Other planners have told us they are reluctant to hire young people for fear that they may be training their competitors. That, of course, may be a risk if the young planners feel their opportunities to grow at a firm are limited. However, the valuable people we have hired in our firm have not left because we have made it possible for them to acquire ownership positions. This has been the growth model for successful law and accounting firms for years.
That brings us to our own firm’s recent transition. In January of this year, I sold all of my shares in RTD Financial Advisors Inc., part of the transition that began several years before. I have relinquished most of my management responsibilities to other highly qualified shareholders.
Jeff Weiand, who has been with the firm since 1985, has been our chief operating officer for about 10 years and is now president of RTD. Rich Busillo, who joined RTD in 1986, is chairman and chief executive officer.
In addition to Jeff and Rich, we have added other shareholders over the years and now have six. In addition, there are several other highly competent associates who will undoubtedly become shareholders in the future. I can confidently say that our firm will continue its growth for several generations. And while I am no longer an owner of the firm, I continue to service clients and am available if I am needed by the firm’s officers. However, since I have considerable confidence in the other shareholders, I am not “meddling.”
So what has been the result of that decision I made many years ago to sell some of my shares and adopt a formal succession plan?
• I was able to monetize my equity in the firm. And all other shareholders know that they have the same opportunity.
• We have learned from each other over the years because of the broadened perspective that comes from having multiple owners.
• The good people we hired over the years do not leave to establish their own practices or join other firms that may offer better opportunities.
• The incentive to grow the firm is intense.
• Our shared values have created an atmosphere throughout the firm of doing what is in the best interest of our clients.
• Since new planners know that there is an opportunity for equity ownership, we are better able to recruit quality associates.
• Since our clients were made aware of our succession plans, the transition for them was a smooth one.
• On a personal note, I am confident that the firm I helped to build will continue without me and will be my legacy to the profession.
As I look back on my career in financial planning and the development of our firm, I can unequivocally say that the best decision I made was to invite key associates to buy shares in the firm and become partners. No other decision has had more impact on our growth over the years. We have had unusual stability (three of us have been with the firm for about 30 years).
Our system for buying and selling shares is simple. We value the company, internally, as a multiple of gross revenue. But the system itself is not nearly as important as having a plan. You may settle on a different formula or even get a professional appraisal to value your firm. We chose simplicity, but it is the concept—not the formula—that is important. While we are not equal shareholders, none of us has ever voted our shares. At meetings, we each have one vote, and that has made for a very healthy relationship among us.
If you haven’t already done so, I encourage you to establish a succession plan. You deserve to monetize your equity. Other associates in your firm deserve to create equity of their own. And, most important, clients deserve continued quality service.
Roy Diliberto is the chairman and founder of RTD Financial Advisors Inc. in Philadelphia.