Writing a profile of Ron Carson is a bit like trying to shoot a moving target.
To make matters worse, in this analogy the writer has no discernible talent for shooting and the target is moving very fast indeed.
The pace of change within Carson’s multi-faceted business means that stats and facts that are correct one week are out-of-date the next as new deals get done, new targets are set and increasingly ambitious comparisons are drawn.
‘We are literally going to be the Amazon or Netflix of financial services,’ he says.
Well, you can’t get much more ambitious than that. But still, you get the point.
Carson is in the 35th year of his hugely successful advice career and could be forgiven if he were looking to slow down at this stage, having become a grandfather for the first time this year. Instead, he seems to be speeding up.
‘With my enthusiasm, conviction and confidence in what I am doing, I will keep on doing it as long as I’m providing leadership and growth to my organization,’ he says.
Right now there is no question about growth. He is currently on a one-man roadshow around the country in a bid to grow his network of RIAs, Carson Group Partners, and the firm is in the process of adding 18 firms to its tally of 56. Carson has also held talks with a $10 billion RIA over a possible acquisition – a deal that would more than double the size of the business, although this is currently on hold due to the owner’s ill health. Oh, and he’s also looking to buy two boutique asset managers to boost his investment offering.
Add to this a very busy 2016 and 2017 – in which he broke off a 28-year partnership with broker-dealer LPL to move over to Cetera, and sold a 29% stake in his business to private equity shop Long Ridge Equity Partners and his senior managers for $30 million – and you begin to see the challenge faced by the not-so-sharp shooter.
‘This isn’t about the money at all,’ he says, referring to the firm’s growth drive. ‘I’ve got more money than I could spend. It’s about a movement.
‘When Fidelity and Vanguard started, they had a noble cause – the retirement plan space for Fidelity and being a low-cost fund provider for Vanguard. No one has emerged in the wealth management space to be a consumer advocate, to talk about total consumer transparency and being as conflict-free as possible. The time is right. We will be a household name within 10 years.’
LEARNING TO FLYCarson first learned to fly at the age of 16 in his father’s four-seater, which the family would use to go on vacation.
‘We would have gotten there faster by driving. I swear that thing was so slow,’ he jokes. ‘I hated every second of it, because it scared me, but my dad insisted that I learn.’In 2000, his lessons began to pay off as Carson took to flying again. Omaha’s lack of connectivity had started to hold back his business.
Having clocked up 6,500 hours piloting a jet since then, this year he has given up the controls and can be found in the back strategizing with his team instead.‘We are literally Air Force One up there,’ he says. ‘We have full business capabilities, we are getting stuff done. We are having strategy meetings, shoot… we could even have our board meetings on the plane.’
He says private aviation is misunderstood by many as an extravagance. He insists that it is actually additive to the business due to the time it saves and the meetings that it can make happen.
‘It’s a time machine,’ he says. ‘It’s one of the best tools I’ve ever had for growing my business. Until you use it you don’t even realize all of the benefits from a business standpoint.’
Before we get to all this activity and ambition, let’s take a step back.
Carson is the founder and chief executive of the Carson Group, which consists of two main businesses. The first is Carson Group Partners – a network of what will soon be 74 RIA firms, some of which are owned fully or partially by the Carson Group. Others are not currently owned by the firm, but might be one day. One of these 74 firms is Carson’s own RIA business, Carson Wealth Management.
The other major business is Carson Group Coaching, which provides coaching and consulting services to some 5,000 advisors across 1,284 offices all over the country. This includes practice management training and business consulting. It also provides guidance on marketing, websites, technology, compliance and succession planning. Those who join Carson Group Partners get all of this as well as use of the Carson investment proposition (see Boarding Now box ).
Carson says that he tells other advisors what to do in his coaching business, but in the partnership he does it for them.
While much of his day-to-day work is focused on growing the partnership – hence the nationwide tour – the overall business is based on both Carson’s undeniable charisma and the success of his own RIA business. After all, if Carson Wealth Management is not a success, why would all those advisors listen to him? Like Omaha’s other investment sage, Warren Buffett, Carson’s own business must do the business if his well-paid wisdom is going to be worth a dime.
But this is no empire built on sand. Carson Wealth Management ticks all the boxes that a RIA should, with 11 advisors who oversee $1.6 billion in assets under management. It is fee-based with a focus on financial planning. It charges a percentage of client assets, which it aims to keep to a minimum, and is transparent about the total costs a client will pay.
‘I’m all about transparency. I’m all about the client really understanding what they are paying and how everyone is getting paid,’ Carson says.
This means the firm tells clients their total fee, including advice fees, platform charges and any trading fees they may incur.
‘We disclose all the fees and costs at our firm,’ Carson says. ‘Someone will come in and say [the fees] are expensive but they’re not. They’re actually less [than other firms’] but [the other firms] are exposing just their fee and we are exposing all the fees down to a transaction or the cost of a trade. We are disadvantaging ourselves because we are playing to a higher standard than most of the people we are competing against.’
Carson’s dedication to transparency and distaste for commission may be standard practice in the RIA community today, but there was a time when he was in a distinct minority.
He recalls a meeting in 1994 when his then broker-dealer LPL first proposed a no-commission, asset-based program.
‘I remember coming back and telling my wife, “I just heard the most the incredible thing that I think is going to be the future,”’ he says.
‘But I was the minority in that meeting. I remember most of the advisors in that meeting saying, “I would never do that. My clients would never want that. They’re more comfortable paying commissions.” That was code for: “They really don’t know what they’re paying and are comfortable thinking they are getting something for nothing.”’
