Top Adviser Q&A: David Hefty

David Hefty is the 36-year-old chief executive of Hefty Wealth Partners, based just outside of Fort Wayne, Ind. Hefty gives details about his firm’s growth strategy, what he looks for when he is recruiting advisers and whether or not it’s difficult for a younger CEO to bring older advisers on board to his firm.

Can you give some details on the growth strategy you have developed for your firm?

My wife and I started as sole practitioners when I was 23. I did business development and she did everything else. By 29, I was a million-dollar-plus producer and continued to grow that. It got to the point where if we were going to continue grow the business, we had to turn it into a real business, turn it into a firm. Over the course of five years, I transitioned all of my clients to three other advisers in my office so I could focus on growing the business.

The first part of that growth strategy was to define who we are and define the vision for the firm. We have a W2 model with partnership opportunities. Our model is to give every adviser the opportunity to be a partner in the firm, like it is at large CPA and law firms. We have a hybrid model, with 92% of our business coming from the RIA. The second part of the strategy is identifying the ideal adviser. To that end we want someone with three to five years of experience and $150,000 to $300,000 in production. Those are the ones that have figured it out; they’re a little bit seasoned. They have worked in a regional wirehouse environment yet are not so embedded that you can’t weed them out. These advisers tend to be younger, in their 30s, so they’re a good fit here. Those advisers are looking for that culture fit and want to go through the paradigm shift from a broker to wealth management specialist. The third part of the strategy is building the right team framework. We have roughly $170 million under management and we have corporate and branch teams. The corporate team serves the end user, and we also have a branch team that is focused on the financial adviser as a client, as well. We make sure they have the tools and resources to make them successful. The final part of that growth strategy is that I believe I have selected the best-in-class partners to help us. LPL Financial LLC is our hybrid partner and they have superior integrated solutions for a hybrid firm. We use them as our broker-dealer, but we don’t use them for technology services. For that, we use Orion Advisor Services out of Omaha.

Being a younger adviser, do you find it challenging at all to recruit older, seasoned advisers to your firm?

I haven’t had any challenges with that. I believe the reason is that I’m not just a young guy with some crazy idea. I’m one of them. I’m not a corporate recruiter; I can share their pain and frustrations, and swap war stories. The other thing is that I went from zero to a million dollars in seven years; I did more than a lot of these guys did in 20 years. We’re not recruiting people like me, because those types of people are probably selling to a roll-up. So we’re not recruiting anyone who has done more than I have. The other thing is that the older advisers are focusing on an exit and looking for somewhere that they can transfer their book.

What are the challenges of bringing in advisers who have left a wirehouse and are joining an independent advisory firm for the first time?

I think there is a culture shock, because through the recruiting process, we try to screen out advisers who don’t want to go through that paradigm shift (from a broker to a wealth management specialist). There is an independent wirehouse model that exists, but that’s not our model. So from the client level, they’re not used to just calling the clients and being proactive on service. There was this guy who was a really good producer at a wirehouse who asked me, “If I don’t call [clients] to sell them something, then what do I call them for?” Baby boomers are more interested in comprehensive wealth management instead of financial services. I love good sales guys, but they need to educate themselves. This is why we offer two career tracks: You can choose to be a wealth partner or you can be a vice president of business development. These are the guys who enjoy sales, enjoy the chase, but hate being financial advisers.

When you are recruiting advisers, how do you prioritize the skill set that he or she would bring to your firm? In other words, what consideration do you pay to the adviser’s book of business, how he or she fits the firm’s culture, experience, etc..?

We have a fairly low barrier of entry in terms of the book of business you need. After that, I want to know whether you want to be a VP of business development or a wealth partner; not everyone wants to be a financial adviser and I get that. We use a third party to do a job-fit exam as we’re progressing down the conversation. Now you always want to outsmart the results (of the exam) and sometimes you wonder why you pay for it, but I have learned to not deviate from the results.

What do you think is the biggest mistake that someone can make when it comes to building a growth strategy and recruiting advisers?

I would say it’s having the wrong focus. When I go to these conferences, I get lumped in these office of supervisory jurisdiction meetings. I don’t consider myself to be in that peer group, but when I’m in these meetings I hear people saying, “Well, I can make X number of dollars per head, so if I can just get all these [clients] in there …” That just sounds horrible and it’s the completely wrong focus. My focus is on what experience I want affluent baby boomers to have for the rest of their lives in terms of their financial services provider. I want to find people who share the same vision as me and there are no exceptions. We turn away more advisers than we accept.