At a time when many RIAs have sold out to private equity firms and others with deep pockets, Minneapolis-based Accredited Investors Wealth Management is an exception. In a conversation with Financial Advisor magazine Editor-In-Chief Evan Simonoff during the Advisor Growth Summit, Accredited’s co-founder Ross Levin explained how and why his firm has remained independent in the face of compelling offers to sell to outsiders.

“We felt it was important to create opportunities for the people behind us to share in the wealth that we’ve been able to create,” he said.

When he and his partner Will Heupel founded Accredited back in 1987, he said, they were driven by the idea of integrating their money with their values.

Levin, who was the first recipient of the Financial Planning Association’s Heart of Financial Planning Award, the inaugural recipient of Financial Planning magazine’s Lifetime Achievement Award, and an ambassador for the Certified Financial Planner Board of Standards in Washington, D.C., acknowledged receiving multiple buyout offers.

Every week, he said, there is a new offer, many bidding as much as 14 times the firm’s annual earnings before interest, taxes, depreciation, and amortization (EBITDA), a common measure of the cash profit generated by a firm’s operations.

But instead, he and Heupel chose to sell the company to employees for half as much, or seven times EBITDA.

“This allowed us to create an orderly transition,” he said—one in which clients continue receiving a consistent level of service throughout their association with the firm. “We weren’t sure that would be the case if we sold to a private equity firm or to a consolidator."

His firm’s true value, he stressed, comes from the client relationships. So the decision to remain independent primarily had to do with what would be best “for both constituents—our clients and our staff,” he said.

Asked about the mechanics of the sale to employees, Levin said local banks provided the capital for staff members to buy the company. Levin and Heupel continue to help manage operations (they serve on the executive committee, which meets weekly), receiving a salary and profit distributions. This way, he said, they “continue to benefit from the growth of the company.”

As for clients whose businesses have been approached with comparable buyout offers, Levin said a lot of his guidance depends on the client’s objectives and whether the buyer has “similar values” to the client’s. “Sometimes it works out well for them, and sometimes it works out terribly,” he said.

Simonoff asked for more details about the firm’s current structure.

Levin said there are 11 shareholders at present. Every January, a valuation based on the prior year’s EBITDA is calculated so that a share price worth seven times EBITDA can be determined. Then each shareholder sells 3% of their shares to the employees.

Only certain people get to become shareholders. They are evaluated for different “skills and attributes that would be difficult to replace,” Levin explained. High marks go to “a track record of high performance,” he added.

Levin called ownership in the company “a long-term incentive,” on top of salary. At the end of every year, staff members who have been with the company for five years or less qualify for 7.5% profit sharing. Those who have worked there longer than five years qualify for 15% profit sharing.

“We have never paid people for production,” he said. “Everyone in our organization falls under this structure.”

To illustrate the firm’s fair-minded, democratic reward system, Levin said that last year’s “employee of the year” was the woman who staffs the front desk. She had demonstrated a sense of responsibility and initiative that enhanced the firm, he said. For instance, when a client complimented the skirt she was wearing, the employee printed up all the information about where to buy the skirt and had it ready for the client before she left the office.

“That’s the kind of special stuff that we think is going to prevent organizations like us from being replaced by artificial intelligence,” said Levin.

Client service like this is essential to Accredited, he said. He noted that roughly 70% of the firm’s new business should come from client referrals. “For that to happen, everyone has to serve our clients,” he said. “Being a collaborative firm is a high value for us. The growth of our company is a community effort.”

Simonoff asked about the advantages and disadvantages of remaining independent. Levin answered quickly. Not having access to the kind of capital that ownership from a private equity firm would provide is “an obvious disadvantage,” he said.

But on the other hand, Accredited doesn’t have the pressure of needing to justify all that capital, said Levin. It doesn’t have to grow earnings rapidly, cut costs, or otherwise “make that expense work,” he said. “This is a huge advantage in terms of how we run the business. We run it for our clients.”

If the next generation of Accredited leaders chose to sell the firm to someone else, however, Levin said he is certain it will be for the right reasons—that is, in the best interests of the firm and its clients. “We fully believe in one another,” he said.

The session wrapped up with Simonoff asking about the future.

“We serve 600 families,” said Levin. “Our objective is to get to 800 families, or maybe 1,000.” In other words, he is not looking for rapid, outsized growth.

Technology in general and AI in particular “will surely be a part of our future,” he conceded. “It will streamline aspects of the business, which will be helpful.” But he emphasized that Accredited is a personal financial planning firm, and that personal attention to client service will never change.

“The beauty of our business is that it’s never been one size fits all,” he said.

On a final note, Levin said he is optimistic about capital market returns over the next few years. With bond yields higher than they’ve been in many years, he said, “your stock portfolio can work a little less hard.”