Angela Shah
Hello, and welcome to the PracticeLab podcast, where we talk to top advisors about what makes them successful, so that you can apply those lessons in your own business. 

I'm your host, Angela Shah. And today we are talking to Jonathan Freeman and Brian McCarver, founders of Stonebridge Financial Group, which is based just outside of the Pennsylvania state capital of Harrisburg.

In part one of our conversation, you’ll learn why they believe the way Stonebridge manages their team is the bedrock of their growth, how they’ve leveraged centers of influence to create a robust client referral pipeline, and why spending resources on marketing has helped them fuel organic and sustainable growth.

So, grab your coffee, and let’s head into the PracticeLab. 

Angela Shah
Jonathan Freeman, Brian McCarver, welcome to the PracticeLab podcast. Give us kind of an outline of your practice. How would you describe it, the services you offer, the types of clients you serve, your areas of focus, that sort of thing? Give us a brief overview.

Jonathan Freeman
Thank you for having us. And we appreciate the opportunity. So Stonebridge Financial Group is a practice right now with two offices: one just outside of Harrisburg, Pennsylvania, and one in Lancaster, Pennsylvania. Our group manages roughly  $1.3 billion of assets. And I'm going to say that roughly 25% to 30% of our business is corporate retirement plan consulting, with the remainder being wealth management, financial planning, and some institutional asset management.

Angela Shah
So tell us about two or three things that you think makes you distinctive in your approach in dealing with clients. Is there anything specific that you'd like to say about the way you serve clients, or the way you’ve built a business?

Jonathan Freeman 
Well, I guess one of the differentiators for our practice, from a wealth management or even just a practice management standpoint, we think it's very important that the newer or younger advisors are handed business. We don't expect someone who's one or two years in the industry to be a huge originator of business. The practice itself originates a lot of new business, and we want to make sure that that trickles down and really enables people to be successful. I'd say that the rate of failure for our advisors is extraordinarily low. For the most part, if you are willing to work, you're going to bring in business, and you're going to succeed in this industry.

Angela Shah 
And it takes some of the pressure off, that they're not so much worried about eating what they kill. They can really focus on client service and building up both their experience but also building an experience in with the clients and working with them. That seems to benefit, it seems like that would benefit the firm.

Jonathan Freeman 
Exactly, right. I mean, senior-level advisors might be close to capacity in terms of clients that they're handling. They're encouraged to pass down some of the smaller clients to other advisors, and try to increase the quality of their books, but not the quantity of their book. And again, that enables smaller advisors to operate without a whole lot of sales pressure. Again, our expectation is that they're involved in our marketing efforts and sort of our engagement within the community. But our expectation isn't for them to be high-pressure salespeople or originating a ton of business upfront.

Brian McCarver
John covered a lot of things that I do think are a little bit unique. John and I both came out of, say, not the independent world. We came out of the traditional wirehouse world. And I think one of the difficult concepts of working within the wirehouse is you might have 20 or 30 or 40 people within the wirehouse who are theoretically competing against 20 or 30 or 40 other people in the same building. So as a consequence of that, I really think about it, like every single person that works for us was at one point an athlete on a team sport. And I mean, football, soccer, baseball, basketball, lacrosse; they all played team sports. And I think our practice operates much more like a team than a bunch of 17 individuals chasing business opportunities around this area. And as a consequence, working as a team is a lot more fun because you get to celebrate successes together, and you collectively try and serve clients and find clients and do all sorts of things. So it's a rewarding experience working, and sort of competing, as a 17-person team, than it is one individual chasing down one lead, finding the next lead, etc.

Angela Shah 
That would seem to me also to be great retention strategy and building loyalty to the firm. How is that a differentiator for you when hiring people?

Brian McCarver 
So we have very high employee retention. I don't know that we've ever taken any type of studies to understand why, but I would imagine the fact that we're collectively trying to make everybody a success, not just us individually, or the practice. But I think it works because it's working. And I do know, I started in the business in the ‘90s, the late ‘90s. I do think it is possible to start as an individual in the business. But it's very difficult, especially in a fee-based model where you're trying to really acquire and build client assets in a reasonable fee as opposed to a commission-based model. It's very difficult for an individual to start and sustain a business with very low assets and are searching for clients all the time. So I do think the natural trend of the industry is towards teams, which leads to the teams that create the best environment and the conditions for every member to succeed, should continue to succeed, but also serve their clients well and serve their employees well.

