Building a wealth platform to transform lives
Brent Brodeski, CEO & Founder, Savant Wealth Management
Hear Brent Brodeski, CEO & Founder, Savant Wealth Management discuss his journey to becoming a successful entrepreneur and leader in the financial industry. Brent shares his personal experiences and how he overcame challenges, made tough decisions, and developed a strong vision for the future of his company.
From his early days as a stockbroker to founding Savant Wealth Management, Brodeski shares valuable insights on building a culture of growth, selecting the right partners and staying true to core values. Learn how one of the most respected figures in the financial industry cultivated leadership skills and implemented effective strategies for managing teams and driving innovation and growth.
Hi, welcome to the show. Brent, it's an absolute pleasure to have you on.
Yeah, thanks for having me, Matt.
For Brent, I believe it's about 7:00 PM at night, but Brent, whereabouts in the US are you?
Well, at the moment I'm in Naples, Florida, so southwest of Florida.
And I think you like to move around a bit, is that right?
Yeah. A lot of it's tied to where the weather's best, so business's headquartered up in the Midwest near Chicago and it's quite cold this time of year there. So we have a house down in Florida here where we winter.
We might have to come to that conversation a little bit later on. Love to hear just how you do manage that work/life balance given the size of your business. But before we get into it, we've obviously had an opportunity to have a chat, but it'd be great just to hear a bit of your story, how it all started, and I think why they didn't originally hire you at 25 or fired you at 25.
I was working on my MBA and got an internship with a small local broker dealer and I continued on. I essentially became the marketing department and the accounting department and the technology department, did it all. And I had written a business plan during my MBA to start a fee only RIA, registered investment advisory firm. My deal with the founder of that firm, CEO of that firm was that I would come work for him, but we needed to set this separate business up that was speed based, that would compliment the more traditional commission based business. After about a year and a half, I really needed 5,000 bucks and I needed some of his bandwidth and a willingness to bring some of the clients that were commission oriented over to the other side of the business and pushed a little too hard one day and that resulted in my becoming unemployed.
Yeah, I thought, well, I guess I have to get a real job then. So I went knocking on doors and big companies and nobody would hire me. I guess in retrospect, I was entrepreneurial as you get and I'm probably unemployable by anybody else, but it really didn't have a lot to lose, because nobody gave me a job. And so I started knocking on doors, found a co-founder and had dusted off my business plan and that was 30 years ago and just had my 30th Savantiversary. So it's been a great ride and we've done some really cool things over the years.
We'll come back to that in a moment, but it's not all that common that you get someone at the age of, I think it was 25, having written up a business plan that was going to fundamentally change the way that the industry did business. What was it that attracted you to advice in the first place?
I always love finances and investing, so I thought, well, maybe I'll be a stockbroker. Of course, I didn't know what stockbrokers really were. I had not heard of fiduciary type advice businesses and it was really before I was too ingrained by the traditional way of doing things, I did a MBA and listen, I looked at modern portfolio theory, which was really strange academia back then and realised that index funds dominated the institutional arena 40-50% at that time. The big pension plans as an example, used to index vehicles at the same time it was about 1% in the retail world. So just saw an opportunity to take what academia had done and some of what the institutional world was doing and bring that down to common folks. I guess I didn't know any better. Retroactively is like, wow, I'm surprised this worked.
I think it was a little ahead of its time, but on the other hand, the timing was such that it's a story that resonated. And right now you think, well, ETFs and index and asset allocation, financial planning, everybody does that, right? That's kind of commodity or table stakes. But back then it was pretty unique. It was different. So different enough that we were able to attract some great clients and make a living and then grew it from there organically. And for most of the years and then the last 10 years really the timing was right to start growing the business inorganically as well doing acquisitions.
Whilst there's a lot of similarities between the Australian market and what's happening in the US might be worth just spending a moment on what exactly are the services that you're delivering for your clients?
So the way I think about it is we are building a platform that's focused on transforming lives. And so let me go back in time. If you think, go back 30 years ago, it was really the sales of securities. It was a sales of commodity stocks and bonds for commission. Then I think the next level of value creation was let's create products that package stocks and bonds like mutual funds, charge commission. Then the next evolution was provide a service that does asset allocation and rebalancing and investing for a 1% fee. And then it sort of evolved to, well, let's do wealth management. We're going to do financial planning along with investing and helping people implement that. So that's kind of where a lot of the world is right now. And what we're trying to build is really this platform that's focused on building ideal futures.
