How to build a better business model — with Dean Zayed

Dean Zayed had what he called “a lightbulb moment” when he realized how many successful advisors had their clients’ best interests in mind but focused only on providing insurance. As an attorney who specialized in estate planning, Zayed had the idea to merge legal advice with financial and insurance advice to form a one-stop shop for those needing help in planning their financial future.

Zayed is the founder and CEO of Brookstone Capital Management. Brookstone has gone through a number of changes in recent years, first partnering with AmeriLife in 2019 and, about a year later, with FormulaFolios, resulting in what is now a more than $8 billion company.

A self-professed lifelong learner, Zayed started out with a B.A. in economics from Northwestern University, then obtained his juris doctor degree from Northwestern School of Law. Zayed also obtained a master’s degree in taxation from Chicago-Kent College of Law and is a Certified Financial Planner.

Brookstone forged strategic relationships throughout the country with independent investment advisors who affiliate with Brookstone as investment advisor representatives. Brookstone provides a large array of investment options and vehicles to create model portfolios that span varying levels of risk. Through its network of IARs, Brookstone provides comprehensive financial planning, including asset allocation, retirement planning, education planning and portfolio management, and offers a one-source solution for the management, growth and preservation of its clients’ wealth.

In this interview with publisher Paul Feldman, Zayed describes how the vision he formed early in his legal career led to the founding of a financial planning powerhouse.

Paul Feldman: You started out as an attorney. How did you get into the insurance industry?

Dean Zayed: I had a vision early on as a young attorney to incorporate financial services side by side with an estate planning law firm. Essentially, I was an estate planning attorney and tax lawyer who dealt with high net worth clients. There’s a lot of overlap between estate planning and financial and retirement planning. The overlap of these disciplines really interested me and led me to think there’s probably a better business model out there to provide more coordinated and uniform advice across the disciplines with one common set of professionals.

I had this entrepreneurial idea that maybe lawyers and financial advisors could work together in what I called a “multidisciplinary practice.” That’s fancy language for saying let’s have a one-stop shop of professionals that can coordinate the most sophisticated advice that transcends different disciplines.

Feldman: You went from this idea of a “multidisciplinary practice” to becoming interested in the registered investment advisor side of the business. How did that transition occur?

Zayed: My personal practice really had the seeds of the Brookstone RIA world that came later. I built a personal practice within this one-stop-shop business model, side by side with the law firm, as an advisor who had access to the entire universe of vehicles.

It was really all about providing the most sophisticated advice and having access to the entire universe of financial services, products and vehicles in order to provide what would be in your client’s best interest — whether that was insurance products or managed money or broker-dealer products. Over the next six or seven years, I had a lot of success providing advice to clients. Our client retention rate was basically 100%.

When you blend insurance products with more traditional fee-based managed money — those vehicles that most clients are used to, such as stocks, bonds, mutual funds, exchange-traded funds and so on — that is a powerful combination.

I came to know successful insurance agents in the industry by networking and going to conferences. These agents had their clients’ best interests at heart but were focusing only on insurance.

That was a lightbulb moment.

I thought “Boy, this whole side of the industry needs a partner, a platform. If I can help incorporate the RIA side of the business into their insurance-only practice, that would be a powerful combination, and everybody would win.”

Feldman: What would you tell an agent who’s thinking about getting registered? Is this a good time?

Zayed: I thought back in 2005 and 2006 that the future was going to be fiduciary-based, that fee-based would be a prominent theme and there would be a migration from the commissioned old-school Wall Street brokerage world to this more modern, 21st-century fee-based fiduciary world.

I think we got that right back then. I would say nothing has changed but for the fact that the migration is alive and well. And as we know, with a lot of the laws that have been considered and some of the changes at the Securities and Exchange Commission and the federal level and

Congress, fiduciary is the future. There is no doubt about that.

To embrace the Series 65 and get licensed as an investment advisor — whether you’re your own RIA or you’re an IAR of an existing RIA — is a no-brainer. If you want to grow your practice, you want to be the most credible advisor and you want to offer the highest standard of care advisor you’ve got to be a fiduciary.

Feldman: Do agents struggle when they make that transition to becoming an IAR?

Zayed: If you’re used to selling product on the insurance side and you’ve done so successfully, the difficult transition typically is moving from a transaction-based environment with the client to a more holistic, relationship-based approach. That’s a learning curve.

You’re now the chief financial officer for that family. You’re their chief financial quarterback. They’re outsourcing all those things, not just insurance.

The transition is really about how you actually talk with clients and the steps you go through, to not limit yourself to insurance only or RIA only but to look at the big picture. You must put yourself in the mindset of being the quarterback for a family’s entire financial affairs.

Feldman: It’s a much deeper relationship. And those one-call closes don’t seem to happen.

Zayed: You must incorporate the insurance products in the context of providing a more comprehensive solution. The product sales don’t go away; they’re just incorporated now into a broader, more comprehensive solution that benefits the client. The whole picture becomes clearer when you’re an advisor and an agent and you take this more holistic approach.

Feldman: How does a new agent communicate with a client? How does a new agent build confidence? What are some strategies they can use?

Zayed: Even Tiger Woods had a coach. We all can use coaching. You want to continue to learn, upgrade your knowledge, upgrade your skill set, go to trainings, learn from others, network with others. Nobody ever stops learning.

From early on, I had this hunger for knowledge that never stopped. I never thought that I knew it all — that I could just put it on cruise control. That was never me. And that’s not what we advocate with our RIA.

You always have to push the envelope to be innovative and progressive. There’s always the next great idea. Part of the gratification of this work has been to stay ahead of the curve. The world has changed in the last 20 years. The industry has changed, and people’s expectations about retirement have changed.

