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Shaun Tucker
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, Shaun Tucker, and I’m the Director of Practice Management here at Capital Group. Today, we’re speaking with Scott Oeth of Cahill Financial Advisors in Minneapolis.
What makes Scott unique is how much he has focused on niches and specialization to acquire new clients and scale his practice to $230 million in AUM today.
Some of Scott’s clients know him as an expert on executive compensation. Others know him from the volleyball court as a former All-American volleyball player. And some even know him as the wilderness guide who runs outdoor expeditions and hosts a local radio segment called “Pack and Paddle.”
So how do you carve out niches and win prospects in them? We’ll answer those questions today. So, let’s jump in with Scott Oeth and begin with some background on his practice.
Scott Oeth
I'm an investment advisor representative with an RIA here in the Twin Cities. My team: I have two really great Certified Financial Planners who work for me, a good team operations manager and then shared staff.
I joined this group just over 17 years ago and more or less started from zero, really. I had been an employee advisor at two different firms, I had been a bank manager, I had been in sales, consulting and advanced planning for American Express financial advisors. So, you know, I had a few stints like that that were all very useful in terms of skill development and experience along the way, including being handed about 100 households, you know, right before the dot-com crash and saying, “Here you go, take care of them,” and dealing with all that.
So, you know, each of those were important stepping stones, but it also became real clear to me that I wanted to be in a position where I owned my client base and was building some equity in that sense. And so I joined this group 17 years ago.
It was two older fellows. And, you know, the three of us in the depths of the financial crisis in 2008 were about $70 million combined. Now our group is, you know, I think $1.2, 1.3 billion.
My team has grown to about $230 million in assets, and I'm in the process of taking over one of our retiring senior partners, which will be about another $50 million in assets and 60 households, and picking up at least one more direct staff with me for my team for that.
So I guess that's just a little bit about the metrics, you know.
We custody at Schwab and Fidelity. I come very much from a financial planning background.
My days in-house at American Express were actually great for that. I learned I didn't necessarily love their product sales agenda, but they were early on in really adopting a financial planning type approach. And I went on and did Certified Financial Planner and had an undergrad in finance but did a master's in financial planning and then taught in the CFP program for many years. And I think that was certainly part of my identity and my story early on. For so long, I was just trying to get by and scrimping and saving and hoping I could make it, you know. My little checks I'd make as an adjunct professor paid my rent at least each month, but they forced me to know the topics very well, and I think get real comfortable with presenting.
And the topic I taught was retirement planning. So that's a huge core, obviously, of what I do.
I do both individuals, do a little bit of company retirement plans. But you know, in that area, at that time, that was the core section that covered executive compensation: stock options, restricted stock, nonqualified deferred compensation.
And I had a few clients in that area. And I looked at it, and I'm like, “Look at this.” Out of, like, an 800-page book, there's about three pages. And this is a huge issue for executive clients.
And so you can look at all the normal planning topic areas, you know, saving for college and real estate purchases and funding retirements and all these normal-type things. Executives have this extra layer of complexity that is concentrated, it's leveraged, there's often time constraints around it, there's a lot of extra pressure because it's tied to their job and their job performance and their company. And it just seemed to make sense to me to work to develop a specialty of working with corporate executives.
So that's not who I work with exclusively, but it certainly has been a big part of my practice over the years and has really helped with the growth. Especially early on, I was able to work with quite a few director-level or maybe early-stage VPs where maybe they were flying below the radar, the asset minimum of some of the bigger firms, but I was able to do the planning work with them, portfolio work, really establish a good relationship, and then over time as those options came to vest, their relationship size significantly expanded.
Shaun Tucker
Next up, Scott talks about how he developed technical expertise in executive compensation and how that became an important niche in his business.
Scott Oeth
Early on, in one of my employee roles, I worked for a fellow that was a successful longtime advisor, and he had some executive clients. And I was his, you know, younger analyst, employee advisor. So I spent a lot of time in the early 2000s, and this was… you know, a lot of interesting stuff was going on. You had dot-com crisis, you had Enron, you had Tyco, you had WorldCom, you know, three years of terrible markets. And I was really the analytical guy crunching numbers and seeing not only wealth had been created through things like stock options, but how quickly it can, it can vaporize.
I mean, I clearly remember a local executive with a local regional-type technology company who, you know, she'd lost it all. She had made a million dollars the year before, which was a shocking amount back then, and her income was down to like nothing. I think she was unemployed and had been way too concentrated and what she'd had happily was she bought an island in Lake Minnetonka, which is a prestigious, fancy island, big lake out here, and so was selling that and kind of trying to rebuild.