Jonathan Freeman
Yeah, just to speak to the turnover. I mean, it really has been less than 10% turnover. So that's been great. And again, nearly everybody who starts with us, our hope is that they spend their careers here. One of the nice things in terms of from a team standpoint is that we have hired people with a lot of complementary personalities. We have our [introverts] who might gravitate toward the Investment Committee, as an example. We have people who are more sales-oriented, who might be the ones who are going out there and getting out in the community and trying to network and bring in business. So, everybody contributes in some way according to really what their skill set is. And we've also built the infrastructure to help people succeed. I mean, again, we have two full-time portfolio analysts; we have a full-time trader; we have an exceptional office manager, some really great and experienced client associates. So the advisors really do get to focus on the clients, and also on building the business, of course. So, Brian's absolutely right. I mean, everybody here has been involved in some way with the team. And it truly does function that way.

Angela Shah
I want to ask you a bit about, you mentioned that some of your associates, they have non-wealth management backgrounds, the payroll background, the accounting background, etc. Were those hires made sort of on purpose, like a we have a need here that we can fill it through this expertise that this hiring prospect has? Or did it kind of fall into place and you realize, looking back now, wow, that was strategic of us, because, we have this capability now. And now we try to use that to take advantage of it. How much of that was that by design? And how much of that was just sort of happenstance and then leveraging the benefits of getting that expertise after the fact?

Jonathan Freeman 
I want to call it 50/50. But it was luck and timing. Specifically, the CPAs that we hired, who are very proactive reaching out to CPA firms, knowing that that's a really good fit for our business, for our business model. And frankly, having a practice manager who's a CPA is fantastic. So that was very intentional. Some of the other ones were less intentional. I would say the hiring of someone working for a payroll company was in fact intentional. That's a great sales background. It's a great background to understand the corporate side of the business. The others were probably more accidental.

Angela Shah 
One of the things I wanted to, it's a nice segue to know what you both have shared about the evolution of your practice, since the two of you started. What were the triggers or turns in the road that made you both kind of realize, hey, we need to pivot this way?

Brian McCarver 
Well, I mean, I've been in the business for 24 years now. And I certainly didn't plan it, to be at this point. I mean, it sort of just happened through events and people and activities and stuff, and you just keep sharpening the pencil and you keep trying to move in the right direction. Certainly, again, I started in the late ‘90s in a wirehouse. The world today is a lot different than the late ‘90s in the wirehouse. Probably the most interesting aspect of our business is that John and I are literally like yin and yang. We have complete opposite skill sets and personalities. And, I think you run the risk of attempting to, in any business, try and be the person with all the ideas or direction or whatever. And invariably, somebody else has a different viewpoint or a different idea that ends up helping it. So the fact that we're not completely opposites, but we're pretty opposite in our backgrounds and our personalities, and that our work together complements each other. And individually, we couldn't have done this. Together, we've done this because one plus one equals three. And then the mindset that, we just need other pieces of the team that actually do things that we don't do well. So I'm sort of a process kind of analytical guy. John's a relational kind of business sort of interactive-type person, and we have people who are more analytical, but we have a lot of people who are more relational, and we have some exceptional support staff that, again, it was just sort of on purpose, but luck and timing in terms of finding the right people who fit the right piece of the teams [for] the role that was needed on the team at the right time.

Jonathan Freeman 
I think financial advisors or financial practices have gone from sales to being more professional practices. I mean, we think it's not just a desire, but a requirement to have the CFP designation at this point. We do think that we serve a purpose. And our purpose is not to hawk as much product as possible, [but] to do what's right for the client and provide good, sound advice. And part of doing that is moving away from a transactional business and toward an advisory-based platform, whether it's fee only or  advisory fees, or hourly planning or what have you. We needed to bring the practice up to speed in the early 2000s, just like a lot of other practices [have done]. And as you do that, you find that there's a lot of different things that you need to accomplish.

