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rory henry, a behavioral financial advisor, is the director at arrowroot family office and co-founder of afo wealth management forward. he has created a program to help accounting professionals incorporate holistic wealth management and proactive planning services into their practice. |
why “advisory” encompasses more than you might think.
by rory henry
the holistic guide to wealth management
i work at a virtual family office called arrowroot family office. over the course of my career i have learned that family (and family dynamics) significantly shapes who we are and how we form relationships in life.
more: why now is the time for cpas to embrace wealth management
research shows that one of the biggest drivers of family dynamics is the order in which each child is born. birth order theory, developed by alfred adler in the 20th century, suggests that the order in which children are born can have a significant impact on their development and personality.
according to birth order theory, firstborn children tend to be more responsible and less reckless than their younger siblings as parents are often stricter with their firstborn offspring and expect them to set an example for the younger siblings. firstborns also tend to have a great deal of confidence, having benefited from having their parents’ exclusive attention early on. it may come as no surprise that eldest children gravitate into leadership roles professionally and often serve as the leaders of their families.
youngest children have a carefree reputation and tend to take one of two paths when developing their personalities, according to adler. they often enjoy freedoms that older siblings didn’t have. as parents’ rules become more relaxed, youngest children are assured of their place in the family and can be very creative, rebellious and outgoing. according to adler, they can become the “go-to” person in the family, achieving great things. but they can also become avoidant if they lack the confidence or drive to excel.
middle children are often seen as peacekeepers, diplomats and negotiators. they are often skilled at seeing both sides of an argument and can mediate between their siblings. they are also often creative and independent thinkers. some famous middle children include martin luther king jr., abraham lincoln, madonna, britney spears, jennifer lopez and diana ross.
each of these luminaries have strong leadership qualities and are known for their creativity and independence. they become more independent, think outside the box, feel less pressure to conform and are more empathetic according to katrin schumann, co-author of “the secret power of middle children.” in a psychology today interview she explained that “middles are not embittered wallflowers – they are social beings and great team players.”
as a card-carrying middle sibling, i can assure you that being a “social being” is what has allowed me to form tremendous relationships in life. again, there’s that word “relationships,” which i believe will be the key to guiding us through the technological revolution that is upending work as we know it. relationships help us through difficult times and are the catalyst to help us reach our greatest heights.
as some of you know i am a member of what southern californians call “the ucla family.” we’re bruins through and through. my parents met at ucla and graduated in 1971 and 1972, respectively. my older brother sean graduated from ucla in 2001, i graduated in 2004, and my sister tara graduated in 2007.
mother and lifelong learning
i’m fully committed to lifelong learning. i think i picked up this attribute from my mom, mary, who was a high school valedictorian and then became an educator and school principal. mom was always reading books when i grew up and she encouraged my siblings and i to do the same. she once appeared on the tv game show “the $25,000 pyramid” and walked away with $25,000 in prize money after sailing through the rounds without missing a question. in fact, she only got one question wrong on her sats. i also have no doubt that my mom is the source of my creative thinking and my thirst for lifelong learning. that curiosity, combined with being a voracious reader, allowed me to obtain both the cfp (certified financial planner) and bfa (behavioral financial advisor) accreditation in less than six months.
to earn the cfp you must master six core areas:
- general financial planning principles, professional conduct and client psychology
- risk management: insurance and employee benefits planning
- investment planning
- tax planning
- retirement savings and income planning
- estate planning
the cfp provided me with a very solid foundation for understanding the technical part of financial planning. meanwhile, the bfa gave me a deeper understanding of human behavior, people’s complicated relationship with money and how they make decisions (for better or worse). we will help you utilize principles of traditional finance, psychology and neuroscience so this unique blend of technical knowledge and behavioral knowledge becomes a superpower for you.
as an advisor, improv performer and golfer, i have found that performance is a function of talent, skills and decision-making. according to the professional development company think2perform, decision-making has twice as much impact on performance as talent and skills do. being mindful of our decisions is crucial. our brain is hardwired to react before it reflects. for instance, an emotional response takes just 12 milliseconds while a cognitive response takes over three times as long (40 milliseconds). we all know the dangers of being impulsive. what sets us apart is the relationships we build with our clients. it’s about helping people understand things about themselves that they may not have understood in the past.
