Bruce: So where did you grow up?

Bob Carter: I grew up in small-town, working-class Texas. Three little places you’ve never heard of, Lulling, Kilgore, and Victoria.

Bruce: I’ve heard of Kilgore.

Bob Carter: My dad was in the working end of the oil field, and we moved around a lot, ended up in Lulling, Texas, town of five thousand, forty-five miles south of Austin, going to high school.

Bruce: Where did you go to college?

Bob Carter: Little place in Brownwood, Texas, Howard Payne. The president of Howard Payne came through Lulling one Sunday night, and was preaching at our Baptist church, he said, “Son, you need to go to Howard Payne.” He was a very convincing; Guy D. Newman was his name. So I trundled off up there and then finished a Bachelor in theology there, and then went onto Southwestern Seminary in Fort Worth, and got a Master’s in divinity, ’73.

And then did you start a career as a pastor?
– ALT sample for Questions

Bob Carter: You know, I never had a full-time after-seminary gig, I was a youth director part-time to please my mother. I felt like I had a real call, but on the other hand the practicality of being married, there wasn’t a really good job network. I leaned to the more progressive side of the Baptist belief system, and it was going more conservative. So that just wasn’t really a good match. So I had to get a job. Went to a placement agency, they said, you know, with a Master’s degree, you can be a night manager at the 7-Eleven, you can sell vacuum cleaners, or sell life insurance.

Bruce: Did you get married in college?

Bob Carter: After seminary. So graduated, got married, and didn’t have a job. So the only person that I knew from college that had a company car was my former roommate, and he had come out to sell life insurance for Southwestern Life. And that’s what I did. Moved to Austin, didn’t know a person in town.

Bruce: And went to work for Southwestern Life?

Bob Carter: Mm-hmm (affirmative). Six hundred dollar a month draws. They said “Here’s the phone book”.

Bruce: So tell me, how did you get prospective clients, and who was your first client?

Bob Carter: Oh, that’s a real long story; you don’t want that one on the blog. I got to tell you that one night at dinner, I can’t tell you that one. It’s actually a pretty funny story, but I don’t want that one on a recording. Ian, he was a close friend of mine, he wanted me to succeed. So I got a few orphan deals, but I did what everybody had to do, Monday night phone calling, you try to figure out … I think what enabled me to survive were two or three things. First of all, I hated cold calling, that was just horrible.

At some point, three to six months into it, this was back when you typed letters, pre-approach letters, put them in an envelope, mailed them, waited two or three days, and then called. So my father-in-law was a big-time attorney with Fulbright and Jaworski in Houston. Somehow, I got an old mimeographed copy of the UT law school list. So I wrote these letters, practically promising them a job at Fulbright and Jaworski if they would just talk to me about life insurance, because I knew the special needs of attorneys. And literally just sent those in to law school and started calling and making appointments.

So you just got, at some point about, I think it was in my first year. You know, I just really didn’t like cold calling. I’d start hiring college students to cold call. Give them a six-pack of beer, they’d sit there and say, hey, I’m Bob Carter, I’d like to make an appointment, they get [inaudible 04:33], they didn’t care. And so, you know, just kind of survived getting appointments, and became friends with a young banker that networked me into some, you know, they’re all young loan analysts, and just gradually, gradually worked into it.

Bruce: How’d you meet the banker?

Bob Carter: How did I meet Ronny? He and his wife had gone to UT with my wife Cindy. So we met like the first week we were here because they knew her.

Bruce: Is he a friend today?

Bob Carter: Yeah, well, that’s a very interesting, we were very close friends. He actually had early onset dementia about four years ago. So he’s been really, you know, it’s one of those things where you drift apart, we were really close friends, kind of drifted, I feel kind of guilty not checking in on him.

Bruce: So where’d you go from there? How long were you with Southwestern Life?

Bob Carter: Boy, you’re making me go way back to remember this stuff. Did that for three years, had no natural market. I got my CLU very early at about that time. I started calling on property casualty agencies. I used to go to the library and just read, because if you’re a career agent, you only read what they send you. I would go down and try to read the industry rags that would not come to the office, like National Underwriter at that time and stuff – Just what other people doing in the industry.

I just couldn’t get in front of people, I was like twenty-eight years old, looked nineteen. So I first started interviewing with Aetna, CNA, calling on P&C agencies. I liked the point of sale, and I was good with clients, but I just couldn’t get in front of clients or at least the ones I wanted to. So Provident did kind of a start-up deal. I did that for a couple of years, which really enabled me to go call on all the P&C firms in town. When they shut that down nationally, one of the firms I’d worked said, why don’t you come in and build a life department for us, life and benefit department, and group insurance.

That was really my big break; I was probably thirty, thirty-one years old, making some pretty good money. I was building a big house. And they sold me ten percent of the agency. I had a nice little run there for about five years. It was right at the very beginning of universal life. To some extent, it was kind of fish in a barrel. The Agency had the car dealers, the beer distributors so I could go in, they’d never called on them for life insurance. So it was a beautiful, beautiful thing.