I love insurance products. I’ve used them very successfully. But when you incorporate the beautiful products that we like on the insurance side in the context of providing a more comprehensive solution, it’s magical. It’s no longer just the product sale. Products don’t go away. They’re just incorporated now into a broader, more comprehensive process that the client benefits from.

Now it’s like, wow, well, there’s a marriage between that product and that managed account and my 401(k) at work. The whole picture becomes more clear when you’re an advisor and an agent and you take this more holistic approach.

Feldman: What do your most successful advisors have in common?

Zayed: They have a burning drive to do what’s best for the client. And they have a long-term outlook toward their practice. Any decisions you make today ought to be the right decisions for your clients and your business. You forsake any short-term gratification for a longer-term view. You must consistently do what’s best for the client. We’re all going to get paid fairly — and hopefully handsomely — over time, but you must view this as a business with a long-term objective.

Those are the advisors who don’t think of it as a short-term transactional proposition, but now really consider themselves as business owners that happen to be in the business of financial services. They have all these beautiful licenses and tools we can use to help folks. Our successful advisors morph and evolve and transform into real, true business leaders. And that, to me, is the beauty of this dynamic industry. And for those who take it seriously, who love it, who embrace it, there’s nothing better than being a business owner in this industry.

Feldman: What do you see your most successful advisors doing to market and promote themselves?

Zayed: The usual suspects in terms of marketing and lead generation are still out there. The traditional seminars. Teaching at a local college — you’re still doing a seminar, but you’re doing it as sort of the professor of the room. It’s interesting to see how many advisors have gone down the road of radio and TV successfully. Many of our advisors are very successful and very good at those types of marketing outlets.

The real winner in the last couple of years, though, especially with the pandemic, has been online lead generation. We have some advisors who have found success in generating qualified leads, nurturing those leads, all from the internet, whether it’s Google or Facebook or LinkedIn. I think that’s obviously going to be the next gen in terms of lead generation. Folks have to figure out how to get in front of their target audience using the internet. You’ve got to embrace that at some point, whether you insource it or outsource it.

And there’s so much you can do on social media and video. You can use webinars and talk about any number of very interesting and relevant topics, such as taxation, Social Security, required minimum distributions, rollovers and so many other things that can be part of an arsenal that you can use out there to create content to generate that interest and educate people.

Feldman: What should an agent or advisor consider in looking at an RIA?

Zayed: Today’s RIA platform needs to be large and national in scope, with resources that will allow you to plug in and scale your business, take away the day-to-day noise and free you up to do what you do best. It should include an investment platform that is sophisticated, that does not require you as the agent to become a research analyst or to have to build portfolios.

Why not partner with an RIA that can take away all that day-to-day noise — operational, paperwork, service technology? That will allow you to be the rainmaker of the firm. That’s the way I see the RIA partnership with our advisors.

Feldman: The current state of the economy is pretty crazy. How do you view this period?

Zayed: The industry has been and will continue to be ripe with opportunities in terms of the demographics and the movement of money between generations. I think the economy is this thing in the background that we get caught up with. There are these big swings, but to me, that’s short-term noise. You have to see through the noise.

Whether we have a recession or not, that’s going to happen regardless. To me, I’m focused more on the advisor experience within an industry that will continue to boom for 20-plus more years. We’re here. It is a great place to be.

Feldman: What do you recommend advisors say to their clients in this tumultuous time?

Zayed: The most important thing would be to make sure that the advisor has put the client in the most risk-appropriate portfolio. The most important thing is that there’s not a mismatch between the client’s risk profile and how you’ve invested them.

The second most important thing is that you have the right tools that can risk manage the portfolio and avoid large losses. If there is a recession, can you still deliver competitive returns? We’ve been very cutting edge on that and had great results, delivering competitive returns even through recessions, but doing so while minimizing or mitigating larger losses. Those are tools that you want to think about if you’re an advisor, a fiduciary. You must have access to some of these portfolio strategies.

Feldman: What kind of trends are you seeing in portfolio design and strategies?

Zayed: Twenty years ago, nobody talked about income planning on the advisory side. It was all about generic retirement planning. The trend we’ve seen now —and I think we were right about 20 years ago — is to specifically help folks with income planning that likely will incorporate some insurance products but also look at the RIA side.

We’ve built an entire suite, for example, with our RIA, which focuses on the idea of income planning and sustainable withdrawals that you cannot outlive. And that’s a real niche within the advisory space.

Feldman: Do you see robo advisors as a threat or an opportunity?

Zayed: I don’t see them as a real threat to the target audience that most of our advisors want to work with. I do think there is a generational sort of interest when you get down to the millennials who want to go to a coffee shop and work on their cellphone and their laptop and not talk to anybody. When they open an account, they just want to do it online. I get that. There’s a need for that, and there’s going to be a demand for some robo tech activity in that generation.

But for now, I’d say they’re absolutely not a threat to what we do. People want a live person — a seasoned, experienced advisor — who can sit across a table from you or even through a Zoom meeting. Most people want to be able to look you in the eye and really, really uncover what will be best for them.

I love technology. Robo is just the beauty of technology evolving, and there will be a place for it in the industry. I think it probably will rear its head more in a competitive way in the decades to come, and I don’t see it as a threat to us right now. We use technology in our firm. We can even call ourselves a robo in the sense that we can do a lot of the things that the robos do without calling ourselves a robo. We’re just using technology to enable kind of a smoother relationship. So the word robo and the whole idea of competitive threat really are not an issue for us.

Feldman: I like to call it the robo-enhanced advisor, and I’m not sure that there’s anything better!