So if you use Apple computers just as an example, they dropped the term computers, because it allowed them to provide value well beyond making hardware, now they're in the music business and the video business and the app business and the watch business and you name it, all the different areas. But the commonality of all these things is they've created a huge amount of value improve people's lives. You could look at something like an Amazon is similar, right? They've created a platform that brings together parties, creates great service. So that's kind of what we're trying to do. It's create this one stop shop platform where of course there's investments and there's financial planning, either the largest or second-largest wealth advisor that's also an accounting firm. Why is that? Well necessarily that we like accounting or it's actually a really difficult business, but our clients need that.
They need their tax returns done, they need the tax planning. And we started a law firm, but it's a law firm that's tailored to doing the estate planning documents that our clients need. We've got a trust company. People at the end of the day, whether it's investments or insurance or tax return or these are all commodity components, but I think the real magic is being able to bring all those into a unified one-stop shop platform that again, first and foremost is focused on improving lives. We call it building ideal futures. That's priceless. The money is important and the financial planning strategies are important, but what really the client cares about is their ideal future.
Then the planning, that's just like the car that drives you into your ideal future and the gas, that's the investments you have to put in the cars gas tank to drive it to the ideal futures. But first and foremost, I think really the opportunity to differentiate and create massive value is really around helping people get clear on priorities, goals, values, vision, legacy, what matters to them and their family. Then of course, being able to implement all the component parts, whether that's investing or what have you.
Quite an interesting observation, because in Australia we're certainly seeing the rise of the multidisciplinary firm where they do wealth and accounting, debt, mortgage broking, but it's quite unique in America, you'd be certainly one of the pioneers in that space.
Yeah, and I think there's a lot of the other RIAs are aspire to this and we've actually been able to be very successful in accelerating our inorganic growth. I hate the term M&A, because that's like big fish swallows little fish or Al Dunlap [inaudible 00:08:49] and fires people and that's not how we think about it. We've found that by being able to deliver that package of taxes, investments, planning, trust, accounting, retirement plans, business succession planning, being able to bring all these things together, A, it makes it easier to get clients and get wallet share and grow those relationships and get referrals. But in a world that's increasingly commoditized where anybody can buy ETFs or anybody can buy mutual funds and anybody can buy financial planning software and deliver a plan, mostly advisors are mostly the same. So being able to bring that one stop shop that integrated, which first and foremost delivers ideal futures, that's pretty unique.
And I think most importantly, also makes it very simple for the client. They don't want to be seeing 6, 7, 8 different people to manage their ideal future.
Yeah. You think about it, for years we avoided doing legal drafting, because we thought listen, we don't really want to be in that business and it's complicated from a legal perspective around having a law firm when I'm not a lawyer. But what we were finding is, we did all the heavy lifting on the actual estate planning and then it was sort of like you said, "Okay, we're going to refer you to an attorney and you send them to the attorney," and it's kind of like, here's a prescription for penicillin, we'll make you feel better.
Then a lot of times the attorney would instead prescribe a wonder drug that cost too much and didn't make them better or they actually didn't have the full perspective that we had from planning angle. So they may have tried to take the client a direction that they thought made sense, but it wasn't necessarily consistent with what we clarified was most important with the client. So we certainly will work with outside professionals, but for a lot of our clients it's like they would rather not have to open their kimono, if you will, to an attorney when they've already got a relationship with us. It's just an extra party. Things get lost to translation, extra costs and frankly they trust us and have confidence in us. So the idea of just saying, "Okay, get it done for me," hit the easy button to actually implement that advice. Pretty valuable to the end client.
In this podcast series Matt Heine, Joint Managing Director of Netwealth, chats to industry professionals and thought leaders on what opportunities and challenges they see for financial advisers and the wealth industry as a whole.
We've jumped into the detail pretty quickly. I thought it might just be worth pausing for a moment. You have a very big business. Do you want to just maybe describe the size of the business and then we might even do it slightly unconventionally, go backwards how you actually got there, because I know you've had some interesting points within your career where you were growing organically, you've had to exit partners and then that's actually created opportunities to really fast track to where you are today?