And so, that was part of the sort of natural just evolution of our practice. One of the first people we hired, well, really two of the first people we hired, one was a gentleman who worked for a payroll company. So he was very accustomed to group benefits and things like that. And he gravitated very well to the 401(k) plan side of the business. And another one was someone who was working in analytics for a company that originates municipal bonds, and he ended up becoming our portfolio analyst. And he's really one of the main people who was really a force multiplier. He took a lot of the work off of Brian’s and my plate, and enabled us and other advisors to just work so much more efficiently with clients. Those were two big steps in our evolution. And not trying to knock the wirehouse that we were affiliated with — Wells Fargo had some very positive aspects as well — the wirehouse model's right for some people, not necessarily right for the more entrepreneurial teams. And we saw the writing on the wall. So we did have to go fully independent at some point to really accomplish what we wanted [to do.]

Angela Shah 
Here at PracticeLab, we talk a lot about creating and deploying centers of influence. They're a great tool for prospecting and servicing clients. And you've mentioned that it took about five years before you felt like these efforts had borne fruit. Tell us about your process in creating one, who you felt needed to be on that to satisfy what needs with clients and, kind of, how  do you measure success when you establish, kind of, a COI network?

Jonathan Freeman 
So, just like probably everyone in the business, we tried a little bit of everything. I think I lasted about one day with cold-calling. Just like for most of us, that was not a fun exercise at all. Part of the problem with cold-calling is it's not starting a relationship with trust upfront. I mean, seminars maybe are a little different, but kind of the same thing. People are meeting you for the first time, and they're giving you their assets. And do they really have full trust in what you're doing? And  what we sort of figured was, if we're getting introductions from these people's other trusted advisors, from their accountants, from their attorneys, or maybe if it's a corporation, maybe it's from their HR consultant, or someone like that. If we're getting introductions, then we're immediately beginning with the people are coming to us with the intent to hire us. And the intent to trust the advice that we're giving them, and take the advice that we're giving them. So it really just created a different type of client relationship. I would say our closing rate on prospective clients has become extraordinarily high. As a result of that, it's almost not even like a sales process anymore. It's kind of they come in and just work with us. So, before Jeff Kline joined us in 2007, as the gentlemen came from the payroll company, who focuses almost entirely on corporate retirement plans right now. We were already working on that. We were already really doing our best to get to know different centers of influence, and really begin sort of that practice of marketing to them. Jeff coming from Paychex, had an extraordinary mountain of relationships, specifically with CPAs. And that really just expanded our network and changed the way we do business. So, I would say at this point right now, we do spend some money on branding, some social media marketing. We do a lot of that; we do a lot of just general support in the community. We join boards of organizations; we sponsor events and things like that. But the majority of time, in terms of building business, it is really networking with, marketing to, educating, helping centers of influence, CPAs, attorneys, again, HR consultants, payroll providers. They're all very valuable sources of introductions. And  if we look at the past couple of years of business that we've brought in, I'm going to guess it's about probably 50% to 60% referrals from clients, because that's always going to be a huge source of business. And 40% to 50% centers of influence. Centers of influence do tend to have, I'd say, higher quality introductions on average.

Angela Shah 
You did mention though that at some point you both came to realize that you couldn't necessarily rely only on the same client referral from COIs to continue to grow at a faster rate than you had. And so you started looking into branding and marketing efforts. How did you decide which sort of marketing or branding efforts were going to help boost the current referral rate, the current business-building that you had?

Brian McCarver 
I think it really just became a budget item. So I think I'd say probably in the last two or three years, we've really ramped it up. I think it was three years ago, or two and a half years ago, in the summer of 2019, we actually hired an outside third-party marketing person who really, really ramped up our presence online, and presentation, and just the quality of how we were delivering information to clients in the marketplace, and whatever, which is a cost to have somebody, a third-party person on your staff. But you can focus more on clients, and that all this stuff is sort of happening in the background. And it just creates more and more activity and branding and just introductions and possibilities for the team. I think that when you look at any business model, businesses know they have to reinvest in capital or something that ends up generating growth in some format. And I think financial advisors, broadly speaking, are less willing to invest in matters like that. We have not, I think, in a calculated way. But we’ve always tried to spend money on either people or events, prior to us really, not so much affording them, but probably prior to when we, from an analytical standpoint, probably should have. And it's all paid off, between the people we've hired, and the marketing and the branding, and the effort we put in. It has really helped. So yeah, had to be calculated, and you got to go to pay your own bills. But you got to, you got to reinvest in the business some way through those efforts.