And so I think early lessons there and then teaching the CFP was maybe a bit more than the analytical piece, and really from there, well, was kind of hunting around for, “How can I learn more about this? What can I do?” And so I read that somewhere there, Tim Kochis a guy from San Francisco who I know is specialized in working with executives, and I read his books. And I would hunt around. There's a fellow named John Nersesian that teaches a lot with the CIMA and CPWA program, but he does a lot with executive compensation. So I've tried to, you know, read and listen, I've had conversations with him.
And so it was, there wasn't really any clear path, especially at that point in time, there was no sort of like, program, this is what you do. It was working with quite a few executives and reading the documents and understanding them and figuring out that nuance. And, yeah, reading some books that kind of gave a good general overview and general framework. But what I found is these, these, if you're a corporate executive, where do you turn? You go to your accountant, and they can help you understand the tax impact. And they're usually kind of focused on well, you know, what the tax might be. But they're very wary of giving any type of actual push or strategy in terms of, “You should exercise these lots, you should do it now.”
If you talk to your investment guy, they'll talk to you about the stock price itself, where the stock is trading at, maybe where the market is, whether it looks like it's a good time to sell or, “Oh, we think this one's got some legs on it, let's let it run,” you know, that type of conversation.
Where I view, what I sort of crafted my approach into is, yeah, we want to understand the taxes, we’re very tax-savvy. We do take a look at the company stock, you know, do we think it's overvalued, undervalued, how much do we let that inform our decision, understand that the company stock is like a boat floating in the ocean, you know, and you can have a great company and the tide goes out, doesn't matter, stock’s going down anyway.
But that third element where we really bring it together is: I looked at, you know, using the tools of financial planning to help inform the decision. Do you have kids’ college fully funded? What do you want to do with them? Are you on track for that or not? You said you dream of having a vacation home. Is that money packed away or not? What about retirement, are you on track?
And, you know, essentially, we're doing a running Monte Carlo analysis or financial planning projections. We're sort of able to “dot, dot, dot, dot, dot,” look at a present value type line.
And if someone is on track, or they're ahead of the game, you know, then look and say, “You have risk budget, you could afford to be more aggressive, you can afford to be more concentrated and take on more risk if you want to strive for more wealth building. But hey, if you're behind the game, and we get to reasonable stock prices, we want to consistently prune and go from this concentrated high-leverage position and, you know, port you as taxfriendly of a fashion as possible into a more diversified grid from high-leverage, highpotential to higher probability position to fund these goals.”
And people really seem to like that. In fact, not a lot of people have talked to them about that.
You know, first of all, seems like a lot of advisors, it's a one-off, they get someone and the options are all new. And they're not used to thinking about, “OK, it's not just the options, but which year, which grants, which ones have the most leverage remaining? Which ones have the most intrinsic value? What are we looking at in terms of time decay, tax liability, those types of things?”
So I'd say there's, there's, you know, there's a bunch to it. And the nonqualified deferred compensation piece has gotten trickier. That used to be more fast and loose. And now usually, at the end of the year, you know, you're having to decide, “How much of my salary, how much of my bonus next year do I not want to receive?” And you're making this decision at the end of 2023 for 2024. You're not only deciding how much income do you not want to receive and you want to defer, but you're deciding how do you want that paid out? Do you want that paid out in a lump sum at retirement over five years, over 10 years?
So it gets, it's gotten a lot trickier on the deferred compensation side of things. So those are some of the two nuts and bolts. If I had to think about that question a little bit more, I'd say you know, the one thing that hasn't changed is the complexity and the psychology of the executives sitting in that seat. You know, these folks are usually very sharp. Many of them have, you know, you look at their bio and say, “Oh, wow, look at that MBA from prestigious school, these are smart people.” And they are, but they have time constraints in terms of when they can exercise these options, blackout windows, they only last for 10 years, you know, that's running on. Often there's sort of internal cultural pressure to, you know, hold the company stock, sometimes they have stock retention requirements, they have to hold two times their income in company stock. The tax consequences, you know, no one's excited about recognizing it, but really the psychology of, “When do I pull the trigger or not?”
And I think the technical stuff aside, you know, evaluating the company and the stock, we're getting the tax impact, and they funded their goals or not, it seems to me, even really successful executives, really smart ones, it's helpful for them to have someone at their side, just really that’s saying, “Yep, let's do it. Let's take, let's take this grant off the table. Let's exercise, sell and diversify. And we're going to revisit next quarter, and maybe we'll take another bite, you know.”
