SPEAKER_00 0:00

When you're an advisor, you have lots of things to do. We outsource as much as we can. And the reason why we do it is I'm good at investments. I'm not good at a compliance. I'm not good at marketing. I'm not good at being a CFO. My best value is not trying to figure out how to use MailChimp to send out a newsletter. It's just not my best use of time. So if I can hire a fractional marketing person, which we've done, to do that for us, I can still manage that process. I can still sort of have control, but I don't have to be the one responsible for actually creating the newsletter and making it look good and actually sending it out. It's the same thing for an advisor. You want to send out a quarterly newsletter to your clients, but creating the collateral, writing it all out, putting together a PowerPoint recording, making a YouTube recording, all of those things take significant time. And if that's time that you'd rather spend is more valuable to you building your business, finding more clients, serving your current clients, that's when having a fractional CIO can make all the sense in the world because you get to focus your time on what matters most to you, and we do the heavy lifting of investments while you still maintain all the decision making.

SPEAKER_01 1:13

Welcome to Planning and Beyond, the show where financial planning meets human understanding. As an exceptional financial advisor, you know that financial planning is about more than just numbers. It's about giving clients the clarity they need to align their money with what matters most, which is why each episode is designed with that goal in mind. You'll learn how to uncover the psychology behind client decisions and gain insights and behavioral strategies needed to create deeper, more meaningful client relationships. You'll discover techniques for navigating emotional client situations, drawn from conversations with leading industry experts in behavioral finance, psychology, communication, and more. Whether it's mastering discovery meaning handling sensitive client conversations, or understanding what is truly keeping your client stuck, you'll walk away with not only strategies that you can use in your next client meeting, but also the confidence to do so. Oh yeah, hi. I should probably introduce myself. I'm your host, Ashley Kwamey, a therapist who somehow wandered into the world of financial behavior and kind of decided to stay. My mission is to help you bridge the gap between financial planning and human understanding. Because remember, finances don't have feelings, but your clients do. Let's dive in. Welcome to Planning and Beyond, the podcast where financial planning meets human understanding. I'm your host, Ashley Kwame, and today I'm joined by my friend Eric Stein, who he's a fellow fractional fellow 3Fs, uh F3. Eric, has anyone ever called you that?

SPEAKER_00 2:55

Uh no, that's the first time I like it.

unknown 2:59

Good.

SPEAKER_01 3:00

I'm glad that you like it and that your reaction wasn't like, oh my gosh, what am I getting myself into? Uh although you might be feeling that way. Hopefully not. Today, Eric and I are going to be, we're going to be exploring what really shifts when you hand off the investment side of your practice, when you know you hand over that role, that responsibility, the work, when you hand that off to a professional, what shifts inside of you? What also shifts for your clients as well? Is it your sense of professional identity, the conversations you have, when markets get bumpy? Uh, we'll be talking about all of that on the show today. Eric, welcome. Thank you so much for being here.

SPEAKER_00 3:37

Oh, I appreciate it, Ashley. This is gonna be fun.

SPEAKER_01 3:40

Yes, I think it will be. Okay, before we get into just talking a little bit more about this, you know, I'd love to hear a little bit about how you got into just, you know, fractional investments as a you know, fractional person. I want to call you a fellow, fractional fellow now. How did you get into this? Uh, share a little bit about your story, if you don't mind.

SPEAKER_00 4:02

Yeah, so it's a little bit of a wavy story. I think like everybody's career, it it goes in the past so that you don't necessarily foresee, you know, and before East Bay, I'd been working at an RIA, a national RAA, with a lot of advisors throughout the country. And in some ways, I was a fractional CIO. I was the CIO for the firm, but in some ways it was fractional because I had advisors throughout the country that had different views, different ideas, clients had different questions, and had to support them all. But I was doing it for a very large organization. And one of the things I wanted to do was to be able to do it for myself, be able to work with the clients I wanted to work with, have investment, a philosophy, and approach that I thought was best and not be sort of hampered by a larger firm. You we all have worked for larger firms, or at least most of us have, and we understand red tape and bureaucracy that can exist in those organizations. And so when I was looking for my next path, I met my partner, Mario Nardone, and he was already doing fractional CIO work, and it was still in its infancy. If you talk to people about it, especially you know, eight, nine years ago when we started, it wasn't something that was very much talked about. The world fractional or OCIO was more on the institutional space. We didn't really see it much in the high net worth or advisory space. But I we both thought it was a great opportunity. He had already started ESPE and uh was fortunate enough to have him bring me in as a partner. And you know, for the last eight years, uh we've grown our team. So we now have three. We have Alex Klusner working with us as well. And it's just been fun to see not only the fractional CIO space, but kind of as you referenced with your triple F reference, fractional services has grown throughout our industry to encompass what you do, outsource planning, trading, compliance, marketing, and almost everything else in between. So it's been fun for us to help grow and build that community of outsourced professionals within the advisory space.