So we're 372 employees, I believe, changes by the day. So I'm sure by the time this published as well probably have a few more. I think we have about 15,000 clients, just shy of 19 billion of assets under management and about 10 million of tax and accounting revenue. 30 offices, Midwest, most recent acquisition is in the southeast in Atlanta, Georgia, [inaudible 00:11:58], Washington DC area. So we're not national, but we've identified we got about seven markets that we're in and try to be meaningful in those markets.
And how have you got there?
You look back and you say, "How do we do this," right? And I guess it's a lot of work. 30 years, we've been doing it 30 years and the first few years it was just a client at a time and I had a partner that was 17 years older than me. He went and got clients and I did everything else. I kind of think about it, it was like, I was the bat boy, he was the batter and that's what we did. Then after a few years we realised well we need more than one batter. So then I became a player as well and then we realised we needed to evolve to player coaches. So we started hiring people.
In 1998 we brought a third partner and sort of co-founder and it was kind of like three guys that were pretty darn good warriors right out there on the front lines doing hand-to-hand battle, bringing every client and ourselves and then hired a bunch of people behind us to support us to make us better. It got to a point though, where we realised the phone was ringing a lot and sometimes they're asking questions, we didn't understand the question, let alone the answer. And it was at that, it was about 2001 and we needed to either close the doors and have an nice boutique business, lifestyle business or really build it.
We decided we love building, we wanted to grow it, wanted to create a real business. We modelled it after the Mayo Clinic, which is one of the top hospital systems in the world. And what's unique there is like you don't go there for Joe the doctor or Sally the doctor. You go there for the Mayo experience and what is that? They hire some of the best specialists in the world, but more importantly they work as a team. They collaborate and oftentimes better diagnose and create better treatment plans. So that was kind of our model. We started hiring a lot of specialists. It was about the client and clients were firm clients and whether that was trust specialists or insurance specialists or tax specialists. I mean, go down the list, we literally grew it a client at a time.
About 15 years ago, Rockford, Illinois where we're headquartered about 90 miles west of Chicago, it's not that big of a town, 150,000 people. We were the 3,600 pound gorilla there. We realised we needed to spread our wings a bit. We opened three new Greenfield offices and that worked, but it was really hard. Going into a new market where you weren't there and they didn't know you and you didn't have clients and planting a flag and saying, "Okay, now come work with us." It just took a long time and it was hard. So I'm glad we did that. But the reality was is if you think of a scale one to 10, going from zero to two is a lot of work. It's much work from going two to eight. So really about 10 years ago we pivoted and said, "Let's start doing some acquisitions," but not in the sense of buying peoples spent oil wells and having them leave.
It was rather the very best talent we couldn't hire, because they had their own firms and they had their own practises. So listen, let's find great advisors who want to be part of something bigger and I can't hire them, but I could acquire them and merge them into a firm where we've got a better, bigger stage. And it was also an ability to move into new markets where start from scratch, we can start on a scale of one to 10 on a two and help them grow it faster. Then we also learned that when you're in a market, you got to be a bigger player to have more at bats and bigger at bats. So density was important. So once we went into a market, well let's double down triple down to grow in that market. Then the last of all, it was really, we've learned, we've done this 17 times now and we've learned that almost every deal we're getting new plays for our playbook.
They've got some expertise or some method or process or a niche, capability that we don't have. So we've learned that that was doing partnering as we call it. We've got a winning playbook, but when you bring in really great talent, you get new plays, now you get better plays, sometimes their plays are better. We rip out our page and stick theirs in. Other times it's a new play that we can add to the book. So that's really been the last 10 years. We still first and foremost have grown it organically, but by being able to partner to get new locations, great talent, new plays in the playbook, really doubling down, creating density in the markets in which we are.
So that seems to be resonating. It's interesting, because you say what's the number one organic growth strategy? It's inorganic growth, right? Because a lot of times we find these new partners and maybe they aren't growing real fast, because they're busy, they're taking care of their clients and trying to run a business. And so what we've we found is when you take that great practitioner, take all that business management stuff off their plate, then all of a sudden they can grow a lot faster. So yeah, it's interesting from 30 years ago, remember the first client we got and now we're almost 15,000 clients.
It's an incredible story. Congratulations on everything that you've built.
Yeah, thank you.
