David Hubbard thinks of himself as Johnny Appleseed, devising business plans to help fellow advisors grow

January 4, 2011 — 3:07 PM UTC by Steve Garmhausen


David Hubbard has a hybrid business: In addition to his own practice, he coaches, trains and supports — in just about every way imaginable — 140 other advisers. He and the advisors he coaches are part of the Financial Network Investment Corp., which has an RIA as well as a broker-dealer. Since the early 90s, the coaching part of his business has grown to be the largest component, and takes the majority of his time.

Part of Hubbard’s strategy is creating revenue-sharing agreements, not only with the advisors he works with, but with other professionals who serve his clients. He’s taken that one step further with a recent deal to acquire a six-employee CPA firm.

“Quite often we have four or five advisers working with one client,” he says. “I’ve developed a way to share the revenue. At the end of the day is the client getting best service possible? I believe you have to have a team because our business is so complicated.”

Name : David Hubbard, president, Exemplar Financial Network

Location: 350 Congress Parkway, Suite C, Crystal Lake, Ill., 60014

Years in business: 31

Employees: 14

Assets under management: $250 million; also coaches practices with a combined $2 billion

You have an unusual business model—can you describe it?

We work directly with individual investor clients, serving them from three offices in the Chicagoland area. We provide financial planning and wealth management services to individual investors and small-business owners in over 30 states, and we hold ourselves out to be their personal CFO.

The other side of the business deals with other financial advisers—140 of them, all throughout the Midwest. They are all licensed, with Financial Network as their broker-dealer. I serve as their regional director, and I’ve got a support staff of a dozen people who are dedicated to assisting those other financial advisers in growing, developing and maintaining their businesses.

What’s the range of services you provide to these advisers?

I recruit them and transition them. I help them set up independent offices and business marketing plans. I provide ongoing mentorship, compliance services, and we do a lot of education. I try to open doors for them to partners who can help them grow their businesses. We’ve opened doors at 50 accounting firms, dozens of banks and credit unions and several law firms. I make it part of my business to find markets where these advisers can build their business.

Many advisers have come to me without a substantial business. They’ve wanted to learn how to grow—and I let them look under the covers and see how I run my own business. Effectively I’m almost a partner with other people. I have business plans, marketing plans, I have a series of courses they come through. I help hire staff and negotiate leases. I help with personnel, technology and the services side. I charge no fees; I get paid a very small percentage of all the business they do if I help them grow.

How did that side of the business come about?

It developed by accident. I joined Financial Network in 1990. It’s set up on a regional director basis, and I started asking the regional director in Chicago for assistance. After a year he said, “Why don’t you buy me out and be the regional director?” At that time there were nine advisers, including three in my office. I took the approach that I would do the same thing for financial advisers as I do for my financial planning clients. I sit down with them, determine their life goals, what the want to get out of the business, the resources they have and their experience level, and I come up with a business plan to help them grow. It turns out I had a knack for it.

Are these all fee-based advisers?

One hundred and twenty of the 140 are fee based. I encourage all of them to move their business to a fee-based model. All our advisers do some commission work; it’s very hard, I believe, to run a well-rounded financial services practice and be 100% fee-based.

I have been an investment adviser since 1983. I went from being commission-only to fee-only for several years, and have been fees and commissions since the mid-'80s.

So what motivates you to do your coaching?

I feel a bit like Johnny Appleseed, or like a missionary. When I set up my business, I looked at the industry and couldn’t find a model I liked or admired.

I found do-it-yourself advisers who thought they could be all things to all people, and they didn’t want to share clients with others in the industry because they were afraid of losing business. On the other hand, I looked at the medical industry and thought, “They’re doing it right.”

A general practitioner takes care of the family’s needs, and then if there’s a heart problem, they make a referral to a cardiologist. The medical team works together to make sure the patient gets the right treatment. For 27 years, I’ve focused on that: I’ve got people who are specialists in financial planning, insurance, eldercare planning, and so on.

Generally speaking, the revenue sharing between advisors is a 75/25% split, with the referring advisor retaining 25%. Of course the exact amount varies depending on the situation. There are many shades of gray. The most important detail is that I have the advisors sign a joint work agreement which spells out all of the responsibilities of each advisor and what happens if the agreement falls apart.

Have you helped advisers who were ready to throw up their hands and leave the industry?

I can think off the top of my head of a dozen different people who’ve told me they were just going to give up and get out. They were not running their business like a business: They were operating hand-to-mouth, trying to pay their bills at home and chasing every available dollar.

I’ve taught them how to focus on getting paid as a practitioner or owner, and I’ve often had to be their own financial planner for a couple of years.

Some people have had a lot of clients, but haven’t been profitable because they haven’t figured out how to focus the right services toward the right clients. I’m a strong believer that a financial adviser should only work with about 100 households. If they try to work with more than that, they’re not going to be successful.

On the other hand, I always give people a good, honest evaluation, and I’ve suggested to a number of people that this is not for them. I’ve helped them make the transition to another career.

Have you used coaches yourself?

I’ve used some of the coaches in the industry. The problem was that a lot of the coaches I deal with, you’re sitting with hundreds or thousands of people in a conference or workshop. It’s hard to get any customized support from the coaches out there in the business.

Some of your clients have been CPA firms. Now you’re actually buying a CPA firm. Why?

We’re closing in on an accounting firm (within two weeks) that has six CPAs on staff. Back in 1988, when I was looking to grow my practice, most surveys showed that clients trust accountants and CPAs as their advisers. By just getting your CPA, you have very little formal training in financial planning, insurance, estate planning—yet clients are looking for advice.

Since the early ’90s, I’ve been showing CPAs how to get licensed and build this part of their practice. Along the way, I’ve also learned the tax business inside and out. Right now, a CPA I’ve known for 30 years is in the process of slowing down. I said to him, ‘Why don’t we merge and we’ll become a model for the industry in integrating tax and financial planning services for our clients?’.

Whom do you admire in the industry, and why?

I don’t admire the financial services industry in general. It does not do our clients justice. It’s way too easy to get into the business and stay in. You don’t have to show very much competency to be in this business, and nobody does scorekeeping as far as how we’re helping our clients get to their goals.

(But I admire) Miles Gordon, who, along with a handful of other professionals, founded Financial Network Investment Corp. in 1983.

I came to Financial Network after looking at 50 broker-dealers back in 1989. They were relatively unheard of, but they had a true commitment to the client. They promoted financial planning when nobody else did. They emphasized due diligence; they were talking about compliance when nobody else was. Every financial adviser I bring on board, I make sure they have the same values system.

What was your best day as an advisor?

I got invited to a retirement party by a client five or six years ago. There were about a dozen people there, and it turns out he had invited all the people who had been instrumental in his being successful in life.

I’ve had a number of those days: People who had been in desperate financial times, or who had been on the brink of divorce because of money matters, and they came back later and thanked me for helping them achieve success and security in their lives.

What was your worst day?

The worst days have been where I feel like I’ve disappointed people or let them down. In the 1980s, I was sitting at home on a Sunday night watching 60 Minutes or 20/20, when all of a sudden an expose came on of the general partner of a big real estate firm I had sold to my clients early in my career. I felt I’d let them down because I didn’t do my homework. I was 26 or 27 years old, and I said ‘I’m going to do everything I can so that I never have another day like that.’

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