SPEAKER_01 6:00

So as you kind of said, fractional work is still kind of in its infancy, which is great. It's exciting for folks like us. But maybe for those of those who are listening now that are like, oh, maybe I have a sense of what this is. Can you talk about what does a fractional CIO actually do, like for a firm? Like what does maybe an advisor's workload kind of look like there?

SPEAKER_00 6:27

Yeah, so you know, I think the best way to think about it is if you look at the largest firms that are out there, and you can reference, you know, my old firm as an example, you know, multi-billion dollar firms often have an even larger have their own CIO or investment team. And the average advisor that's smaller, even the ones that are billion dollars or larger, may not want or need a full-time CIO based upon what they have to do or their investment approach or the types of questions they get from their clients. CIOs, you know, if you're a CFA charter holder like the three of us are here at East Bay, you're an internal hire, you can be very expensive. And some firms just may not have the desire or ability to pay for that full-time person. However, many advisory firms, you know, planning focused advisors in particular, got into the business because they like to do the planning aspects of it. The investments are still important, it's just not where they want to spend their time and it's not their expertise. So by being able to hire us, they're essentially hiring an investment staff, but they don't have to actually hire the staff. They don't have to pay for them in terms of the HR costs, the hiring costs, the management costs, uh, they don't have to worry about us going on PTO and all of that fun stuff, as you have with an employee. So you we can work as an extension of their team and cover all of their investment needs just in a fractional space.

SPEAKER_01 7:51

I know that for a lot of advisors, oftentimes their identity maybe, maybe that's a little bit strong, but like their identity can kind of be tied to an aspect of the work that they are very competent in or feel like really good at. And maybe that's planning, maybe that's investments. But you know, letting go of that when an advisor is considering outsourcing, especially something like investments, like what hesitations start to come up, maybe beyond just like the logistics and cost, uh, what do you see kind of underneath some of those concerns or hesitations when considering bringing in somebody like you into the practice?

SPEAKER_00 8:34

I appreciate that question, Ashley. I think that even for an advisor that's a planning focused advisor, even if they don't sell themselves as an investment specialist, it's often sort of expected, maybe from their clients, that they have some investment expertise. They are putting them into investments, they are recommending allocations in particular funds or ETFs or what have you to be invested in. So there's some sort of expectation that they know what they're doing in that space, even if they don't put themselves out there as the expert. And what happens is, you know, the clients may, their clients might expect them to have that expertise. So the advisor can sit there and say, well, my clients expect me to be the investment professional. How are my clients going to react if I tell them that I'm working with an outsourced investment team? And the reality is your clients are going to love it. And I say that from experience because we've we've actually seen it with many of the clients we've onboarded that have had that question. And the reason why they love it is the response that we've we've heard from clients is wow, we're so thankful that you're doing this because they see the advisor investing in the client themselves. They see the advisor investing in their firm. And the client winds up asking questions like, I don't know how you wound up doing this all in the first place yourself. You're an advisor, you're a business owner, you're a financial planner, you do compliance, you do marketing, you're hiring people, you know, you have a lot on your plate. The fact that you're taking some of those things off your plate and you're giving it to somebody that has greater credentials, greater experience, greater expertise, that's a great thing for me as a client. I love that. So you might question it at first, but your clients are going to absolutely appreciate it.