There's something about that, you know, really being a strong guide, you know. I'm a wilderness guide. And so many of these things that I do, I feel like there's just this direct parallel to being a financial guide, you know, they're going through this for the first time, even if they're competent. We've done it many, many times before.
Shaun Tucker
Technical expertise is one way to build a niche. In this next clip, Scott talks about another: a Fortune 50 company headquartered in his market that he became a specialist in.
Scott Oeth
Target Corporation is headquartered here in the Twin Cities, and I met someone in the human resource department at Target and made good inroads with them. And that ended up being a very fruitful relationship for me, until that fellow retired, but he retired—referred quite a few executives to me from Target Corporation.
And it's very true, you know, you do 1, 2, 3, 4, you start getting better and better and better and off the top of your head. It's not just that you understand the concepts. You know about the company, you know about the company stock, you know about the company culture, do people hold stock or not, are they required to? And you start knowing the specific grants like, “Oh, yeah, the 2018 grant at $75 a share,” you know, you know these things off the top of your head. So one point I got up to, you know, I had 17 households that I was working with that were all VP or director-level at Target.
Shaun Tucker
As it turns out, Scott met that Target HR rep in a study group. Next, he talks about what led to the formation of that study group and how it became a centerpiece of his client acquisition efforts.
Scott Oeth
So what I did a long time ago is I'd made a good connection with a trust and estate attorney.
And within Financial Planning Association, which I was very active in, people were forming study groups. And those had been beneficial, I heard from other advisors how beneficial a study group could be. And I was kind of thinking about it after coming home from lunch with this trust and estate attorney, and I thought, “You know, he and I have a lot of commonality.
We share a lot of stories. We're both working with people, affluent folks typically, who have money on money issues, you know, his business card says lawyer and he drafts documents, and mine says financial advisor, but there's a big commonality.” And I thought, “What about a study group that's with people that are all working with affluent folks on money decisions, money-related issues, but different specialties, not all financial advisors?”
So I got back to my office, I called the attorney right back up and said, “Hey, I have this idea.”
And I explained it. He said, “Yeah, that sounds really good.” He was in a study group with attorneys. So the two of us put our heads together. And we invited about a half-dozen people, including a financial journalist for the local paper, a trust officer from an independent trust company, a very high-end insurance agent.
And one of the people happened to be this fellow I knew, who I had met, who was in human resources with Target Corporation and specifically worked with people on financial education. He wasn’t supposed to give specific financial advice or draw the line, it was kind of a unique role.
And so that's where I really, that study group would then get together monthly, have lunch.
We did that for years, we’d take turns presenting a topic to the group. And it was really a great way to you know, make the connection, get to know each other, get a comfort level.
And you know, stay on top of things. You know, the attorney would come back from the Heckerling, Heckerling Institute in Florida and update us on the latest, you know, trust and tax stuff. I would bring in investment topics, this CPA, we had a CPA who was in wealth management with a big accounting firm, she'd be talking to us about updates on taxes. So it was certainly a way for us to stay sharp and, you know, help each other stay on top of what was happening in terms of, let's say, working with high-end folks on money issues. So it was great for that.
That group wasn’t ever and in no way was an expectation, it wasn't really talked about openly, but it definitely worked out that people started having cross-pollinating, client-wise, and working together on different cases and introducing each other. But it was never formally part of the agenda or the expectation, it just happened to grow into that.
Shaun Tucker
In addition to that study group, Scott has several other marketing programs in place, including blog posts and webinars that feature his expertise in financial planning. Here's how Scott describes his marketing practice.
Scott Oeth
Number one, everything's all about our existing clients. How can we ensure really great quality of advice? So that's that's the first. But then how do we repurpose that for marketing?
So instead of us just talking in a room in isolation and kind of vaporizing, let's capture that and make it shareable, make it searchable, ideally.
So first, everything I'm looking at is: strengthen existing relationships, enhance our quality of advice, and then have a piece of content that, when this comes up six months from now and there's a prospect, we say, “Oh, yeah, we did a piece on, here it is.” And then the next step, what I'd love to get to, is that all of a sudden calls, you know, the phone's ringing because Google's directing people to us, because they, you know, they found the huge cluster of pieces on executive compensation on my blog.
I think it's been very good for getting more advice and more touches to clients in more ways.