We'll come back to capital management in a moment, because growing that rapidly into the scale that you are, I imagine has its fair share of challenges and different models that you've looked at. But partner selection I think is a really interesting topic in itself. Making sure that you find the right partners to bring on. So you suggested that you've done 17 acquisitions, be interested to know how many you've said no to and maybe what the top three or five things are that you look for when interviewing and identifying these partners.
We've looked at hundreds to do 17. You kiss a lot of frogs and every once in a while it works. The key thing, there's probably 25 firms in our space, platform companies in the United States where they're doing organic and inorganic growth, trying to build a brand and probably 20 of those have outside private equity capital and it's shorter term. The bulk of private equity is all about, let's pump you full of steroids, let's buy as many companies as you can and three to five year window do financial engineering and then sell it. Don't really integrate it, because that's hard. And if you help somebody you're going to integrate them. A lot of times these are big egos and they like doing it their ways. So don't integrate them, just buy them all and then hot potato into another private equity and that's a great way to grow, make money in the short to intermediate term.
I think it's a really flawed way to build a sustainable, durable business that's really high quality that I as a principal investor want to own and stay in. So contrast that, our capital structures such that we'd have outside capital as well, but it's very patient long-term capital. So they can't ever make me sell the company. They can't ever make me buy them out. We want to turn right and they think we should turn left, we turn right. That's just the deal that we have. And so it's allowed us to think more like Albert Einstein. I don't know if this is true or not, but apparently on his deathbed he was asked, "What fascinated you most?" And it wasn't relativity, it's compound interest. So the way I think about partnering is since we are trying to build something for 10, 20, maybe 30 years, very long term, you got to be really picky about what partners you bring in, right?
Because it's kind of like getting married. Listen, if you're just going to do this for a couple years, maybe you bring people in you don't like or maybe aren't perfectly fit, hold your nose and then sell the whole thing. But if like, our case we're trying to build something that is sustainable, durable, which means you got to get partners that are highly aligned on the vision, highly aligned on the values, really excited about being contributors and growing something, not looking to sell a spent oil well and go to the beach, because there's plenty of other firms that'll buy spent oil wells. Think about bodybuilders. So if you just want to win Mr. Olympia, take steroids, take diuretics, do extreme things, maybe win, but then you're going to die of a heart attack soon. If the goal is only to grow really fast for a little while, then you just bring in anybody who can sell.
But on the other hand, if you want to build something that everybody wants to buy, but you don't want to sell and that means you got to get really great partners. Listen, these are some of my friends in the industry, but I wouldn't want to be partners with them, because they have a different vision or maybe they are optimised purely for a lifestyle practise, but we're about growth, we're about have a big vision about how do we improve a million lives over the next 20, 25 years. So somebody's just looking to cash in, that's not the kind of partner we're looking for, but I'm excited about somebody who wants to really build it and grow it and deliver great value to the clients, great value to the team, have a great value to the communities we serve. That's a sustainable durable business.
In this podcast series, our investment research team pick the brains of key wealth management professionals to uncover unique insights on the investment areas they are most passionate about.
See, you've obviously done a lot of things right over the last 30 years. I'd be fascinated to know what some of the things were that didn't go so well.
Yeah, listen, a couple things come to mind. We're talking to M&A. Our very first deal was over 10 years ago and everything we could have done wrong, we did wrong. Now the good news is it worked out okay. In the long run it turned out to be financially creative and most importantly we learned what not to do. We learned about the importance of not having a country club mindset, but having a growth mindset. The importance of having low ego people, the importance of taking care of your team. I go on and on, but we learned a lot what not to do and then that really informed all of our other deals. We thought differently and it wasn't just about, wow, this looks great on paper and it had to be really a good tailored fit. So that was painful, but it worked out well.
I think the other big thing that stands out is, I was a had a co-founder and six years ago, he was 17 years older than me, and was ready to retire. It was a bit challenging. Partnerships are challenging, especially after so many years. I started Savant when I was 25, so I didn't really know what was good. I mean, we were successful. I think of it as like America's Cup. We were winning America's Cup, but the boat we were racing was an old model. It had barnacles on it, the crew were fighting, we were dragging anchors behind us. There was holes in the sail, but we were still winning. It was really hard and it wasn't all that fun. But I didn't know any better, because this is all I'd ever done. And the biggest lesson I've learned in the last six years is we recapitalized the business.
