There’s a saying in sports: sometimes the best trade is the one you don’t make.  

And in the early part of the prior decade, Halbert Hargrove Global Advisors LLC was on the verge of trading its future to one of three entities that wanted to buy it. One was a private equity firm trying to enter the nascent roll-up business. The second was a well-known roll-up––before it had actually done its first deal. And the third party wanted to do a financing-oriented deal. In all three cases, which were fairly close together in time and entailed detailed discussions, the dollar amounts were substantially more than what Halbert’s partners thought the firm could earn over the next five years.

“So we really had to sit down and decide why we didn’t want to do any of these deals,” recalls Halbert’s 47-year-old president and chief operating officer John C. Abusaid, who goes by JC. “Russ [Hill, Halbert’s chairman and CEO] asked the other partners what they wanted to do, as there was a fair amount of their money at stake, though he was not personally interested in selling. Their answer was that they had only considered selling because they thought Russ would want to sell, but that they did not want to sell. It was not a matter of price, but rather a desire to continue building Halbert Hargrove’s future.”

Once that epiphany was reached, the next order of business was, “OK, now what?”

“Since these were reasonable offers with real money on the table, we then had to decide what must be done to make turning down the offers not feel––and potentially be––incredibly stupid,” Abusaid says.

That meant focusing on creating a sustainable business and establishing an internal financing/incentive mechanism to bring it about. “After looking at the internal-rate-of-return calculations of the potential acquirers, we decided that if someone were to earn these returns, it should be our associates and shareholders rather than outsiders,” Abusaid says.

Today, Halbert Hargrove is a thriving firm with roughly $4 billion in assets under management spread across its clientele of high-net-worth individuals, pension and profit-sharing plans, trusts, estates, charitable organizations, corporations and business entities. Amazingly, the company nearly doubled its asset base in 2013 (more on that later), making it one of the fastest-growing firms on Financial Advisor magazine’s annual RIA Survey list.

Based in Long Beach, Calif., and with branch offices in San Diego; Denver; Houston; Scottsdale, Ariz.; and Bellevue, Wash., Halbert began life as a broker-dealer in 1933 and has since evolved into a forward-thinking outfit that strives to stay on the cutting edge of the advisory profession.

As part of its ongoing evolution, the next act in Halbert’s story centers on figuring out how to replace Russ Hill, 68, the longtime driving force and face of the firm who realizes it’s time to throttle back his role and let the next generation take over. Hill comes across as self-effacing when talking about his role at Halbert. But make no mistake—he has been every bit the main cog you’d expect from a leader who’s been at the same company for 44 years.

Hill doesn’t want to retire and spend the rest of his days picking olives at his vacation home in Tuscany, Italy. He plans to have some sort of future role at Halbert, even if he and the rest of the company aren’t sure what that will be.

“That hasn’t been worked out,” Hill says. “I’m having too much fun to leave, and I expect to be around for a while. It’s a tough thing to figure out.”

Meanwhile, a cadre of young leadership was duly deputized to take Halbert into the future when six thirtysomething staffers (some of them were twentysomethings at the time) were made directors a couple of years ago. At the same time, the company is going through a financial transition as it explores different ways to transfer some of Hill’s sizable 50% stake in the firm to other key employees.

Cookies And Wine
The firm opened its doors 81 years ago as Halbert, Hargrove & White. Russ’s father, Stan Hill, joined the broker-dealer as a salesman in 1943 and became a partner in the early 1960s. After Russ Hill got his undergraduate economics degree and his MBA from Stanford University, one of his father’s partners asked him to join as a salesman. Russ came on board in 1970 and initially took a draw of $500 a month against commissions, which he says earned him somewhat less than his classmates in those early years.

In 1973, Halbert had two other partners besides Stan Hill. One was nearing retirement and the other wanted to change careers. Russ Hill stepped in and bought them out. “Easy terms permitted their buyout,” he says. His father worked at Halbert for about 12 years after Russ joined, until he became ill. He died in December 1987.  

