financial planning. I am pleased to introduce the speakers for today's panel. I want to introduce them here. We've got Carla McAvoy right here next to me, then Stephen Fletcher, Asha Baylis, and then we've got Tim Coaches over on the end. They're going to offer insights about transitioning from within, what works and what doesn't. Please help me welcome them as they present. Thank you. I suspect that some of you may know me and know my background, so I'm not going to spend a lot of time talking about that. I'm here to try to moderate this panel. These are the three people who you are going to enjoy hearing from, but I'll tell you at least a little bit about some of the things that I do these days. I've been in the business for a long time. This is my 50th anniversary in the profession this year. Thank you. I'm going for 100. In chronological years, I don't think I'll make it to 100 in professional years. During most of that period of time, I have been a financial advisor. That's been at the centerpiece of what I've done throughout my career. But in more recent years, after I stepped away from being a CEO and then the chairman of the firm that I founded, a firm you may know, Aspiriant, headquartered here in California, I have been doing a lot of training work. I work with probably about 100 people in any one year who are in the G2, G3 of their firms that are looking to expand upon their skills and develop their managerial talents. That's one of the most fun things I get to do. I get paid for it, but I would do it for free because it really is so much fun. And then I also do a lot of consulting work. I do a lot of consulting work with domestic RIA firms, usually on the topics of strategic planning, and within that, particularly on the topics of transition. Transitions of management within the firm, transitions of ownership within the firm. And that is the core topic of today's presentations and conversations. Last thing from me, last week I was attending a conference, the Tiburon CEO Summit in Boston. And there's a huge amount of information that gets presented at those conferences. One tidbit that's highly relevant to what we're talking about today is that all of the notoriety around transactions in the M&A world, mergers, acquisitions, that we hear about so much and we see reported in the press. And the numbers, the absolute numbers are quite big. Last year there were 518 of these transactions. That sounds like a lot, but it really pales in comparison to the other 30,000 RIA firms in the United States that are doing their thing in terms of remaining independent, looking for internal transitions. And those are the kinds of firms that I typically work with. Occasionally I'm working with a firm that's in an M&A transaction, but mostly I'm involved with helping firms who are currently independent and intend to remain independent. I help them figure out how they're going to do that well. So I'll stop there. And then I'm going to ask each of the panelists to say a little bit about their own experience. Let's begin with you, Aisha. My name is Aisha Bayless. I work with Elwood & Goetz Wealth Advisory Group. I started my career there as an intern. About seven and a half years ago I've been there, I guess. And then when I finished my internship, I got offered a job from there and then a few other places as well. The job at Elwood & Goetz was significantly less money. So as a college grad coming out, it was hard to take it. But they offered a lot of growth potential. So I ended up going with that lower paying job, which was probably the hardest decision that I ever made. And it worked out really well for me. So I got offered partnership about two years ago. And I'm currently a partner and the chief compliance officer there. So we have about $620 million and about 21 employees. Stephen, let's hear from you. My name is Stephen Fletcher. I'm with Evo Advisors in Richmond, Virginia. We have $250 million AUM. We have three owners and we have seven team members, but we're looking for number eight. So if you're interested, you can also get an Evo vest. We do have these. Stephen, you didn't tell them that you are the newest of those three owners. I am the newest of those three. Yes. Earlier this year, I had the honor of being able to join the ownership team. My background is, I started outside of the NAPFA world. I went to New York City and worked for a small Wall Street firm for a few years, just to try to get the experience realized there, what the difference between fee-only and not fee-only is. Fled to the fee-only world. And I worked for a firm in North Carolina for about five years. And it wasn't just that right culture fit that I was looking for, in terms of taking that next step and becoming an owner. And I, like I think probably everyone else here, knew Dave O'Brien and had known him for a number of years. And so I went to him and said, Hey, Dave, I would like some advice on how I can take that next step. You can help me think through the type of firm that would be the right fit. And Dave said, Great. Ours. And so we chatted for several months actually to make sure that that was in fact the case. But it was. And so here we are. Thank you, Steven. Carla? Hello, I'm Carla McFoy. And first off, Tim, I have to say I cannot believe you've been doing this for 50 years. You must have started when you were two? 27. So I am