He wanted all cash from the barrel head. I had to raise $53 million, I put in north of 20, my employees put in eight. We went and got family office capital, fill the difference, fill the gap. And it was great, because as part of that transaction, everybody got what we wanted. My co-founder wanted to cash out, retire, a lot of different agendas. There was a lot of employees that wanted to come in and be owners. The outside capital, we had 70 different interviews of capital providers and found one that was highly aligned. So the term I learned was alignment of interests and I didn't realise how difficult it was to win before. When we didn't have alignment there was a lot of fighting, there was a lot of dysfunction, there was different agendas. Some people were half out the door. We won, but there was a lot of cost and a lot of energy.
When we aligned interests, we got the right employees, expanded ownership from 17 to 50 employees and we brought an outside capital partner. All of a sudden our success is skyrocketed, have compounded since then at north of 45% annual rate return over the last six years. So it's pretty cool. We were successful before in spite of ourselves, but when you align interests and you get the right people in the right seats on the bus with the right shared vision, shared philosophy, positivity, now we were winning, but it was a lot more fun and winning by a lot larger margin. Again, I didn't know what I didn't know. I didn't how dysfunctional some elements of our business had become until we created an alignment of interests and it's been a lot more fun since then.
I absolutely love that story and I've loved some of your analogies throughout this conversation. When it came to aligning interests, you sort of didn't gloss over it, but it's hard to do. So I'm interested, was that a formal process you went through or was it more just a recognition of what wasn't working over an extended period of time?
Yeah. Listen, there were some on the executive team that were near retirement and they didn't really want to work that hard. There were others on the executive team that were more about lifestyle and it wasn't about accelerating growth. So there was a partner who didn't care about grow. It was just like, "I want my dividend, just give me the dividend, let's not grow, because if you grow, it's going to cost cash flow, which I can't use to pay for my toys." So it was really a matter of saying, all right, let's start out with our employees. They're the ones, the key people, let's give them an opportunity. And they've got long runways. By that point, I already built a lot of wealth, but our employees had not in many cases. So identifying those employees that shared a vision that were willing to go all in with me and I put it all on red.
I mean, I literally had to borrow north $20 million and I went from financially independent to all on red and I had to do that, because absent that, we would've had to sell the company. Because I went all in, I got the confidence of my key employees to go borrow $8 million and put it in. Then with myself doubling down and my employees, 50 employees coming in, that provided confidence to our outside capital partner to be willing to give us the terms we wanted, which was they can't ever sell. They can't make me sell, they can't make me buy them out. So it was, you get what I get and our employees get what I get and we're all locked at the hip. It doesn't guarantee it's going to work, but if you've got partners and team that all share a common vision and are all in, you're just kind of like burn the ships, you burn the ship. Doesn't mean it's going to work out well, but it's kind of a litmus test and at a different level of passion if you're aligned and all in.
So you've burned a lot of ships, you've got rid of the barnacles, you've fixed the sails, you're flying, you want to get to a million lives improved. I'm interested, how do you do that? What are some of the innovations in your business that are going to help you scale that quickly?
So as I said it, I really see the opportunities to build a platform and what is a platform? We call it the ideal futures platform. And it's really, yes, the vision, the goal is to how do we improve a million lives? But you do that with people, with process, with technology, proprietary deliverables, and then branding all the above. So on the people, it's hiring the best people. The cool thing is at our size now, in the early days we were C players, you had to beg the D players to work for you. Then once you become B players, the C players are like, yeah, I'll work for you if you pay me enough. Then you become A players and the B players, yeah, we want to work for you. But what's interesting now, when you're A plus player, other A plus players are willing to work for you and businesses large enough so that not only can we attract them, but we can afford that.
As I think about the leadership team I've got today versus five years ago, six years ago, it's night and day different. Now they're a lot more expensive and listen, they're participating in the upside with equity, but it's a whole different calibre of people. So that's the people side. Process, when you got 15,000 clients, like listen, if you got a 100 clients, you just take care of them, right? And you do whatever you need. But if you got 15,000 clients over 30 offices, you need to have a consistent Savant way, we call it, of a way of doing things. This is how we do things. This is that playbook that wins, right? Now listen, there's other playbooks, other teams have different playbooks that win too, but it's having a consistent way of delivering value, real and perceived value to the clients. So that's the process, the technology.