SPEAKER_01 10:15

Yeah. And, you know, we were talking a little bit kind of before the pre-call, and you're, you know, mentioning this referencing it, just that trust piece that gets built, you know, and feeling like taken care of and you know, oh, I see you making like these investments. It does make a client then say, I feel like I can trust you more because you are willing to let go of some things, or maybe even say, like, I don't know what I don't know. It's my granddaddy's like favorite. It's like, I don't know anything. Would you believe I don't know anything? I don't know, girl. Like it just makes somebody trust you better when they say, Hey, like, I'm maybe I'm not the expert like on investments, but I have somebody here on my team who is and we're investing in them. You know, that goes a long way. It speaks a lot to clients. I'm curious, like, what about for the advisors though, Eric, where they're like, no, I am the investment like expert? Like that is where like their, you know, their niche, like their identity, like so much of their own like learning, you know, is focused. Like they are the investment expert. Like, what kind of hurdles do you see come up maybe for them? And on the flip side of that, what are the benefits when they let go?

SPEAKER_00 11:26

Well, I think the reality is for some people, fractional CIO might not be the right solution. If they're so tied to what they're doing on the investment side and they don't want to have the support, that's perfectly fine. If that is a solution that works for them, we see it. And if you know, fractional CIO or having an investment team is not what you want to have in your practice, that's fine. And that's what's great about our industry is firms are built all different ways and all different shapes and sizes. And whatever works for you can work if you build it correctly and build it well. For the advisors that do want to, you know, have some support. The nice thing is we don't have control. So I don't have discretion. We don't have access to your accounts, I don't have access to your client roster, I don't have access to trade. So we are we cannot influence or provide any change to your clients or their situation. We can only provide advice, and you have to actually make the decisions to follow it or not follow it, and that's totally fine. So we we don't have discretion, which is a really nice way to say for the advisor that you know wants the support but wants to maintain control. That's exactly what you have when you work with a fractional CIO like East Bay. We're there to provide the support, we're there to help answer client questions, we're there to provide guidance and you know, some of the answers that you and your clients are looking for. But at the end of the day, I'm not communicating directly with your clients outside of you being there or having your input into what actually happens to your portfolio. And you know, I think a lot of this kind of goes back to we can talk all day about sort of what it is we do as a fractional CIO. And I think the other component of what's important is what does it actually feel like to have an outsourced CIO as an advisor? And some of what you're talking about is just sort of what we would call the comfort factor. It's the sleep at night factor. I know that I have a team of credentialed professionals that are looking at my allocations, that are looking at my investments, that if something happens today in the market can help me make and understand it and communicate it in a digestible way, that I can then communicate it to my clients. So it's just having that third party that's there. We can play devil's advocate when we need to, we can provide support when we need to, we're there to give answers when we need to. So it's a lot of different roles, and that comfort factor is a lot of what we hear is is why one of the ways that we can be valuable in terms of what it feels like to have a fractional CIO by your side.

SPEAKER_01 13:54

Yeah, I can attest to the comfort like piece, even just myself and our own practice, like having, you know, like a fractional like assistant or ops person, like there is a level of comfort at least that I feel like knowing this problem, like sure, maybe like I could tackle this, or if something comes up unexpectedly, you know, okay, yeah, I can handle this. But there is some comfort to knowing like somebody else is there, at least with me. I'm not alone, like in the trenches, or someone else can take care of this, you know. For I'm sure for many of you know the advisors you work with, it is that being able to sleep better at night, knowing like, oh, okay, if I wake up and things are going crazy, right? Or today was crazy, but like I can still go home and have dinner, like with my family, you know, because Eric Leg and his team, you know, they've got it. And, you know, maybe kind of to that end, maybe we can expand a little bit on if you have any like just examples of clients where they've handed off like the investment work. Like, where do you see them then putting that time and energy? Maybe it's extra hours, but you know, where do you see them putting that time and energy after they've handed off you know the investment work to you guys?

SPEAKER_00 15:04

Yeah, I'll go back to that's under the bucket of sort of what it feels like to hire a fractional CIO. We've kind of talked about that comfort piece. What we can talk about here is what we would refer to as capacity. And, you know, when you're an advisor, you have lots of things to do. Speaking for ourselves at East Bay, we outsource as much as we can. And the reason why we do it is I'm good at investments. I'm not good at a compliance, I'm not good at marketing, I'm not good at being a CFO. My best value is not trying to figure out how to use MailChimp to send out a newsletter. It's just not my best use of time.