Jonathan Freeman 
Yeah, one thing. I mean, one thing we have not been doing is: We're not buying business, we're not buying practices. Not that we absolutely wouldn't, but we focused almost entirely on organic growth. And at this point, now, I think, again, building an infrastructure. I mean, we want to have an infrastructure for people to succeed, for our business to grow. We think it's less risky to grow organically than it is to grow inorganically. It might not be quite as fast. But it's happening at a pretty rapid pace. And having a practice manager and portfolio analysts and traders and operations people and just a marketing person, that kind of infrastructure also lends itself to, if, for example, somebody wanted to affiliate with us, but not be an employee. We now have the ability to work with advisors who might want to  be a 1099 advisor, through our practice, all those same resources that you really couldn't do as a small practice. And marketing is tough, because it's not something that's super easy to measure. I mean, we can see our website traffic; we know how many clicks we got on Facebook. We don't exactly know how that translates into business. But what we do know is that every CPA that we talk to probably has a dozen financial advisors who are also talking to them, or trying to talk to them. And if they see Stonebridge Financial Group 15 times and the other group twice, we're probably going to get the referrals. And so I can easily say that the volume of new business has been exponentially higher these past two or three years versus prior years. And it definitely has something to do with branding. Again, hard to measure, maybe someday we'll ask everyone specifically why they referred to us and find that out. But I do think that's adding a lot of value. The other thing is, it's allowing us to be just more consistent with our communications. I mean, we now have a very formal sort of publication schedule for newsletters and emails and social media posts and things like that, where we're not just using ghost-written articles. We're doing virtually everything ourselves where we're trying to get these published also in other local publications, whether it's newspapers or the business journal or what have you. And we're having some success doing that, which again, it's all part of the branding process. But it's also clients. We do have a great service model where they hear from us with frequency, but they're also getting very consistent in communications and messaging across the entire practice at this point.

Angela Shah 
Why is that important? Why is that consistent messaging or having a program of messaging or communication, whether it's directly to clients or just in the market at large? Why did you determine that was important?

Jonathan Freeman 
It's real simple: The more frequently clients hear from you, the more likely they are to stay. The happier they are, the more likely they are to refer to you. So it is super, super important. I can't tell you,  just as an example, when COVID hit and the market was crashing, just the ability to quickly turn around information to clients was invaluable. Or when PPP loans came out, we have a lot of corporate clients, I know that we were a resource to a tremendous amount of, in terms of obtaining PPP loans and just other potential help from the government, while they were really concerned about the viability of their businesses.

Angela Shah 
Just knowing that they had someone to turn to when things are very uncertain, and you being visible, makes a difference.

Jonathan Freeman 
Yeah, and a whole lot of proactive communication. I mean, two of our employees here are CPAs. So that was also very helpful during that time, because they were able to understand a lot of what was happening, especially for businesses.

Angela Shah 
One thing I wanted to talk about, I found interesting, was your experience with a business coach. You mentioned that you used one. What were the factors that led you to decide that we'd like to engage someone in this role? How did you go about finding them? What was that process like? And then lastly, sort of, how working with them, how that experience directly changed how you run your business, or how you serve clients?

Jonathan Freeman 
Well, I mean  we've had a few coaches over the years. And I remember we went through a program at Wells Fargo that was sort of called Pareto, helped us segment our book of business and service schedule. That was valuable. Brian at one point joined a group called Vistage. And part of that was sort of [getting with] other business owners to discuss matters that impact all businesses, not just the financial industry. But the leader of the Vistage group would also meet Brian and [me] individually, and as over a couple of years, provide monthly coaching. And I will say that it was very impactful. Because it really did force us to make decisions, and move in the right direction. I remember at the time, Brian was doing all the bookkeeping and HR, and I was doing all the compliance and a lot of the investment analytics. And we were sitting there saying, “This just isn't working; we're wearing too many hats. And we either need to slow down and dial it back or we need to grow out of this.” So having that business coach kind of helped us make the decisions in terms of how we grow our business so that we didn't have to wear all those hats. And that really was valuable. It was money well spent. Maybe we would have made those decisions ourselves eventually. But I think that having someone else holding us accountable to making those decisions was very helpful and did push us in the right direction quite a bit faster than we would have otherwise.

