest today is Max Winthrop. Max is the CEO of Winthrop Wealth. Today, we're going to be talking about leveraging technology to build your own financial firm.

Welcome to the podcast. Thank you, Alison. It's great to be here. It's great to have you. So tell us a little bit about your business, specifically the types of clients you have, your advisors, and your asset center management. Well, since this is a next-gen podcast, we are technically Gen 2. The business started a long time ago, almost 40 years my dad and uncle have been in this business. But we...

We really serve high net worth clients. Everybody defines that differently, but our wheelhouse is call it the five to 25 million on our platform or under management. As an RIA, we report the regulatory assets. So that's technically how we keep it kosher. And they are typically clients who have some degree of complexity. We call them our AAA clients. And so they have assets that create complexity, estate tax problems that we can help them solve for.

They have great attitudes. And that's really important because we need engagement. It's a collaborative process to help them. This wealth management thing isn't just the firm. It's a back and forth collaboration with the client. And thirdly, the third A is advocacy. So our clients care to kind of go out of their way and make sure their family and friends are taken care of too. So you get a lot of referrals that way. How did working with your family change

change really your relationship with your dad, your uncle, your family overall? I came into the business working for my dad. My dad and uncle were both advisors under a corporate RAA, very large corporate RAA. Now they have 26,000 advisors there.

But at the time, they had both grown sort of independently successful practices, if you will. And they had some shared resources, but they were independent operators. When I came in, my mission was really to create a business. And so creating a partnership structure, creating the RIA, creating centralized resources,

And that was, that wasn't easy, right? There was a lot of tension that came just as a result of trying to make change. Successful advisors typically don't love to make a lot of change because something's working well if you've gotten to the sort of level of success that, you know, you're Barron's ranked, you're Forbes ranked, you're a top advisor in the country.

And so that's where what I'm most proud of, but also some of the more challenging sort of

dynamics of working in a family business and trying to create change. And that's a great point. And let's dive into that. I've worked with businesses and companies before that try to take it from family-led business to an actual corporate structure. Oftentimes, people say people process technology is how you really think about that transformation. They overlay legal risk and compliance. Especially recently, there's been new compliance regulations that have come out specifically for REAs.

But let's break down each and every one of those components and first tackle the people side. How did you look at compensation, the incentive compensation of your team? And what changes did you make to really drive towards your version of success? So I think the compensation is incredibly important, but it's not the end all be all in this industry.

you're competing for talent that has the opportunity to be at large institutions in different roles, potentially. If you look at the asset management side, there's potential for very, very high compensation depending on what you choose to do and where you're running money. So the three key pillars of the business, so you have portfolio management, financial planning and service. That's how I look at it. And the

those key areas are really important to have the right people in the right seats. So I started not with comp, but

My brother, who is our chief operating officer, Lucas, he's amazing because I'm a little bit more the visionary. We do a lot of collaborative things in leading the business, but he's able to help actualize and implement it. But it's about butts in seats, right? So do we have the right person in the right seat? And I'm going to just allude to this concept of functional accountability. That is the most important thing that I think

we can think of as running a business, anybody who's doing this, is do you have the right functional framework to succeed? And that means that, you know, responsibilities end with one person, not with two or three, and it's not shared, right? So functional accountability is as simple as, let me give an example. My brother's focusing on marketing, right? He owns marketing. Like we have somebody who is an associate director in that position,

But if something happens, if there's an opportunity or a challenge, it ends with him, not with me. I own finance. So it's who do you look to and who owns that? And so making sure you have the right butts in the right seats. And you can own more than one seat. So I can have finance. I can have portfolio management. I can have my CEO duty. But you can't have two people sharing a seat. So that concept I really love.

It sounds like there's some internal ethos that you, your brother, your dad, your uncle really follow. What are those principles? So it's the core values of who we are. We actually hired a coach.

about two years ago. And that was one of the best things we could have ever done. We have an advisor coach, but this is an executive business coach that helps us with our operating system. I believe in coaching. I grew up ski racing and whether it's a personal trainer or my dad works with a breath coach, a business coach is fantastic. So if you can find one, I would highly encourage that. It will unlock your growth. So we went through this with our coach. Core value one is if it ain't broke, make it better. All right.