SPEAKER_02 15:38

Sure.

SPEAKER_00 15:38

So if I can hire a fractional marketing person, which we've done, to do that for us, I can still manage that process. I can still sort of have control, but I don't have to be the one responsible for actually creating the newsletter and making it look good and actually sending it out. It's the same thing for an advisor. You want to send out a quarterly newsletter to your clients, but creating the collateral, writing it all out, putting together a PowerPoint recording, making a YouTube recording, all of those things take significant time. And if that's time that you'd rather spend is more valuable to you, building your business, finding more clients, serving your current clients, that's when you know having a fractional CIO can make all the sense in the world because you get to focus your time on what matters most to you. And we do the heavy lifting of investments while you still maintain all the decision making.

SPEAKER_01 16:30

I love that. Let's shift, Gears, if we can, maybe over to the client side of things.

SPEAKER_00 16:36

Sure.

SPEAKER_01 16:36

And this is where you and I probably we could swap war stories around clients. We won't do that today. Maybe if I come out to the Charlotte area, uh we can go out for a drink and swap war stories.

SPEAKER_00 16:47

That would be great. Yeah. Let's make that happen.

SPEAKER_01 16:49

So, okay, you and I both know that, you know, clients, they rarely like experience like the market as just like the numbers on a screen, right? Some of them do, right? But there is a large group of clients. Like they experience the market dips and you know, upswings, like they experience them as like a feeling, right? And when there is, I guess, volatility in the market, how do you help advisors like walk into maybe these client conversations? I know you said you don't speak directly, like you're not working and having private like client conversations, but how are you helping like advisors maybe with clients that really experience like the emotionality of market swings?

SPEAKER_00 17:31

Yeah, well, the first thing I'd say is we actually can speak to an end client as long as the advisor is present. So, you know, if an advisor, and we do this regularly, if an advisor has is working with a prospect or is working with a client, whether it's a technical situation, they have questions, they just want to go deeper into a certain area, they can absolutely bring us into an email exchange, a Zoom call, or we're even willing to be there in person if we absolutely need to be as well, or if it makes sense for the client situation. So we absolutely can support advisors in being in client conversations. So I think that's an important point to make. But just in terms of general market news, we're trying to be proactive in terms of, you know, if there was a large event today, think of COVID, think of, you know, we had issues with banks a couple of years ago. If there's a major market move, our advisors should expect some sort of communication from us. Based on our investment philosophy, we're not trying to time the market. We don't think that most people can outsmart the market. So we're not trying to say you should, you know, sell out of equities and buy your bonds or do make different changes based upon what we think is going to happen in the market. We're not trying to read the tea leaves or create expectations on what the market experience might be tomorrow or the day after. But we're helping our advisors talk through how to actually think about what happened and communicate what happened and what advisors may be doing, which is you know, looking at potential for rebalancing. If something changed in a client's situation, maybe the risk tolerance has changed, have a conversation that way. So it's it's trying to uh distill what happened in the market, in the environment, into simple to understand, digestible terms and in ways that clients are asking the question. So a great example would be you know, over the last couple of months, you've seen interest rates rise, yields rise across the yield curve. And that has caused a lot of fixed income returns to be negative. And so clients aren't asking necessarily specifically why are interest rates rising, what's happening with the Fed, all things that you know we want to talk about as investment nerds, but it is not necessarily things that most people's clients are asking. Clients are asking, why are my bonds negative in return? So we try to answer that question. So we'll do it in a way that we can help educate them on what it means, how markets actually work, how bonds work. You know, what we're seeing today is different from 2022, which is in everybody's mind, but especially when we talk about bonds and interest rates rising and inflation. So we try to find out what it is the question the client is asking and provide that education and support, whether we create a recording or a collateral piece that our advisor can privately label and share, or whether it's very specific to a client email or question, we are there to provide that support as well.