a managing director for the Mather Group in Lafayette, California, which is just outside of San Francisco. The Mather Group is actually headquartered in Chicago. My story is that I started my career in the software industry. And as was typical, I think, of much of my generation, I didn't find financial planning until a little bit later. It was about 2000 that I decided that the software industry was probably not where I wanted to spend the rest of my career. And I, through a series of steps, ended up finding some great mentors in NAPFA and in financial planning. Joined a firm in Lafayette, California at the time called HC Financial Advisors, which was originally started by Peggy Kapanis, whom many NAPFA members will know. Became a partner there in 2011. So we were, me and two of the guys that I work with, bought it from Peggy starting in 2011. So we were the G2. And as we approached 2022, really, we've been looking for years at how to sort of think about the G3. And I'll just say for a lot of different reasons, it became apparent that that was going to be a very difficult transaction for us. And at the same time, we were introduced to the Mather group, who we felt philosophically is very aligned with us and they're a good NAPFA member. And so in August of last year, we decided to merge with them. So we've been with them since August of 2022. I don't know what G2 is. Oh, sorry. G2 stands for Generation 2, the next generation after the founding generation. Generation 3 is the next generation after. Thank you, Carla. Aisha, can you describe for us how people are selected to become owners of Elwood Getz? And are there specific criteria that are observed in doing that? Or is it more fluid? So rather than suggest what the answer is, tell us what the answer is. I mean, I think it's a little bit of all of that. Yeah. So we really only hire people who we think could be future partners. So a lot of those evaluations start from the second that an applicant comes through our door, submits a resume. I guess no one just walks through the door anymore, but submits an email or whatever. So we definitely look at cultural fit. So I think kind of going back to the keynote this morning, values are super important. So if someone aligns with our mission, vision, and values, that's something that's just really important to us. And then in terms of after they start working, a lot of it is based on technical competency, leadership abilities, how they work with others, if they're a positive role model for other people in our firm, are they able to coach and provide feedback and also receive feedback really well. And if they're able to kind of take in that feedback and change a little bit or ask questions, things like that. Time management is also something we look at really seriously because as a partner, you are balancing a lot of things, especially if you're working with clients and taking on new owner responsibilities, it can be a lot. So time management is important. And then also just, I mean, it's a little more subjective, but just like personality fits. So we, I mean, as a partner, you're working with each other super closely for a long period of time, lots of time together, and you're really in it for the long haul, or you're hoping to be in it for the long haul. So you want someone that you work well with together. And I'm not going to lie. There are times we all disagree on things. So you want people that you can disagree with and that it doesn't rupture the relationship that can't be repaired. So people who are able to disagree, able to hear other people's opinions and receive other people's opinions and kind of reflect on them, I think is something that's just super valuable that we look at with people. So a lot of it is subjective, but that's kind of the criteria. Thank you. I'm going to ask all of you eventually a question that we haven't prepared for. So I'm going to apologize in advance about this, and perhaps ask you to talk a little bit about the mechanics of the ownership transitions that take place. In other words, how are people selected? How do they pay? What are the terms? Is financing provided? So I'm giving you advance notice that I may ask you to talk about those kinds of things. I think the audience will be very interested in that. But before we get to that, I have a question for Steven, and that is, how did you, and I realize you have several of your EVO colleagues in the room, so pretend they're not here. And the rest of the people in the audience would be very eager to know how you concluded that EVO was the right place for you. Yeah, I think, I mean, obviously culture is always going to be one of the first words that everyone says, but I think it's so much more than that. The interview process that we went through, because I thought it was very important to be upfront, like, hey guys, if I'm joining this firm, I'm ultimately not really going to be happy here unless ownership is going to be on the table at some point. And Dave and John, I think, had a very good response to that, which was, of course, like, we want our firm to live beyond us, so we have to have another generation of owners who are going to come in and see things the same way that we do and keep things moving forward. So there had to be the culture fit. But even beyond that, I think our interview process took some time because we wanted