So we're always evolving. We live in an industry that it can be easy to do the same thing. Or the answer is that's the way we've always done things. So we don't want to stagnate. We always want to be pushing the envelope. We want to make sure that our team is okay taking those risks and not punished for that, but instead rewarded.

The other thing is passion. Um, we have a lot of passion in our industry. Like people are caregivers. They want to help clients and that's a beautiful thing. So, um, this passion drives us principle is about having the right people in the right seats, allowing them to go deeper into their passion, whether it's financial planning, specialized on wealth transfer techniques, on cashflow planning, on tax planning, uh, portfolio management is a good example. Um,

And then I will say, I'm not going to share all four, but I'll share my favorite one is quirkiness matters. Okay. You get three of the four. So quirkiness matters is...

Everybody on our team is a little bit quirky. I think people inherently have quirks. And sometimes we seek to hide those quirks because we want to put up sort of a professional facade and we want to face the world in a certain way. I came in here and I did makeup. I've never done makeup before, but you know, we're on camera. So like hiding the blemishes, we want people to be able to show up as their authentic selves and feel comfortable doing that. So that's

That's my favorite. So what's your blemish? What's your quirk? My blemish, my quirk is I'm really goofy and I like to joke around. And I think that also makes me approachable. And I try to sort of use that as a strength. When you're looking at your advisors, you mentioned different parts of your business. Do you think of segmentation in any specific way for your advisors? Do you think of segmentation for your clients? If so, how?

So client segmentation, especially technology-assisted client segmentation, so you can't cheat the system, is one of the best ways to free advisor capacity. That's why I believe in technology and investing in technology and AI. And we've done that in a big way because if we can help advisors to understand where they're spending their time, number one, and then how profitable that is, then we're

it changes their day. It changes how they focus when they come in on a Monday morning and say, I need to hit my top clients. One of the advisory coaching systems that we're using

call it the 80-20 rule, the Pareto principle. So the top 20% generates 80% of your revenue, your referrals, just business in general. And so that should be the focus area. And when we're spending too much time on the bottom part of our book, and by the way, I am by no means advocating that you should give clients that don't have as much in

inferior service. I'm advocating that you should find a phenomenal home where they can get help, but maybe it's not with you.

And I think that's some of the strategies that these larger banks are doing, JP Morgan being one of them, creating their remote advisor channel, offloading the books that didn't have clients with enough deposits and investments for an individually allocated advisor. They really made them a home and national branch. You also saw that in various different places in Wells Fargo as well. They start doing client segmentation based on the book value on the client size to really free up capacity to your earlier point for your advisor's

best use of their time. It's not necessarily firing clients. I think advisors sometimes think of it as that, but it's really...

showing them actually more love. Because if you're not going to be focusing on them, you might as well give them to someone, maybe it's an up and coming advisor, who will give them the attention that they actually need. I couldn't have said that better. And if we could spend like 30 seconds more on this topic, I'm passionate about it. It's an emotional bond an advisor creates with a client. It's really hard to let go of that, you know, 500,000 or the

depending on the size of your book, million dollar client that you've worked with for 20 something years. Like that's one of the hardest things in the world to do. And at the same time, you owe it to that client, like you just said, to make sure that they're getting a fantastic service experience. And when I have this conversation with advisors and we do it internally, yes, it's hard. But the one question that we can kind of ask them is, are they getting the experience that you want them to get?

You're listening to Barron's Advisor, The Way Forward, Next Generation. We're going to take a short break. Stay with us. Welcome back to Barron's Advisor, The Way Forward, Next Generation. Let's get back into the conversation.