And it's helped me build the team, because at this point, I'm not in every client meeting. But it's also getting me in front of clients in more, more ways. So that's absolutely happening. I'd say the strengthening of the advice and the existing client relationships, it's been very good, well, for… all of a sudden I get a call from David, you know, he and his wife got my name from, whatever, his buddy on the golf course or a mutual volleyball friend or something like that. And I ask him a few questions about his life and what's going on. And I have sort of this library of content where I can follow up and say, “Oh, you know, by the way, here's a couple related pieces I did on this.” So it's like a very enhanced business card, I'd say, I think it's helping a lot that way right now.
Shaun Tucker
In this next clip, Scott outlines the business planning process in his practice. His team divides their operation into two parallel tracks -- one that is working in the business and the other that is working on the business.
Scott Oeth
And what we do is, you know, we have at least once a year where we get offsite for a day, and we go through the business plan, we talk through all the topics, what's working, what's not, big picture issues. And when it comes to implementing it, what we do is: every week, we have a “working in the business” meeting. So my operations manager runs it. And that is: what's happening, what meetings are coming up, what do we need to prepare for, what's three weeks out, two weeks out, one week out, what's on the agenda, so the Gantt chart of who's doing what. So that's very much the to-dos in the business.
Every other week, we have a 90-minute session that's “working on the business.” And I think this goes way back to me reading The E Myth many years ago. We talked about the difference in working in the business and working on the business. So I just called these two different meetings that. And so “working on the business” is actually my next meeting coming up in an hour. And that's where we're pulling items down from the business plan, and prioritizing those and talking about, “OK, we're not talking specifically about client actions now, we're talking about the bones of the business, what we need to be doing, what are thebig project type things, and what are we working on in the future?”
So I talked with Anna earlier today as we're prepping for “working on the business,” she's my operations manager. And off the top of my head, some of the things that we talked about is actually restructuring our “working in the business.” In part because we are taking over this other advisor’s practice, we realized that “working in the business” is going to be too lengthy and too cumbersome. So we're going to break that up by advisors, where they're presenting their weekly to-dos within this CRM. And so we're kind of managing it that way. You know, she's overseeing it that way instead of us all round-tabling every single item.
So we're going to talk about that. So even though we're talking about working in the business, we're doing, how we're working on it. So we're working on the business. And we are talking about our upcoming webinars. So some of those are wealth strategy team, and then some of those are me where I'm reaching out to people like… David's helped me set up one with a couple actually, you know, in the past. Leslie Geller come on, and she and I talked about a high net worth strategy. We talked about family limited partnerships and recorded it.
And before that we talked about—David came on talk to me about international investing and some things like that. So we're talking about some of those items.
Shaun Tucker
In addition to his niche in executive compensation, Scott also has two affinity groups in his practice that grew naturally from his background as an All-American volleyball player and his passion for guiding wilderness expeditions.
Scott Oeth
I think maybe a couple more—some of the interesting things or at least the ones that people always seem to latch on to is, aside from sort of the technical specialty, is—I was a serious volleyball player for a long time, you know, competitive, been an All-American a couple times, won a few national championships. And that was my fun zone when I was young. I was still very active up until about 10 years ago when I was 40 or so. And I never wanted to be the guy where everyone sort of turns their head when I walk in the gym like, “Oh, here comes
Scott, he's going to try and, you know, get me to sign up as a client.” And so it’s just my personal life. It's been very interesting how it's really come back strong at this point.
The volleyball community is, I mean, first of all, most volleyball players are kind of deadbeats when they're young, they spend all summer hanging on the beach, and they work as a waiter or they’re perpetual students or something like that. But guess what, hey, you know, you go
far enough along, well, these people end up having good jobs, good careers, they've inherited money, some of them married well, you know, things like that. So volleyball community is a big part of my practice now. And that's fun. And it's, I got to figure out maybe how to maximize that because I sort of haven't tried, it's just kind of the right place, things are coming together, and these people are coming back to me, which is a lot of fun.
And then the other one, that certainly is the one that always you know, if I'm at a conference, or I'm at dinner, whatever, catches people's attention is I'm a lifelong outdoor enthusiast. And I think, in part to help me wean myself off of my volleyball career as that was kind of crapping out on me, I really threw myself into the outdoors. And I started not just doing trips and wilderness adventures myself, but because I am someone who's very goal-oriented and the old Boy Scout in me likes collecting the next patch, I started doing some pro-level guide type training. And that led me to think, “Well, again, hey, why not me?” And I set up a side business where I guide wilderness trips, I teach outdoor skills, I teach wilderness survival, and it's become… I seem to have a bigger profile in the outdoor world than I'd say I do in the financial advisor world.