to go through all of the little bits of, okay, what would responsibilities look like, and how do we make decisions? Because if a lot of what Aisha said, if we're going to disagree and, you know, it's going to be the breaking point, we're sure you're willing to give ownership, but we're going to be butting heads all the time. It ultimately is not going to work very well. I don't think you have to be friends, necessarily, with the people that you're partners with, but I don't think it hurts. I think respect is a very big piece, though. And for me, it was really big that that went both ways. From the very first interview, it felt like I was respected, like what I was bringing to the table really mattered. And then they also just had a background that, of course, demands respect. So it's just being a partner, to be a partner, and to have that job title is absolutely a mistake. If you can't see yourself somewhere for the rest of your career, then you're just setting yourself up for a lot of pain on the other side. And so making sure that this was something that felt like, okay, I now have enough information from you in order to feel like I can make this long-term commitment and be comfortable with it, was essential. Yeah, thank you, Stephen. I'll interject a thought here about, I've worked with many firms over the years about this very issue, and the criteria tend to come down to three categories, and they all begin with C. One is competence, you have to be good at the job, whatever it is. You have to be willing to make a contribution, whether that's a contribution to the success of the firm and or a financial contribution to the resources of the organization. And then finally, commitment, the point you were just making. And that means that even though none of us work in an environment where we don't have labor freedom, we can take our services and do them anywhere we choose. But the criterion for becoming an owner of an RIA firm almost always includes the notion of commitment to a lifetime, a total professional lifetime of continued involvement. So it's very, very common. So we're going to go to questions from the audience shortly, but before we do, Carla, can you talk a little bit about the emotional aspects of your combination with the Mather Group? I've been through things like that, I've witnessed a lot of other things, and there's always an emotional component. Can you share some of your experiences with us? Sure. So I should preface this with, again, we did this in August of last year, so we're kind of right in the middle of the hardest part of a merger, which is integrating all of our systems. I described it to somebody as, if you've ever gone through a major remodel in your house where all the cabinets have been torn down and you're trying to figure out where to put stuff, we're kind of just moving beyond that. So I think that part has been the hardest. I've also discovered personally I was a bit more of a control freak than I thought I was, so not being able to be totally in control of things anymore has required some adjustment on my part, but it's going okay. If I had to think about things that we would have put more thought into prior to that, we're perfectly happy with where we are right now. We think it's a good long-term firm for us and are happy in that regard. I think the change for our employees is very emotional and difficult, and we had to keep it quiet for legal purposes for quite a while, and springing that on people is hard, and getting them through the transition is hard too. If I had to do anything differently, it would be really thinking about that more thoroughly and making sure that as we introduced this new firm that we really had everybody lined up and feeling good about it. I would say it's taken some time, but we're getting there. Can I ask a follow-up question on that? Were there any impacts for clients that were difficult to manage, or did that all go smoothly? It was very different than I expected, actually. We called every single client when we had made the decision, and the clients that I thought might freak out were like, yeah, whatever, are you going to still be there? When I said, yeah, they were okay, great. Sometimes they still refuse to use our new name, but that's okay. And then there were a couple who did kind of freak out that I never would have thought. I would say our retention was about 98% of clients, so it was really good. But we've been very conscious of their emotional as well, and we're doing a lot of things to sort of change their world, and so we're trying to be very thoughtful about that. But overall, the clients have been great. I felt like they tested us for a little while. Like, are you really going to answer the phone anymore? And, you know, now almost a year into it, it's just sort of the same as it was before. That's great. Thank you. Are there questions from the audience? Yes, please. I can be loud. Okay. Yeah, please. So project your voice. So my question has to do with, I've heard a lot about the qualitative aspects of transitioning, but the quantitative requirements that founders generally put on G2 from a business development or revenue perspective. What is that? What was it for you all? Was it there? Was it an important piece? Maybe somebody can talk on that a little. I'm happy to start. Okay, so let's go back 12 years, I think, when I