Because I know you want to get to technology and we're going to get there. But before that, the processes portion, as we just mentioned, is so important. So when you're looking at your business and how you are really moving it forward to that next phase, what processes are you looking at and how are you transforming them? Not too much at once is what I've learned. Okay. Because when you do that,

Advisors are so busy in their day with their meetings, with their clients, they're sort of engaged. And if you give them too much, and I'm an advisor too, so I get it. It's overwhelming. So change needs to be intentional and manageable.

And so when we think about process, it's what can we tweak? What dial can we turn that's going to have the largest impact? I'll just share this because we've set up this way and it works really well for us. Centralized management teams. So portfolio management is centralized in our case. So we're a

$2.5 billion regulatory asset firm, and we have 90% of our AUM tagged to our centralized risk models. It doesn't mean they're not customized portfolios, but the risk chassis allows us to understand the level of risk across 90% of the money in a very, very deep way. And so when we seek to make change, we can do that very quickly at the investment committee level and then translate it into the portfolios.

I think that's so wise. And also that you're centralizing your resources or else all of your advisors are going to be doing that. And you're going to have duplicative situations and they're going to have come up with different models, different risk analysis. So centralizing it is really smart. What other centralized resources have you come up with? I knew you were going to ask that. Service. So if we think about an advisor opening accounts,

an advisor chasing down information to even just get an account open. Um,

If it's a complex trust, there's a whole different set of requirements in terms of what needs to be collected from a documentation standpoint, moving money, making wires, cashiering activities, all that is centralized. So our advisors can plug into our ecosystem and they don't have to open accounts and they don't have to trade and they don't have to move money. And so all of a sudden, and I have a quick story about this is when I first got into the business,

I remember my dad and uncle would print out portfolio reports and they'd use their HP-12C calculator, reverse Polish, and come up with the trades that should be made by account. Now we have, I think, over 3,000 accounts. And so that would just not be manageable.

We're going to transition to technology because I think that's where we really wanted to end up. So I've seen a rise in TAMs or turnkey asset management platforms and other sort of modular technology vendors that are out there that have helped REAs, specifically in the $2.5 billion range, scale in certain ways and continue to scale and be primed for growth. How do you look at technology and has it changed since you've been at the firm for about 10 years?

Drastically. To all of those questions, I remember coming in and there were barely any CRM systems in place. I remember the ACT, and I'm sure some people listening had the ACT database, which

Hopefully you've transitioned off of that. It was fantastic for like record keeping, but now we're in a different world, right? We're plugging AI into our systems and we're getting insights. And so we've been really focused on creating a world-class technology infrastructure that

to create capacity for advisors. So what does that mean? It means that all facets of the business flow through our tech platform. So we have centralized CRM. It's customized. We have a chief technology officer. People said we were crazy out of the gate at, you know, sub one billion when we formed the RAA to hire a CTO that wasn't revenue producing. But we knew we needed to clean everything up and have organized structured data in order to move forward and to scale.

And then it's plugging in the right trading systems and having a system like Adapar where a big Adapar power user has been transformational for us. And people ask us, why would you pay so much for a reporting engine? Well, yes, we have institutional clients that we need to cater to and run on the fly custom reports, which is fantastic. That was maybe the 15 to 20 percent reason why we got it.

The 80% reason, going back to Pareto, is because it unlocked all of our other systems. So all of a sudden you have ownership of your data and it's reconciled and then you could feed it into your other systems. So I could take the Allison household, might have five accounts in it, and I can look at it and I can say, I've set parameters for how the portfolio should be allocated. I know that it can be no more than 70%. Maybe we come up with an IPS for you.

And then the second it hits 71, 72, 73 percent, I get a notification as an advisor saying, hey, this has drifted. And so put eyes on it. And so that's an example of what integrated tech can do. How are you currently thinking about your data and organizational strategy in preparation for AI? And I know you want to talk about AI. Well, I'm itching and we're all excited about it. I think you have to create the culture. But the data organization is it's brutal.