SPEAKER_01 20:22

And I actually think that you guys have a really great newsletter. I'm on your email. I don't know if you knew that. Um, but I think you guys have a great newsletter. And to you know, what you're talking about here in terms of communication and how you are, you know, educating like really clients. You guys have talked recently, I forget which newsletter it was, but you talked about repetition in it and how like repetition it matters when we're talking about investments or when we're communicating to clients. And you know, that one kind of makes me smile, obviously, on my side of you know, the the fence here and talking about change in client behavior and walking through like emotions, because I think repetition can matter. So let's maybe talk a little bit about how advisors, you know, maybe for those who are not reading the newsletter, like why repetition might matter so much in investment communication. Like, how can advisors utilize that to maybe bring comfort, but at least if not comfort, to even just educate clients?

SPEAKER_00 21:29

Yeah, it's a great question, Ashley. I think a lot of it just goes back to client expectations. Many clients, depending upon where they're coming from, they might expect their advisor to want to tell them, hey, we're going to invest a few percent more in US large caps today and a little less in international small cap tomorrow, because here's what we think is going to happen in the market. And some advisors might do that, and some clients might expect that. The advisors that we engage with aren't necessarily doing that and don't believe that that is going. To fundamentally work on a regular basis or that we can outsmart the market would be the terms that we would use. So, you know, if you're an advisor, setting those expectations early on in a relationship, talking about what it is you do as a financial planning focused advisor, how you think about what their allocation should look like. Most of the advisors we talk to, if you ask them, you know, if they have an hour-long meeting with their clients, 55 minutes plus is spent on the client and planning. And very few minutes are spent on the investments, performance, or things like that. And as an investment professional, we absolutely love that. That's what we want because the investments are the engine that makes it work, but it's not what clients should be focused on, in our opinion, or the advisors that we support in their opinion. So, you know, it's what we love is when there is a market event and we put out the collateral because our clients often want it and they have it prepared in case they need it. But when we ask them, did you hear from your clients a lot? The answer is either usually no, or I did hear from a few clients, but they were saying, you know, I bet you're hearing a lot from your clients. I've been a client of yours for a long time. I know better than to ask what's happening in the market. I'm a long-term investor. I just wanted to see how you were doing. And I love those calls because it just shows that those clients really truly understand what that advisor is doing and what to expect in that relationship. So I think sometimes it's just a matter of time, that trust factor in what your advisor is doing, what your expectations of that advisor are, and communicating clearly what your role is as an advisor and what your clients should expect from you. And just saying that repeatedly over time in good markets and bad markets is super key. So when those events happen and they will happen, your clients know exactly what to expect.

SPEAKER_01 23:46

Well, and I the thing that hits home for me hearing you say that is you know done early and often, right? It can go a long way and it makes a difference. We are currently right now. This might be a weird analogy here comparison, but we adopted a dog several months ago. And so yeah, uh, she's precious. But we are in that place of, you know, I think about like early and often, like from a training standpoint, and not that I'm comparing people to dogs and our clients are dogs and that we need to like train them, but there is an element there of, you know, if we are repeatedly communicating, you know, what we would like for them to do or would like for them to know, it does create just like a conditioned response there. So, you know, the example that you gave of a client saying, you know, we know what to do, we're not worried because you have quote unquote taught us like all along the way and educated us and repeated that message, and we get it. You know, to me, I'm like, that is such a beautiful example of communication like done well and right over time that I think can be overlooked. You know, I think sometimes like advisors, they're like, they want to have like, you know, here's the answer and like that's it. But to that end, like that's not how we learn as like humans. Like we need that small, like repeated exposure, like over time, right? To really have things sink in so that when those emotions start to come up and start to get kind of loud, like then our brain can turn on and go, oh yeah, this is what Eric talks about. And this is how, you know, oh, I don't need to worry about this. I don't need to panic. Like this is just headlines being headlines or trying to, you know, bait click me and getting me to respond a certain way, but I don't need to respond, right? Because I know based on, you know, being a client, this is what it is like. So I think that is really fantastic suggestion there for advisors.

unknown 25:44

Yeah.

