CHICAGO - A new Schwab lending program could provide an option to advisors looking for help with succession planning.
The program, announced Wednesday, will provide financing for junior partners seeking equity in a firm. It's currently in a pilot phase for registered investment advisory firms with more than $400 million in assets under management and at least three existing senior principals.
"When we ask advisors about their transition options, eight out of 10 say they'd like to consider internal successors," said Scott Slater, Schwab managing director of business consulting services.
About a dozen firms have expressed interest in the program, said a Schwab spokeswoman, and the company expects to make several loans over the next few months.
The program is part of a broader Schwab initiative that also includes executive leadership development for younger firm members as well as training for firm leaders on transition planning.
"Most people think about succession planning two years before they want to get out," Slater said. "What we're trying to get advisors to do is think the process. They really need to allow five years."
Looking for Options
Boston advisor Chuck Bean is familiar with the challenge. After more than 17 years leading his firm, he's starting to think about a succession plan. But with 600 clients and a progressive disease, he needs to consider the options.
"I have two partners that have a minority share, but are they capable of buying out my wife? Or do I go to a firm like Focus Financial?" he asked.
Succession as Growth Strategy
At Foster Group, winner of this year's Schwab Impact "Best in Business" award, founder Jerry Foster said judges cited his firm for his approach to succession planning, as well as other technological and cultural practices.
"I started bringing in other shareholders probably two years after I helped found the business," said Foster, who added that the firm will have 11 shareholders by end of year. "That's been really instrumental in the growth of the company : bringing in strong people with skillsets that are different from mine, helping them grow the business, and letting them experience the rewards of the business."
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