brendan frazier, founder of wired planning and host of the human side of money podcast, once told me that “plans and pie charts don’t change lives, people do.” what he means is that the real value of an advisor is no longer their ability to build a plan and portfolio. “it’s the ability to build trust and connection with clients, unearth their values and emotions around money, and get them to actually follow through on your advice.” you’ll learn more from brendan throughout these posts.
you’ll also learn from hal hershfield, ph.d., professor of marketing, behavioral decision making and psychology at ucla’s anderson school of management. one of hershfield’s most best-known discoveries is that when people are confronted with their “future selves,” they experience an emotional sense of connection that can influence long-term financial and ethical decision-making.
in one of his experiments, one group of college students is shown images of their faces digitally altered to appear 40 years older. the other students are shown only current, unaltered images of themselves. in the vast majority of cases, students shown what they look like 40 years later declare that they would save 30 percent more, on average, than the students shown pictures of their current selves. “the lesson from that,” hershfield says, “is that anything we can do that will increase how concrete and salient our future self is can help us make better decisions.”
father and finance
my interest in finance came from my father, frank, a banker. some of my earliest childhood memories are of the unique color and smell of his leather briefcase and the sound of his financial calculator clacking away. i remember clearly how he filed away papers at his bank job and held his own playing in pro-am golf tournaments with professional athletes.
no matter how busy my dad was at the office, he told his assistant that he would always take a call from one of his children. and unlike some of my friends’ fathers, my dad enjoyed having me in the office. it was there that i learned about business through osmosis.
when i visited my dad at work, he’d usually let me listen in on client calls. to my childhood eyes, business was all about my talking on the phone, working together with people i liked and doing successful deals. it didn’t seem like work; it seemed fun spending so much time together with my pals and getting paid for it.
i have come to realize that my father had such great friendships and relationships – inside and outside the office – because he was so likable. he wasn’t a networker in the salesy sense; he was just always there for his friends and colleagues. they could always count on him. we’ll talk more about the value of trust and reliability.
older brother and the performer in me
my older brother sean is a performer to his core. his high school drama teacher considered him one of the most talented actors ever to come through el modena high school. that’s quite a compliment considering that el modena alums include emmy-nominated actor milo ventimiglia, from hit shows like “heroes” and “this is us,” and mikey day, lead writer and actor on “saturday night live.”
my brother is the sales manager for the largest title company in the united states, first american title. and while he never became a professional entertainer, he still performs with his 1980s cover band, “powerserge!” and regularly sells out the house of blues in southern california. clad in wig, makeup and pink tights, sean belts out hits like “living on a prayer” and “don’t stop believin’” to a couple of thousand folks in our hometown.
sean’s talent and stage persona eventually led me to become a “performer” myself. i now do improv comedy, and have a podcast, as mentioned earlier. not bad for an introvert.
younger sister
my younger sister tara was the star athlete of our family. she received a full scholarship to ucla for softball, won a national title her freshman year and helped the bruins nearly achieve a championship “threepeat.” tara has excelled in her post-playing career as a coach and mentor to younger athletes. she is the head coach of great britain’s national women’s softball team, guiding them to the women’s softball world cup. she also runs softball america, run the bases, which promotes gender equality through softball. i was never the athlete my sister is, but i have come to appreciate her work ethic and willingness to step out of her comfort zone. it’s a commitment not only to improving herself but improving the lives of others.
as mentioned earlier, i am a middle child. i have always been good at forming relationships. however, i am also an idealist and a visionary. i believe that we can create a better tomorrow, and i am always looking for ways to improve the world around me. i am never satisfied with the status quo, and i love to think about what is possible. it’s the optimist in me. to that end, i wanted to share a short clip from optimists 2.0, the ucla alumni organization to which i belong.
