Guests: Gary Roth and Mike Capelle, Co-Founders and Co-CEOs of Modern Wealth Management.
In a nutshell: I first met Gary Roth and Mike Capelle when they were partners at United Capital, a firm they helped grow into a $25 billion RIA that was eventually sold for $750 million. Today, they’re redefining what it means to scale an RIA through M&A and kickstarting organic growth.
On today’s show, Gary Roth and Mike Capelle share their vision for Modern Wealth Management and why they believe the RIA industry is just starting to hit its stride. We dive into their approach to scaling through acquisitions, the importance of organic growth, and how they’re investing in their team to create a company culture that prioritizes innovation, client success, and career development. Gary and Mike also reflect on the lessons they learned from scaling and selling United Capital.
.Gary Roth, Mike Capelle, and I discuss:
- The industry trends Gary and Mike wanted to stay ahead of as they grew United Capital.
- What’s motivating Gary and Mike to start and grow another firm.
- The strategies and expectations that come with private equity investments.
- Gary and Mike’s approach to acquisitions, from valuation through integration.
- Helping firms achieve and sustain organic growth.
. Quotes:
Mike Capelle on harnessing opportunities for both RIAs and their clients:
“ The industry is still in a phase of consolidation and maturation. There’s a tremendous opportunity out there with consumers who are not receiving wealth management services that could benefit them. A huge opportunity within the consumer space. You still have a very disaggregated RIA market. And the opportunity for the benefit, ultimately, of clients to be able to bring together larger firms that have more resources to bring to bear on the client relationship. And from my perspective, it’s just an incredibly attractive industry and market. The characteristics of the industry as well. You talk about an industry with a service model where there’s very little capital investment needed. Granted, the flip side of that is people. And that kind of model has just really attractive characteristics to it. And I think we learned a lot over our time at United Capital about how to bring those firms together in a really beneficial way. Not only for the firms and the advisors, but for the clients as well.”
Gary Roth on creating capacity for growth:
“The data shows most firms stop growing for a whole bunch of reasons. One of which could be capacity. The advisors are like, ‘I’m full,’ and even if they have multiple advisors or a G2, okay, now you have to feed those people. Typically people build their books however they build their books, some affinity, some set of relationships, and then maybe they grow more via referrals. But after 20, 25 years, how many more referrals are there for your clients to make? So the pace is going to slow down. Creating capacity can mean taking some necessary, but not critical, functions off of the advisor’s plate. Many advisors in a small firm are also the Chief Compliance Officer, they’re the Chief Marketing Officer, they may be the Chief People Officer, or they may have someone who does it, but they’re really reporting to them. So giving them more bandwidth in those areas that are necessary to the business, but are not really why they got into business to begin with, and are not really their highest and best uses. And I think most people who are acquiring firms today will say that’s what they do. But having a multichannel organic growth strategy, stacking up different types of leads and prospects, and then having a team whose dedicated function is to make calls to prospects, and then building in best practices and continuing sales training and reporting back what’s working, what’s not working, articulating the value proposition around all the client service offerings — all of those things go together.”
Mike Capelle on bridging the “succession gap”:
“For over a decade we’ve heard about the aging advisor base, and the generational wealth that’s going to transfer, and the need for succession plans. At least for us, it seems like we’re actually running into those situations, and I think if you look at quite a few of the transactions that we’ve done and the businesses that we’ve acquired, we’ve enabled that succession plan to occur. Whether it’s going from the first generation of the founders to the second generation or even the second generation to the third generation, it does seem like is actually coming to fruition. They do need an enabler though. There is quite a gap. The old model was, your next generation can basically buy you out of the business over time. Trying to make that work these days, with where valuations of these businesses are, there’s a gap, and there needs to be some way to bridge that gap. And we’re finding a lot of success coming in and enabling that.”
Resources Related to This Episode
- Gary Roth on LinkedIn
- Mike Capelle on LinkedIn
- The “Secret Sauce” That Led United Capital from $0 to $24 Billion in AUM Matt Brinker and I discuss how being early on a trend, M&A, technology, financial life planning, and a charismatic leader all came together to create one of the industry’s biggest and most innovative RIA firms.