You can hire a firm to help. You probably should. We have done it. Doing it yourself is nearly impossible, especially if you have a sizable business with a lot of clients. It's really hard to organize past data too. But I look at it and the analogy I would give is farming. So this is so funny because our coach asked us, if you weren't doing what you're doing today,

what would you be doing? And my brother and I both said we'd be farmers. You both answered the same way. Yeah, which is hilarious. So I guess we're doing something right doing this together. But if you just throw a bunch of seeds into a grassy field to expect to grow a crop,

like what happens? What does your yield look like? How organized is it? How, like, how easy is it to harvest versus intentionally like running the tractor over the field, making sure that like you've turned the soil over, making sure that you've then fertilized it, making sure that you have irrigation, you have weed control. I'm not a pesticides guy. So, you know, I wouldn't... Organic only. Organic only. Um,

But that's even harder because then you have to weed by hand potentially. And then you have to tend to that, right? So I look at the data in the same way. It's like you need to prepare that field, that data to then grow and to scale. And so before you can feed it into all the systems, you need to have that data structure and integrity. Like once you do, like the sky's kind of the limit. The other piece of that is

Every time you add a new system, you have to train your advisors on how to use that. So we're trying to reduce the amount of logins over time.

How many pieces of technology are you logging into in a given day? You have your custodial system. You're probably going into that, which has maybe a trading system or you have your trading system separate. And then you've got your planning system and then you've got your CRM and you got your password manager, which manages all your passwords. So it's a lot. So the more focused you can be and the less logins or the less systems you have to plan,

The more readily, I guess, available that information is in one central place, the easier it is to have some more time in your day. Spend it with clients. So, Artificial Intelligence, where are you on your journey? Once it's all organized and working, it's like adding the rocket fuel. So if you have a plane that barely flies and then you put a crazy jet engine on it, you upgrade the engines, it's not going to go so well. And so...

Build the airplane while it's flying, but maybe you're not, you know, don't go ultrasonic before you feel like you have an aircraft that is worthy of that speed. For us, we've plugged in most recently Einstein activity capture, which has been really cool. So that's kind of the first step of our AI journey. We have a dedicated budget line item for innovation.

So, you know, creating culture of AI isn't just saying, yeah, we're like doing stuff with these tools, but it's about being intentional and saying, I've carved out a percentage of my budget that I'm going to allocate to trying these things. They might not work, but we're going to try it and we're going to innovate and we're not going to punish our team for failing, going back to sort of core value one, right? If they ain't broke, try to make it better and then punish people for trying to make it better. That doesn't work.

Einstein Activity Capture does within Salesforce is really interesting because it automatically logs the emails instead of them having to manually assign it or relate it to a record. And then from there, the AI will enable you to get insights on, hey,

You sent Allison an email two days ago and she responded, but you did not. You should probably follow up on this. That's huge in our world, especially if you have a lot of clients.

Is there anything that you would like to add that maybe we haven't covered? You have an approaching inflection point with the average advisor in their late 50s. And then the average founder is a little bit older than that. So call it early 60s, maybe mid 60s. And I think the biggest challenge we have as an industry is recruiting talent.

How do we replace these amazing professionals and the impact that they're able to have on people's lives? That's really hard. The barriers to entry are still too high. I believe there need to be better training programs. Who is willing to invest in that? I think if you're in this business and you're young, you're really well positioned to make an impact. And if you can help to mentor other talent into becoming fantastic advisors, even better.

That's great. Thank you so much. Thanks for having me. The production team for Barron's Advisor, The Way Forward Next Generation is Ellie Ismaladou, Rebecca Bisdale, Paul LeBlanc, Kinga Royjak, Joseph Lesby, and Alexis Moore. Melissa Haggerty is the executive producer. Jenna Mathis is the director of programming for Barron's Advisor Programs. Greg Bartalas is the editor-in-chief of Barron's Wealth and Asset Management Group. We'll be back soon with another episode. Thanks for listening.

Capital Ideas, conversations with Mike Gitlin from Capital Group, features our top investment professionals sharing what drives them in today's market. Get stories and actionable insights. Subscribe wherever you get your podcasts. Capital Client Group, Inc.