SPEAKER_00 25:44

And it's interesting. I just came back from a conference and they were talking about the client experience and some of the simple things that advisors can do in meetings and even in their conference rooms or wherever they have their client meetings. And one of the suggestions was just to have a box of tissues available for the for your clients to have on the table that they can easily reach for it. And it's just it's a reminder that money is emotional. And you know, not everybody's going to agree on what's happening. Not every situation is going to be a positive situation. It could be, you know, two spouses and one passes away and they're meeting with their advisor for the first time and trying to get their arms around what exactly they need to know and what this change in their life represents. And as an advisor, you know, sometimes even as an investment professional, we can be focused on the numbers and allocations and all the details, but it's good to just have that reminder that we're all always dealing with people and money and investing is emotional. And have that, you know, I know this fits right into the work you do, just having that reminder available to you is so key, just because the language we use, the way we present ourselves, we always have to remember that.

SPEAKER_01 26:55

Yeah, absolutely. Well, Eric, as we're kind of wrapping things up here, I'm thinking about the advisor. Maybe I'm actually thinking about my husband Clayton specifically, who's maybe listening and like on the fence about bringing in outside investment support. Maybe what's one question that you would encourage them to sit with or think about if they are on the fence?

SPEAKER_00 27:20

Yeah, I would just think about you know what it is you want your practice to look like in the future. You know, where what is your best use of time and energy? And if it's on things like investments, great. If that works for your practice, wonderful. If you want to spend your time somewhere else, whether it's again investments or marketing or something else, the fractional space is a large and growing space. There's a great community of outsourced professionals out there. We are great examples of it, and there are many other wonderful people that are out there. We're happy to make introductions if you have questions, whether you're interested in our services or just curious of what else is out there, please reach out. Please have that conversation. We think it's a really valuable one. If it's a fit for you, wonderful. And if it's not, we just appreciate having the conversation.

SPEAKER_01 28:08

Yeah, I like that question. What would you want your practice to look like? And maybe even I would add, how do you want to feel as a practice owner as an advisor? I think that's fantastic, Eric. Well, if people want more Eric Stein, more ESPE in their life, like where can they find you? Where can they connect with you?

SPEAKER_00 28:25

Well, they can always go to our website, espayis.com. Uh, you can sign up for our newsletter. There are questions about there on there whether working with a fractional CIO can make sense for you. Uh, you can find our LinkedIn profiles out there as well. And there's always a way to connect online and set up a calendarly appointment with myself as well. So love to see you. And Ashley, thanks for the opportunity.

SPEAKER_01 28:48

Yeah, absolutely. Thank you for being here. And thank you to all of you for allowing Eric and I into your ears and into your mind today. It's a part of your week that you don't have to give us, but you're choosing to. And for that, we're both incredibly grateful. If this conversation resonated with you, I would also love to keep the connection going. You can find me on LinkedIn at Ashley Kwame, where I share weekly insights on the human side of planning. And if you'd like a little bit more beyond the plan in your life, you can head over to our website, beyondthefp.com, and sign up for our monthly newsletter. You can also, while you are there, you can check out in the right hand corner, there is a tab that says Advisor Skills School. And if you click on that tab, you will learn all about what Meg and I are up to in 2027. Advisor Skills School is designed for you, the advisor, to provide the ground, the space to practice all of the communication skills for the meetings and moments that show up in your life. If that's something you're interested in, go ahead and save your seat. We would love to see you there. Most importantly, though, my friends, make sure that you follow the show wherever you get your podcast, that you never miss a future episode like this one. And as you go into your week, remember, finances don't have feelings, but your clients do. Until next time, keep planning, keep growing, and keep going beyond. Thanks for joining me on this episode of Planning and Beyond. I hope you found today's insights valuable and inspiring for both your practice and your personal growth. If you enjoyed the show, please subscribe and leave a review on your favorite podcast platform. Your feedback helps us reach more advisors like you who are dedicated to making a difference. For more resources, tips, and to continue the conversation, visit our website at beyondthefp.com. You'll find articles, tools, and information about upcoming episodes designed to support your journey and practice. Stay connected with us on social media and never miss an update. Follow us on Twitter and LinkedIn. And remember, the best way to grow is to keep learning and sharing. Until next time, keep planning, keep growing, and keep going beyond.