“it’s not always easy being the exception – the square peg. they’ll tell you you don’t belong; that it’s not your place, that it will never fly. but here you learn you have a choice. you can listen to those voices, or you can leave them all speechless.” – ucla optimists 2.0 alumni sports video
it’s taken me a while realize this, but the optimist in me drives the improvisor in me.
improvisor
webster’s dictionary tells us an “improvisor” is someone who makes or fabricates out of what is conveniently on hand. “improv” is a form of theater in which everything is created on the spot. it is like a magic trick when performers take a suggestion from the audience and turn it into a unique and hopefully funny scene. one of the things i love most about improv is the freedom to fail. in improv, there are no wrong answers. you can try anything, and you aren’t judged.
improv is a great way to learn to let go and to move onto the next scene or line without fearing failure. improv works by building on the ideas of your fellow performers and by accepting whatever is thrown at you. it is about creating characters who have a relationship with one another. one word can spark a world of possibilities, and it is our job as improvisors to bring those possibilities to life. we listen to each other, support each other and trust that whatever we create together will be entertaining and worthwhile. improv teaches us to take risks, embrace uncertainty and work together to create something truly special.
improv is a valuable skill that can be applied to many different areas of life away from the stage. it can help us to be more creative, more flexible and more confident. it can also help us to build better relationships and to work more effectively with others. see, there’s that word “relationships” again.
blending my passion for technology, science and comedy
the movie “anchorman” (starring will ferrell) was the hottest comedy in america when it debuted in 2004. at the time, i liked to hang out at a north hollywood restaurant. one day, lo and behold, i saw ferrell leaning up against the wall of the eatery. i was a huge fan of his comedy, but i didn’t like the fact that he was a university of southern california trojan (archrivals of the ucla bruins). i thought the best way to approach him would be the indirect approach: befriend all the people he was hanging out with first. so, i did just that, and after about 30 minutes of friendly banter with his entourage, i finally mustered up the courage to take a picture with ferrell.
as i got close to ferrell, i saw another celebrity out of the corner of my eye; someone i considered to be an even bigger celeb than ferrell. it was none other than bill nye, a.k.a. “the science guy.” without skipping a beat, i turned to nye and said, “bill, can you take a picture with me?” as i handed my snazzy new nokia camera phone to ferrell to take the picture. both men thought it was a great ploy and were good sports about the encounter. i got to tell bill nye that i loved his science videos in school, and then turned to will and said, “hey, your movies are pretty good too.”
after graduating from ucla with a degree in history i had short work stints in banking, mortgage finance and at a tax resolution firm shortly after the global financial crisis. you might be wondering how a history major got into financial services, but if you can sell you can sell, and they were happy to have a young go-getter who was willing to work on commission.
i suppose i was pretty good at selling because i made a lot of money at it. but selling wasn’t remotely fulfilling for me. instead, i was fascinated by technology and knew there had to be a better way to run a tax company more effectively.
so, still in my late 20s, full of energy and self-confidence, i co-founded signature tax services, a tax-based tax resolution and tax prep firm. about that time, i also discovered improv theater. mainly improv was a way to meet interesting people and get outside my comfort zone. after being bought out by my partners at signature tax, i did some consulting for tax firms. improv training also gave me the courage to raise money for my next venture, tax tech portal, a tax management software play – similar to canopy tax.
building a tax software company to disrupt the accounting profession
it was clear to me that the tax world was far behind many other businesses when it came to technology in general, and client management software in particular. i couldn’t fathom how accounting firms could operate without having a proper client relationship management (crm) system in place. didn’t they want to have a deeper understanding of their clients – and have it right at their fingertips? but crm wasn’t a priority for many, and i knew they would face possible extinction if they refused to adapt.
so, around 2016, i took it upon myself to educate them while attempting to build a crm practice management software that would digitize and modernize an accounting practice. apparently great minds think alike, because two other significant players in that space, canopy tax, a utah-based software company, and karbon, a bay area practice management software company serving the overseas market, were working to solve the same problem.
the folks at canopy got out to an early lead, raised $77 million and blew most of it on sales and marketing and a failed tax prep solution. unfortunately, that ended my journey with tax tech portal, because the venture community didn’t want to put their money behind another similar software, especially being run by a smaller, younger startup like mine.
however, i remember during my product research for tax tech that thomson reuters, a prominent player in the accounting reference information industry, was making some inroads into this area. their software was functional and effective, but not particularly flashy. what intrigued me about thomson reuters wasn’t its software. it was its practice forward program, which coached accounting firms on making the transition from compliance to advisory services.
but i kept asking myself: if you really want to be “advisory,” wouldn’t you need to be financial advisory as well? that led me to ponder the following:
- why don’t cpas and financial advisors work together?
- why are these professions so siloed from each other, as well as from insurance and estate planning?