I mean at the end of the day, we're in the advice business, it's invisible and the biggest assets go up and down the elevators and not the front door every day. But the technology now, listen, there's FinTech and being able to organise those processes and the proprietary deliverables, unique tangible items, whether it's a document or it's an assessment or it's a way of organising data, these take that invisible and make it visible. The intangible make it tangible. And so then ultimately branding, it creates certain confidence in consumers. They know what they're getting and they get what they know. So I think the opportunity is to create a platform that course has advice, course incorporates tax returns and asset allocation and legal documents. At the end of the day, what the clients really care about is what's ideal to them. We use a term building ideal futures.
What is that? So here's the opportunity and challenge. People, you only live once. And most people, the way they gain experience and wisdom is school of hard knocks. They learn it the hard way, right? Now that works, but the problem is a lot of times by the time you have all the experience and wisdom, you're either dead or almost dead. It's like too late. Remember Albert Einstein, it's about compounding, but you need time to compound. So really the innovation is saying, "How do we help people before it's too late?" Get really clear on what their priorities, their values, their goals, their vision, their legacy, what matters to them. This is like you're asking about innovation. We've partnered with Australian firm Lumiant, as you're aware. It's an amazing platform that we're co-developing with them, but it digitises what the best life is. What's my ideal future?
It digitises and quantifies what priorities and values people have. So if you do that, if you get the vision, the values, the goals, the priorities, the legacy right and take the experience we've gained and the wisdom we've gained from working with thousands and thousands of clients to be able to offer that perspective to that client or prospect, then they got an idea of what's possible. This is my ideal. Now if you know where you're going, where the ideal future is, then the planning is just strategies. The structures, the legal documents, these are the car that drives you to your ideal future. But then you think about what about investments? Well, that's just the gas that goes in the car, which drives you to your ideal future. The problem is most advisors think of them as being in the investment business, maybe financial planning business, investments in financial planning are commodities.
I mean, at the end of the day, anybody can do asset allocation, anybody can rebalance mutual funds, anybody can crank at Monte Carlo analysis. It's not a big deal. You can buy the software and do that. But there's not many advisors. Listen, it took me 20 years, I think 20, 25 years to be really good at curating wisdom and experience to ideal futures. The innovation now is at our size in making, co-developing this Lumiant platform. It puts us in a place where instead of having the next advisors, next gen taking 20, 30 years to learn how to do this, we can create process, we can create technology. We can create a consistent client experience, which allows an advisor in five to seven years to become world-class and be able to deliver that ideal futures experience, that best life experience across a very large client base across many different advisors and many different locations.
Yeah. That's what I'm really passionate about. It's like at the end of the day, too many advisors are still thinking their value proposition is investments. The clients don't care about that. There's a few engineer types that maybe are into that, but the vast preponderance of people, they just want to know they're going to be okay. They want their families to be okay and they want to have confidence and they want to have simplicity. So that's really where I think the real opportunity is.
I think also to expand in other areas, like healthcare. I don't want to become a hospital, but what do our clients care about? They tend to be older. They care about their families, they care about their money and they care about their health. We just did an acquisition at Lumiant that actually incorporates, will incorporate a whole health focus around longevity and thinking about how to have part of your best life is to wellbeing and how to optimise that. So those are things I think are pretty on the edge, but I think in ways that will really differentiate our company. And I think there's a few others out there too that are really thinking holistically.
Brent, I can't think of a more powerful place to finish our interview today or our discussion. Thank you so much for being so open and transparent about your journey. It's quite incredible. We're lucky enough to have you coming to Australia in not too distant future. But outside of that, is there some resources that local advisors might be able to go to, whether it's your website or elsewhere to find out more about some of the work that you're doing?
Yeah. At savantwealth.com is our website. There's a plethora of stuff there and there's pretty well known in the industry. So there's a lot of people that tend to plagiarise a lot of the stuff on our website. And you guys are the other side of the world, so I'm not too worried about that. But then Lumiant is in your neck of the woods, and again, we're partnering them it's an amazing platform. Lumiant, L-U-M-I-A-N-T.io. But some really cool stuff there that your listeners should check out.
Amazing. Look forward to meeting you when you're in Australia and thanks again.
Yeah, appreciate the opportunity. Enjoyed chatting today.