So I regularly speak at outdoor shows on both sides of the venue. I'm on the radio once a month with little radio segments. I do a lot of webinars around outdoor skills. I have monthly survival classes. I've… speaking at University of Scouting for the Boy Scouts. I helped run the guide training course for high adventure programs. Geez, what else. I'm getting… I have several contracts for this winter, different military units, they're going to come into Minnesota, and I'm going to teach them winter survival.
This is a little spooky, but David, I don't know if I've told you this, but last winter a naval unit got in touch with me and hired me, we did this, and now they're coming back with four times as many sailors, and the Air Force is getting in touch too. And what they've both said is,
“We've been in the sandbox, we've been in the desert the last 25, 30 years, and we've been tasked with enhancing our cold-weather warfare capabilities.” So what that tells you about Russia, Ukraine, cold weather, that type of thing…
But anyway, the interesting thing for me is, where it was always sort of a fun side gig, now that's, that's turning into a pretty significant side venue. But I certainly have outdoor enthusiasts as clients, and I do put together some, you know, adventures for those folks. And
I'm very interested in trying to figure out how I do more of that. I think more maybe, adventure travel for busy affluent-type clients and things along those lines.
Shaun Tucker
Here, Scott draws an interesting parallel between guiding wilderness trips and guiding clients through their financial planning journeys.
Scott Oeth
Yeah, you know what, it's interesting, one of the things I've been meaning to write about or do a webinar on or something is, there is a whole field of study on outdoor leadership. You know, you look at… some colleges have this, Outward Bound has studied it a lot, NOLS (National Outdoor Leadership School), Boy Scouts I've had a lot. And they have ways of talking about, thinking about risk that are different. We talk about risk a lot in the investment world, but they're completely different.
And sometimes I bring those concepts in and cross over. There's a number of interesting things absolutely that I’ve brought in from outdoor leadership. You know, they talk a lot about perceived risk versus actual risk, you know, meaning rock climbing, and I’m not a rock climber, but it looks risky. But depending on how you're doing, if you're roped up and have a spotter and all that, it's more of a perceived risk than an actual risk. Whereas something as simple as like getting a blister on your heel. You know, if you're a runner at home, you might think, “I just power through this.” But on a wilderness trip, that can be a big deal if it's not cared for properly, it can get infected, and it can be really tough to move you on down the trail and can lead to an evacuation situation. So there's very interesting difference betweenperceived and actual risk, and I think that comes into play in financial planning, as well.
And often also, I just think the simple matrix of: how bad can something be—you know, not that bad to very bad—and how likely is it to happen, not likely to highly likely—and you can draw a sort of a quadrant there. That's a basic risk management matrix for guides in outdoor leadership, OK. Crossing this icy river at high flow, it can be very bad, you could drown, we could get hypothermia, you can entrap your leg in a rock in the fast current. How likely is it to happen? It's very likely, you know, if you don't approach this properly, you know, versus something that, you know is lower risk and lower potential outcomes. So there's a number of things like that, that are kind of fun carryovers.
Paul Petzoldt was this very iconic figure who founded the National Outdoor Leadership School (NOLS), which is one of the most highly regarded guide training programs in the world, really. And he had also been with Outward Bound previously. He talked a lot about expedition behavior. And that is, OK, the four of us, we're going to go backpacking in the High Sierra, and it's going to be a 10-day trip. And we're going to talk about it beforehand, and we're going to talk about what to expect. And we're obviously going to prepare, and we have checklists, and we want to make sure everyone's fit and has the right type of equipment.
But we're also going to talk about, there's going to be times where this is going to suck, OK?
There'll be times where the trail is very steep, the air is going to be very thin, there's probably been some days where it's cold and rainy, and the wind is whipping. There's going to be some days where maybe we decide we have to get up early, you know, there's all these things, but we want to talk about that beforehand. And we want to have an understanding that we're going to try and be cognizant of our emotions and how we're carrying ourselves and how we're, you know, how we're there for each other.
And that's good expedition behavior, recognizing there's going to be bumps along the way.
We're going to complete this trip. It's been done before, you know, we know what to do if something goes wrong, we have bailout points, we have option B, C, all those kinds of things.
But that is a such a direct parallel to the investor experience, you know, getting to retirement, the bumpy road of investing, the tax changes, all the, you know, the economic threats, the scary political cycles and all that stuff that comes along the way.
Shaun Tucker
Well, that’s it for this episode. We really hope you enjoyed it. If you liked what you heard today, hit the subscribe button and consider leaving a rating and review, because that helps other advisors discover this show.
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