That was working well, but I was never going to have my name on the business. It was a second generation, and a third generation was already coming down the pike. Because I’d had more production than normal for a thirty-five year old I had been invited to join the Forum at the Top of the Million Dollar Round Table. I was just fascinated by, and had actually joined one of these early agent-owned reinsurance companies. I just thought the whole thing made sense to organize, I feel like I was better at organizing than I was at selling.

Bruce: So then did you sell your interest in the P&C Company? And then what did you do from there?

Bob Carter: Bruce Callahan was the president of American Founders which was a small life insurance company here in Austin. He had been chief marketing officer at CNA, and this was a chance for him to be a president of a company. So I was thirty-five at the time, he was forty-eight. So that company got sold, do you remember who Charlie Keating was, the Keating Five, the senator?

Bruce: Yes

Bob Carter: He wanted to get into the market with bigger producers. High school football coaches were selling American Founders. A couple of other producers had approached him about this agent-owned reinsurance company. I was fascinated by it. We made a deal for me to come in and run the agent-owned reinsurance company, but then very quickly it was sold. It was one of these deals like two months after you do something.
So basically, on a napkin, said we’ll just start an independent producer group. We had no money. We had free rent from that company for a while. I think he had a twelve-month severance; I had like a six-month severance. We literally hired a couple of people, made payroll on credit cards for a couple years …

Bob Carter: So Bruce and I basically on a napkin said let’s build an independent producer group and go start recruiting agents. And that’s what we did. Probably took a couple, three years. You know, I had a few friends from a study group that joined. He had a couple big producers he knew that joined, so we kind of had five or six producers, had a little meeting, got a few more, and just …

Bruce: What’s a producer group?

Bob Carter: That’s what Lion Street is. Producer group is in essence, guys banding together to collaborate on a mission of not all being individual, but as a collective being able to negotiate with companies and share ideals and own part of it. So it’s really the predecessor to Lion Street. We kind of really started it with the same theory.

Bruce: What was the name of that producer group?

Bob Carter: We called it the Partners Marketing Organization, then we changed it to the Partners Group. When we started our broker dealer and benefit arm of the company, we changed it to Partners Financial. So basically I did that between late ’86 and ’99. So we built that up to about 130 firms. Life was really good, I mean, we were on, making good money, had lots of momentum, building a great culture. And we’re trying to think, well, how do we monetize both our positions and the producers’ position in the company?

We started by meeting a couple private equity firms, and one of our competitors who had started an early agent-owned reinsurance company, Jerry Schwartz, from Los Angeles, kind of was having the same idea, we’ve got these networks of producers but now what?
So we cooked up the idea of what ultimately became you know Peer National Financial Partners. So the three of us kind of schemed about it, he had a connection with Apollo, the big private equity, Leon Black’s private equity firm out of New York. So rather than them owning us, we came up with this roll-up strategy that we would monetize 50 percent of a firm’s IBIDA, in return for a long-term access to that revenue.

We started working on that in March of ’99, closed on it in December of ’99. And ultimately, I got it to about a billion dollar market cap company.

Bruce: Wow. And then?

Bob Carter: And then it wasn’t as much fun, so we went public, you’re getting deep in my soul, here, Bruce. We started in ’99, we’re buying, we probably bought a hundred and something companies, you know, like yours, some smaller, some bigger, financial service benefit, asset management.

Bruce: All over the country?

Bob Carter: All over the country, just because our network was all over the country. And you know, by the time we got our first fifty, the company began hiring M&A guys to go beyond our network. So it started with our networks. We started in December of ’99, we hired in May of 2000 Sandy Wile’s daughter to run the company. Again the private equity asset, like most of them, they want, how am I going to get out of this. Well, we put in $125 million, we had a better chance to get out a high-profile CEO.

It was great, we just kept buying companies. Our company in Austin was the platform for the whole thing. So all the financial people were in New York, all of the broker dealers, the producer group, the life insurance, everything was down here in Austin, which ultimately grew to a couple three hundred employees in Austin. So we hired her, she had a Prudential background. Her father and Jamie Diamond got sideways when he fired her. So she came in, we had a lot of fun building the thing up, it went public in 2003. New York Stock Exchange that was kind of cool, standing on the exchange.

It was still pretty good until about 2004 or five, and then, being a public company, they were meddling a lot more in what was a good thing, a lot more. Everything you read about an entrepreneur selling, trying to work for somebody, began unraveling in 2007. You know, I just hated it, they didn’t like me. All the producers liked me obviously. So I left in January of 2007 with a nice package, a two-year non-compete.

That’s the sad story of that. But a lot of it is just me, I think, it’s easy to blame other people for your problems. As I look back, I had a certain edginess a certain arrogance. You know and no respect for authority. Hey, you sold your business; you got to work for them. I thought it was still my business.

Bruce: So then what did you do? So now you quit there, you just go play golf for a while?

Bob Carter: What kept me from going crazy that was the year I was the AALU president. So I got to travel that year, really being president, and then post president, that kind of kept me in touch with the industry. The I did nothing, I played golf, five, six days a week. I guess that was March of 2007, so I think my non-compete ran all the way through June of 2010. So really in about January, I was starting to say, I’m going to do this again, I missed the race.

Bruce: So takes us up to the beginning of …

Bob Carter: Lion Street.