- who is putting all the pieces together, because taxes affect investments, as well as insurance, estate planning, retirement and businesses?
my “aha!” moment came when i posed these questions one day to rob santos, ceo of arrowroot family office in los angeles. a fellow ucla bruin alum, rob and i met when i was raising money for tax tech software. in 2020, the pandemic upended the world, zoom and peloton took the world by storm, and millions of workers were suddenly able to work virtually, and clients found they were okay with receiving advice virtually. around that time i happily took up rob on his offer to join arrowroot.
rob explained to me the advancements in wealth management technology and the family office model. he went on to show me how arrowroot wasn’t a traditional family office that served a single ultrawealthy clan, but instead served many families ranging from the very wealthy to the fairly ordinary. it was like a timeshare family office, which many now call a multifamily office (mfo). the difference between a wealth management firm and a family office is that the family office takes care of the many financial needs of its clients, including estate, insurance, college planning, business succession planning and more.
until recently, a family office was only accessible to the ultra-affluent. but the pandemic accelerated the adoption of doing business virtually. that’s when i realized that a virtual multifamily office (vfo) model is well-suited and replicable for accounting professionals. again, that’s because of cpas’ longstanding position as the client’s most trusted advisor. without realizing it, cpas often function as the quarterback of their clients’ financial lives. they just need a playbook to follow and a belief they can do it as a service for which they can get compensated.
to that end, we launched the afo wealth management forward program and podcast in 2022 to educate professionals about our family office model. on the podcast, i’ve had the privilege of interviewing nationally recognized thought leaders in accounting and wealth management. the knowledge gained from these interviews, as well as the relationships they spawned, have been invaluable to me and to our firm.
the purpose of my book is to curate the best insights that our influential podcast guests have shared with me about developing a modern accounting firm. the book is also designed to provide you with a game plan for offering financial advisory services to your clients efficiently and profitably.
i know what you’re thinking. you’d like to offer financial advisory services to your clients through the vfo model, but you’re way too busy with your core tax work to do so. here are some of the other doubts that cpas have shared with me:
- “i don’t have the time to get the appropriate licenses and certifications.”
- “i don’t know how to service the clients.”
- “i’m afraid that a bad investment outcome during a bear market could cost me a lifetime tax client.”
- “i don’t understand the investment and wealth protection side well enough.”
- “i don’t want to sell my clients investment products.”
- “i don’t know how to price the services when it’s not a deliverable like a tax return.”
- “i’m not able to set up and manage the back end sufficiently.”
- “it’s not a right fit for our firm.”
sound familiar? well, none of these concerns should be preventing you from having the practice you’ve always dreamed of.
there’s a great book called “hero’s journey” by joseph campbell that will help you transform how you view advice and better serve your clients.
you may be wondering why i am talking about “hero’s journey” here. that’s because as a cpa, you are the trusted guide in your client’s financial life. i’ve always believed in putting the spotlight on other people, i.e., your clients, rather than yourself. you should take pride in helping them become successful. it goes back to my notion of ror (return on relationship). by guiding your client through the unpredictable and often difficult business and financial terrain of modern life, you’re making your client the hero, rather than yourself.
all-star team of contributors
to that end, i’ve assembled some of the most influential thought leaders from the accounting and financial advisory professions, who will be our guides along this journey as we look to create a healthier, more fulfilling life for ourselves and better outcomes for our clients.
regardless of how aggressively you move into this exciting new practice area, my book will help you:
- buy back more time
- create deeper client relationships
- have the opportunity to do meaningful work
- transform the lives of your clients
- advise clients from birth of a child (college planning) to death and estate planning
position your firm for greater profitability
accounting firm m&a expert alan koltin told me that among all services that cpas can add to their businesses, wealth management has the greatest revenue growth potential, ranging from 20 percent to 200 percent a year. we’ll discuss how you can take part in this revolution.
technology is making it easier to connect these professional services to provide holistically for the client. we will show you how a vfo and an annual recurring revenue model can significantly increase the enterprise value of your business and provide you with greater work-life synchronicity.
conclusion
i want you to envision your future. what does it look like to you? do you have good work-life balance? deeper and more meaningful relationships with clients and the people you care about? the great thing about a vfo is that you can make it into whatever you like. this book will outline how to do it on your time schedule and on your terms. my goal is to inspire you to find innovative ways to transform your business and the people you serve.