Halbert had been a traditional stocks-and-bonds shop until the late 1960s, when it shifted to mainly mutual funds. In the 1970s and early 1980s, it started and operated several businesses, including a chain of cookie stores in West Germany and a winery. But the firm realized it needed to head in a different direction. It started and ended one RIA in the mid 1980s, and then started another one in the late 1980s called Halbert, Hargrove/Russell, which enabled it to bring the intellectual capital and institutional-quality money management acumen of the Frank Russell Co. (the precursor to global investment giant Russell Investments) to Halbert’s retail clients. It was never a co-ownership arrangement; rather, it was about branding and positioning Halbert in the marketplace.

Russell served as the primary product vendor for Halbert, but Hill says Halbert started moving away from that arrangement in the early 1990s because it wanted to have an open platform for trading and products. Today, Fidelity is Halbert’s primary custodian, while roughly 40% of Halbert’s assets reside with a Russell product or service. And, of course, Russell’s name is no longer on the doorplate.

Meanwhile, Halbert officially closed its broker-dealer on the final day of 2010. “We had only trail fees left, and we didn’t want the confusion of having the broker-dealer. The RIA never interacted with the broker-dealer.”

Hill says Halbert today is a pure fee business, with most of that coming from assets under management.

Opportunistic Hiring
Most advisory firms probably don’t hire the people who sell them Slim Jims at the local convenience store. Nor are they inclined to hire sharp cookies for a paper-shuffling job they’re clearly overqualified for (nor, for that matter, do sharp cookie-types typically want that kind of job). But two of Halbert’s next-gen directors came to the company in these unorthodox ways.

Cecilia Williams, 30, is the director of investment operations, the chief compliance officer and a relationship manager. Before joining Halbert, she worked the cash register at the ground-floor convenience store in Halbert’s Long Beach office building. A Halbert employee struck up a conversation with her, discovered she was six months away from getting a business degree from Cal State-Long Beach, and was so impressed by Williams that he insisted Abusaid meet with her.

“I wasn’t engaged with the idea,” Abusaid recalls, adding the only opening at the time was for a trader’s position. But he eventually relented to meeting Williams. “We interviewed her, and to date she was the best interview ever at the firm. And our interview process is brutal.”

Williams flourished as a trader, gradually assumed more responsibilities and now is a director.

Brian Spinelli, 34, took his own offbeat path to Halbert. As a financial analyst with aerospace giant Northrop Grumman, he realized he had more interest in talking about people’s finances than the numbers crunching he did at his job. His parents were Halbert clients, and Spinelli talked to their main advisor, Gary Corderman, a regional director, to get a sense of what the advisory industry was about. He learned the differences between broker-dealers and RIAs, and was attracted to Halbert’s business model and company culture.

And Corderman thought it could be a mutual fit. “They didn’t have a job offering, but he [Corderman] told JC, ‘You really should talk to this guy even though we don’t have anything for him.’ So they hired me even though they didn’t have a designated job for me.”  

Abusaid says he tried to warn Spinelli that he was overqualified for the only position they could find for him––filling out paperwork as a client service manager. Spinelli didn’t care.

“Sounds cheesy, but this place has some weird gravitational pull for some of us,” Spinelli says. “We can’t explain it. There’s something about this environment that has an entrepreneurial spirit to it and a sense of freedom. It’s not easy starting the way I did, but they gave me an opportunity even though there wasn’t any glamour to it.”

These days, Spinelli is chair of the investment committee and a relationship manager. In the former role, he sets the committee’s overall agenda even though Hill remains the chief investment officer. In a sense, Hill acts more as the captain of the ship, but looks to Spinelli as the navigator who’s charting the committee on a daily basis. In the latter role, he’s on the client service team for managing director Craig Cross, a Halbert employee since 1979.

“I’ve been stepping into a more day-to-day contact with his clients during the past five years by meeting his clients and delivering service,” Spinelli says.

“The relationship manager is an advisory role, but we don’t step on each other’s toes. We occasionally go to the same meetings, but we want to make sure when Craig eventually backs away that the connection isn’t lost and the client isn’t pushed to somebody who doesn’t know who they are.”

