While I expect to work for many years with my firm's No. 2, Cal Brown, I'm 64 and Cal just turned 59. It was clear a few years ago our firm needed a management structure for the next 20 years.
Since our younger employees are not yet in a position to buy or manage the firm, I took the counsel of Mark Tibergien, CEO of Pershing Advisor Solutions, based in Jersey City, N.J. He recommended I look for a firm providing the management structure we'd need, while giving our young professionals time to grow into the leaders of tomorrow. That meant some sort of merger or combination type of transition before I leave the firm.
My firm is an amalgam of several financial planning practices. In 1999, I purchased the Monitor Group from Lynn Hopewell, and merged my firm's operations into it.
I was 51 then and Lynn was 62. Lynn's firm was quite a bit smaller, with five employees and only 100 clients. Lynn was heavily involved in client advisory work, but he was not in good health. He needed to retire from the business, and soon.
That's not my situation now. My health is fine and I don't want to retire. Rather, the transition will be the culmination of a multiyear strategy to develop the Monitor Group into a firm that maintains its cutting-edge approach to wealth management.
You're now asking: "What the heck is that strategy, and how is their staff evolving as they get closer to a transition?" Clearly, we need to change the organization and our professionals' expectations. For years I did the rainmaking, arranging all new and potential client meetings, and I personally knew all the clients.
That part had to change. So I consciously built the compensation system with significant salaries and some bonuses for retention and later added small bonuses for new clients. That system allowed me to leave the client advisor part of the business as a majority of my clients were moved to my colleague Cal.
In time, clients were handed off to a third, fourth and fifth advisor with no problems or internal resistance. This allowed me to move from working directly with clients to mentoring advisors and working on our brand and marketing. So far, so good. Or so I thought.
In reality, it was not so good. I had nicely unplugged myself from day-to-day client management, but had not put the right compensation in place to motivate staff to grow their client base. They did not have the proper training or incentives to develop business. Virtually every client was given to junior advisors or was referred by an existing client, other professional or called the firm because of our media exposure and brand marketing. Our organization evolved and was transition-ready, but our compensation system was not.
The answer? A new system was created with fixed and variable components based on revenue generated from existing business, clients served, new business originated, and company productivity and profit growth. Is it perfect? No, but we're more than ready now to evolve as an advisory firm as necessary.
MOVING FROM SUCCESS TO SIGNIFICANCE
Notably, one of my professional peers asked me, "Why are you doing all this work before you have a transition? Is this really necessary?" He probably asked because I'm moving from a relatively calm lifestyle where I don't see clients and our business is profitable and very stable to working really hard for the next few years to assure a good transition.
That made me think: "Why am I doing this? Ego? Need for more money? Delusions of grandeur? And, exactly what am I going to do?"
It's important to reflect on the why first. My top five StrengthsFinder list include: Learner-Achiever-Activator-Futuristic-Strategic. I need to learn new things and set goals that I must accomplish, while developing strategies for the future, all on a regular basis. Doing one thing at a time does not fulfill me.
My professional and personal life shows that pattern. I've had a multitude of paying and volunteer jobs in the past 30 years, with at least 16 distinct titles. Each job required learning skills, setting goals and accomplishing several things at once.
So, part of the "Why do this?" comes from my desire to accomplish more and different things. This inward-looking component of "why" is critically important for you to consider. A transition that enhances your ability to use your strengths, follow your passion or make a bigger impact is good. A transition as a result of an unplanned crisis or situation where you have no alternatives is not good.
The outward-looking component of why is larger. I want to have an impact on our industry and society. In doing so, clients, owners and employees must be better off for having made this change.
Better in my mind is not instantly happier for clients, much wealthier for owners or creating job security for employees. Rather, better means more challenges and opportunities for staff, more security for clients because of the deeper bench strength of the firm - and a bigger platform for me means advocating for positive changes in our industry. Having been blessed with a good deal of success, this transition is a chance to create long-lasting significance in the lives of others.
This can be a very scary part of your future to think about. Why? When I've asked top financial advisors what they want to do next after they reach some level of business success, the answers often get very cloudy. Many say that they really can't do anything else because they are inextricably tangled up in their own companies.
A few years ago I surveyed nearly 1,500 business owners about succession planning. One quarter - working as individuals and billion-dollar revenue firms - told me their succession plan was to die at their desks! Does this sound familiar?
There's a good chance you will live a longer and healthier life than your parents. You are in denial if you tell me you don't have time to think about your future, because you have the time and space to craft a compelling alternative to traditional retirement.
In any transition I'd participate in, I'd add professional mentor, large-scale business developer and global strategic thinker to my job description. I'd divest internal operations and direct client relationship management.
In short, I'd adjust my life portfolio, removing some assets and adding others. For more on that very important concept, I urge you to read Portfolio Life by David Corbett.
CREATE THE FUTURE
Your future and the transitions you'll inevitably face don't have to be all-or-nothing outcomes. You can actually start your transition years in advance. Don't let there be a point in your life when you are forced to say "Now what?"
Management expert Peter Drucker said, "The best way to predict the future is to create it." I say, "The best way to assure a successful transition is to see it, plan it and make it happen!"
Glenn G. Kautt, CFP, EA, AIFA, is a Financial Planning columnist and chairman of the Monitor Group in McLean, Va.