Brian McCarver 
I was a little bit hesitant about joining, but largely, the conversations and the topics were less about market trends and fund choices and more about just people and policies, and how you handle circumstances in the office. And it was actually a constructive part of sort of building and growing into a bigger practice.

Jonathan Freeman
One of the real hot topics now is it's hard to find people. And I will say that despite our practice size, one of the real hot topics now is diversity and inclusion. That was one of the major things that we discussed with our advisory board before, and you know the financial industry, it isn't easy to accomplish those things. So, one of the focuses recently was: How do we recruit female advisors? I think maybe industry-wide, it's about 10%. It should probably be 50%. And it's difficult, these things aren't easy, but these are things that other businesses, especially in areas, like, say, engineering, and things like that that may have similar challenges. Learning how other employers are accomplishing that can teach us a lot.

Angela Shah 
Are you getting any ideas that you that you're running with as far as recruitment?

Jonathan Freeman 
Well, I mean, one thing that we're doing is, we are sponsoring the CFA test program at a local college for their finance department. I can't say that that's helping us recruit female advisors, because if you look at the composition of their finance department, [it’s] 99.9% males, but it is definitely helping with recruiting. We do have our youngest employee [who] came from that local college, and we have another one who was an intern last summer, who will be employed with us next summer already. But these are all things that we're still very actively working on. A lot of it is through direct advertising and social media, through LinkedIn, through providing scholarships to high school students who might be interested in the financial industry. I had a meeting this morning, Big Brothers Big Sisters actually, and we do scholarships through Big Brothers Big Sisters. And I said, “Can we try to identify students who want either a finance or accounting background?” And their answer was, “Yes, we can try. It might not be easy.”

Angela Shah 
I kind of wanted to close it out by asking you to reflect, on your, say, the last 20 years of practice as you built it, and you've made these pivots, in response to how you've seen the industry change and how you want your practice to grow. What advice would you give to someone in your shoes in your shoes 20 years ago today? What's your advice for those coming in?

Brian McCarver 
I mean, I heard this said to me when I started, but I would definitely reiterate it, but this is an absolute marathon. It's not a sprint. You have to be just constantly active and doing things to advance your practice and service clients and attract good employees and attract new clients and you name it. It's just a constant window of activity. The mindset of maybe today's generation is the sort of Instagram instant-hit mentality, that it has to happen instantly, and it's not going to happen instantly. This is a slow, steady, grind and grit through the whole process of just doing every single day the best you can to deliver to your employees and to your clients what they're asking for at a reasonable price. And if you do that over and over and over and over, you can't help but win.

Jonathan Freeman 
Yeah, I'll add a few things to that. And I totally agree, I mean, don't expect immediate results. If we had thought that our COI marketing strategy would work in six months, and then saw that it didn't and gave up on it, we wouldn't be where we are today. People need to recognize that you're in it for the long haul before they will trust you to work with them, or their friends, or their clients. I will say a couple things: always doing what's right for the client. And I know everyone says that, but clients, and also centers of influence, know when you are doing something counter to your own interest, but in the best interest of the client. And that has always come back to reward us in the long run. So don't think about revenues, ever. I mean, really, just think about your client. And it's not easy to do that in a sales-driven background. So I do think there's a big value to teams that have that culture where it's not revenue and sales driven, where it's simply, you're a professional, and that's the way you should act. So, those two things, I'd say are big. Karma is huge. And just the way you treat the people that you hire, the way you treat your clients, the way you treat your community will come back, and will help you in the long run.

Angela Shah 
Well, great. Thank you both for your time. I appreciate it. So great to speak with you and learn more about your business.

Jonathan Freeman
We appreciate it as well.
 

And that wraps up part one of our conversation with Stonebridge Financial Group. Be sure to tune into part two, where we talk about the firm’s retirement plan business and how that has helped fuel the growth of its wealth management clientele. I want to thank my guests, Jonathan Freeman and Brian McCarver, for joining me.

Thanks also to my colleague Lesley Reinhart at Capital Group for connecting me to Stonebridge.

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PracticeLab is brought to you by Capital Group. You can find all these episodes and more at practicelab.com. I hope you enjoyed what you heard today and I look forward to joining you on the next PracticeLab podcast.