Carson says he has never liked to sell products that might leave the client questioning who was benefiting more. While good for his conscience, this approach was bad for business when he was starting out in Nebraska in the early 1980s. Cold calling farmers, many of whom had little money to spare, proved tricky.
‘It was tough,’ he says. ‘I had no name recognition. I would cold call out of a phone book.’
Carson was driving more than a thousand miles a week across Nebraska to visit clients, but getting nowhere.
‘I got to a point where I hated this business,’ he says. ‘I was just grinding away as a one-man band.’
After failing to break $30,000 in gross revenue per annum after six years, Carson was ready to throw in the towel. It was in the depths of his despair that he found success. With nothing to lose and no desire to sell, Carson began calling his clients just to see how they were doing. This sparked the kinds of conversations he hadn’t been having before, boosting relationships and eventually leading to a turnaround in his fortunes.
‘I learned that if you took a genuine interest in people, got to know them and could provide random acts of kindness, they would be open to having a conversation with you. I call it “emotional reciprocity.” They feel good about what I’m doing for them and as they become a client we continue to do lots of little things for them.’
While it would be oversimplifying things to say that it has all been plain sailing for Carson since that realization, he was producing around $1 million within two years, and that number has only climbed higher ever since.
His focus today is on growth rather than survival. In May 2016, he sold a 29% stake in the Carson Group to private equity investors Long Ridge Equity Partners and 15 senior managers for $30 million. He says the value of this investment has more than doubled since then.
This money, along with millions of his own, has been used to invest in the firm’s systems and technology, as well as funding acquisitions of other RIAs.
Carson says that over the past five years he has spent about $52 million on the technology that his affiliates use – all as part of his bid to become the Amazon and Netflix of advice. He says another $80 million will be spent between now and 2020 on this and on growing the partnership business.
So what does this money go toward and how will it help an Omaha-based RIA compete with two of the biggest growth stocks in the world?
The Netflix comparison is relatively simple. Carson Group has a team producing original consumer-facing content, which gets carried in Forbes, US News & World Report, Barron’s, CNBC and USA Today, among others. It also sends this content around the web and to the top of Google’s search results thanks to some targeted search-engine optimization. Carson’s advisors can use this content on their sites and in client communications.
‘By creating this original content, that allows our advisors to differentiate themselves in the marketplace,’ he says.
The Amazon comparison comes into play with the platform that Carson Group provides for its RIAs. This includes a client portal that gives access to tools from a host of third-party providers, such as custodians Fidelity and TD Ameritrade, portfolio accounting service Orion, customer relationship management shop Salesforce and financial planning software eMoney.
Carson gives the example of how Amazon monitors users’ hover rates on its website and ships goods to a given warehouse in anticipation of a portion of those hovers becoming purchases within 24 hours. He says the platform he is building will allow his firm to operate in a similar way.
‘Artificial intelligence is going to let us get to know the client better than they know themselves, better than a human advisor is going to get to know them. We are going to be able to anticipate their needs based on very specific behavior,’ he says. ‘We will be able to anticipate and send communication to the client before the client even reaches out to us based on their behavior on the website. It’s really no different to what Amazon does.’
The platform also lets RIAs in the partnership plug into a common investment proposition.
Despite Carson’s passion for financial planning, he is no passive evangelist. He believes both active and passive management have their place in portfolios and argues that his firm’s own in-house stock and bond strategies are a match for any money manager.
‘I would put our team against anybody out there,’ he says. ‘We’re doing a hell of a good job. We are beating our benchmark on more than 70% of our strategies, which is unheard of.’
This is not to suggest that he is against using third-party managers. He highlights in particular those in less liquid parts of the markets, such as Gorelick Brothers Capital, a Charlotte, North Carolina-based shop. The firm has invested with Gorelick Brothers in three funds, two of which bought residential housing in the wake of the financial crisis and now collect rent on it.
‘We own a couple of thousand houses around the United States through those two funds… and our clients are enjoying really solid returns from those investments,’ he says.
Another reason why Carson believes the firm’s internal strategies can have an edge over external managers is that the company makes an effort to keep management fees low. While this makes them more attractive given that fees are one of the major detractors from active management performance, Carson concedes that it comes at a cost.
‘Our margins are thin and it’s expensive to do,’ he says. ‘And that’s one of the reasons why we think that to be competitive today you are going to need to get to $20 billion in assets.
‘We are getting to the point where we are starting to enjoy scale... I’m relaxed today but I’ll really feel like we have reached breakaway velocity when we get to $20 billion. I’m going to feel comfortable when we get to $20 billion.’
BOARDING NOWThe Carson Group investment proposition is overseen by an investment committee consisting of Carson, CIO Scott Kubie, senior portfolio strategist Tyler Schlumpf, portfolio manager Rob Furlong and director of research Brett Carson.Strategies on the firm’s platform are structured as separately managed accounts. Advisors can access a total of 43 strategies, including different risk allocations in ETF strategies.Of those 43, 17 are run in-house, with 11 overseen by third-party asset managers and the remainder a collaboration between the internal team and external strategists such as BlackRock and Dorsey Wright.Third-party managers include Eaton Vance, which runs municipal and corporate bond ladders for the firm, Swan Global Investments, which offers a defined risk strategy, and Day Hagan Asset Management, which runs a tactical dividend offering, among others.There are three ways that advisors can offer portfolios using the Carson investment proposition.● Allocate to its range of ETF risk-based portfolios.● Use its model portfolios, called the Protector Series, which combine a number of the strategies on the platform and ETFs that are in line with the committee’s macroeconomic views.● Build bespoke customized portfolios that blend the strategies that are most appropriate for their clients. The Carson investment committee has oversight of the underlying strategies but not the advisors’ client portfolios.