These tales fit the mold of the company’s philosophy of opportunistic hiring. “Some people we groom from start to finish; others we bring into the firm for specific roles,” says Kelli Kiemle, 30, the company’s director of marketing and client experience and its event coordinator. “We have hired people even if we don’t have a position because we think they have the potential if they have the characteristics we’re looking for. Sometimes we put them in a position they’re maybe overqualified for, but we see something in them and we want to see how they do and if they can grow with us. I was doing random jobs the first year.”

It’s not always a smooth process, though. “Kelli tried quitting on me a couple of times but I wouldn’t let her,” Abusaid says laughing, though both he and Kiemle say it’s true.

Make Way For The New
The two years leading to 2014 were a critical period in Halbert’s plans to remain viable and sustainable far into the future.

In 2012, it named Williams, Spinelli, Kiemle and three others as directors. All of them have dual roles of heading their departments while either serving on client service teams or other operation functions.

“It wasn’t like we suddenly told people two years ago to step it up,” Abusaid says. “All of those folks already had a niche carved out at the firm; they just weren’t empowered. It was as simple as saying, ‘Guys, we’re going to name you directors.’ We laid out what we’re trying to accomplish, and we moved forward.”

“We try to act more like mentors than as bosses, but it doesn’t always work because I’m old and JC’s been around a long time and we’re the boss,” Hill explains. “But increasingly, they’ve been able to run their respective functions and divisions, and to work together as teams. We think it’s great.”

He adds this new leadership group so far has worked well with the roster of seasoned managing and regional directors who’ve generated a lot of the firm’s clients through the years.  “Their actual authority is quite high because they’ve earned the respect of the regional directors,” Hill says. “I can’t think of anything in the past year or two where anybody has crossed them. I think the regional directors have a great deal of respect for them, and they understand how good they are.”

Hill says Halbert is in the process of transitioning all of the relationships with custodians and product providers that he’s developed over the years to other people. “Some of our longtime vendors now deal with Brian [Spinelli],” he says. “Fidelity now deals primarily with JC and Cecilia [Williams]. Our marketing people mainly with Kelli [Kiemle]. I can still be in the company picture over the next several years, but I don’t want to be in front of it.”

And as Hill passes the torch, he and the company are working on the financial aspects of the transition. Hill’s equity stake is just north of 50% and is being diluted through an incentive equity program, along with a shift of voting versus economic interest for estate planning purposes. Currently, Hill is the super-majority voting shares owner.

Halbert also is investigating revenue-based financing. For example, it says exchanging equity shares for some limited participation, preferred shares could create an attractive combination of long-term, reasonably priced capital for the next generation and an income stream for the shareholder(s), presumably Hill’s estate. The much trickier issue, both Hill and Abusaid say, is how to persuade or help Hill to exit if he is disabled and does not know it or admit it. They say they’re exploring all of their options regarding that matter.

While Halbert works on that, it’s also busy doing what it takes to remain relevant and growing. In 2013, it nearly doubled its assets after it added a $1.5 billion family office to the fold, which joins an existing family office with about $125 million in assets. That deal was less about the family office per se and more about gaining access to the investing acumen and industry connections of Duncan Smith, who Hill describes as “arguably one of the top three or four people in the history of money management.”

Smith was a key player at Frank Russell Co. back in the day, and has been the lead advisor to this family office for about 20 years. Halbert says Smith approached them about taking over for him as he transitions away from the family office.

Elsewhere, Halbert is involved in a couple of think tank-type endeavors looking at some of the big issues facing the advisory world. It started the New Retirement Forum, a nonprofit that works with academia to explore issues surrounding the so-called new retirement of increased activity and longevity. And Hill helped create the International Center for Wealth Advisory Excellence, an affinity group for founders and principals of wealth management firms who want to create a legacy by building sustainable, successful businesses that will survive their retirements.

Whether its industrywide or at Halbert itself, Hill and his team say they aren’t resting on their laurels. “We tend to keep pushing because you have to,” Hill says. “The worst thing that can happen is you get fat and satisfied and think things are going well so might as well keep it that way.”