Ignoring succession planning could have serious consequences — as much as $1 billion, in fact.
Mega-RIA Arnerich Messena, with $25 billion in assets under management, may have found out the hard way, losing a three-person, $1 billion advisory team that founded Allium Financial which, like Arnerich, is based in Portland, Oregon.
Allium has affiliated with tru Independence, the multiplatform services and consulting firm, also based in Portland.
The move could be part of growing trend in which established RIAs with undeveloped succession plans lose younger advisers, says David Canter, executive vice president of practice management and consulting for Fidelity Clearing & Custody Solutions.
22 YEARS WITH FIRM, BUT NOT PART OF SUCCESSION PLAN
"The smart money, by which I mean junior partners, are going to make practical choices," Canter says.
In this case, Sheree Arntson, a 22-year veteran of Arnerich, says she left to improve service to longtime high-net-worth clients. Her Allium co-founders are Jamie McCreary, senior wealth adviser, and Stephanie Fagerstrom, director of operations.
"You are seeing a lot of initial [RIA] founders challenged with lack of succession planning," Arntson replied when asked about how her departure fits into breakaway trends in the growing RIA space.
She expects more "like-minded teams joining forces and I think paying closer attention to … better succession so that those firms have a longer life."
Arntson started at Arnerich shortly after it was founded in 1991 and oversaw wealth management services, but was not part of any discussions about succession planning there.
The firm's CEO, Tony Arnerich, and another family member still own at least half and possibly much more of the company, according to SEC filings. Arnerich serves in four top roles at the firm: CEO, president, chief investment officer and chief compliance officer.
He did not return calls for comment.
TOO MUCH FOUNDER CONTROL?
"We see this a lot in founder-controlled companies where there's too much control tied up in a single founder or two or three founders," Canter says.
Arntson called her decision to start her new firm as a "natural evolution" of her career.
Quote"Junior partners are going to make practical choices," says Fidelity's David Canter.
"I've had relationships with many of these clients for almost 20 years so this really allows me the ability to build out a full multi-family office structure that provides the clients with a single point of contact for all of their needs," she says.
"It's going to be an upgrade in the reporting and the technology," she says, and "the technology will be fully integrated, which is something that I didn't have at Arnerich."
The service model for multi-generational, high-net-worth families "is evolving quite rapidly" and requires "state of the art technology," according to Arnerich.
Her former firm serves not only HNW clients, but middle class ones, as well as a large percentage of institutional clients, ranging from banks and insurance companies to pensions and charities, according to SEC filings.
"When you have multiple client types there is a competition for resources," Arntson says. Tru Independence also will handle Allium's compliance function, freeing its founders to put greater focus on their clients, she says.
According to Canter, younger advisers often leave firms because "they want to create value for their investors and for themselves and they want choice and the ability and the freedom to chart their own future."
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