started. To me, very important. If you're going to be an owner, the expectation is that you can bring in new business. I think it's something that takes a little while to develop. I don't think if I were bringing somebody in today, the first year or two probably takes a little ramp up. But the expectation is that the person does have that personality to be able to manage that while also managing their regular job and doing a lot. One of the great things about a small firm is being able to get your hands in a lot of different things. For me, it was a million dollars right away. So we sat down, and yes, there is an element of business development, but we also sat down and said, what are the areas of responsibility that we're all going to take? Because if I can take areas of responsibility off of their plate so that they can go do business development, then we're still kind of getting to the same place. But if you're going to be an owner, you're also going to be one of the most effective salespeople for the business, right? Why did you buy in? Go tell other people about that, and they'll want to work with us. So I think there's an element to it, but we didn't at least have a hard number of expectation right up front. Go ahead. We don't have any requirement to bring in clients or new business. Our main source of new clients is through client referrals. Obviously, it's great if you can develop new business, but we just try to do a really, really good job with our current clients, and that's how we get new business. In terms of having a set amount, we don't have to do that to earn partnership or to keep partnership or anything like that. If I can make a couple of generalizations, and then I'll get to your question about this. The growth imperative that is underlying your question is indeed there. In the RIA world, a firm cannot stand still. I'm going to be talking about this tomorrow afternoon, so I won't go deeply into it here. If you're not growing, you are beginning to die, because what we do is work with individuals who age and eventually deplete their resources or eventually die and give them away to people who aren't our clients. You have no choice but to grow, and so it becomes a pretty important responsibility of the leadership of a firm to participate strenuously in that growth. Another comment that I would make about valuation and about whether it's an affordable proposition, I think a lot of owners of RIA firms have an inflated view of what their firms are worth. They tend to look at the multiples that very large firm transactions are able to invoke and apply it to themselves, and it probably isn't applicable because of the size of the firm. The larger a firm is, the more valuable it is, because it's more stable and generates a greater amount of absolute return. But the mistake that a lot of people, at least a mistake that I see a lot of firms make, is starting way too late. If you start the transition of ownership early, it becomes a much easier financial opportunity to absorb, and so that's the real key, start early. You had a question. Yes, my question is more for Karla and just mergers and acquisitions. When we think about G2 and folks that are on the partner track, how does an acquisition affect the person who hasn't become a partner yet? I think it really is going to depend on the firm that you merge with. I don't know that I can answer that generally. It is something that we talked about a lot during the conversations that we had with the Mather Group, and I think it's to be determined how it's going to all fall out still, but I think that's an important conversation for the G2 thinking about merging. Instead of just making it more expensive for that person to buy in, you're losing the valuation and trailing revenue, and you just merge with a company that now your trailing revenue is twice the size, so that G2 is not going to pay a higher price. I'm not sure. Can I try to respond to that? I don't think you're thinking of how the, partly in mechanics, how the mechanics of that work, because the pie has gotten larger. Not that someone is buying a piece of pie that has sort of expanded. They are now buying a smaller piece of an enlarged pie. So your concern about the unaffordability that a merger might create is not really there. Tim, I want to, oh, sorry. Can I ask you a question? One of the things I think is probably one of the reasons I was asked to be on the panel is that we have been through both the internal succession and then an external succession. One of the things that I think drove us to that decision is part of what Tim just said, which is it's important to get really ahead of this. Somebody told me, as we were in the middle of this, that it often takes three people to replace each current partner, because as valuations go up it becomes a very difficult financial transaction for an individual to buy part of a business that has continued to grow. Anyway, does that seem reasonable? Well, there is a multiple, whether it's three to one. I'm not sure I could generalize about that, but if the business has grown because of the efforts of that founder, that means that there is more, quote, equity to distribute, and so that's distributable then among more than one other person. So is it two, is it three, is it ten? It depends. And there's a question there. I was wondering some of the expectations of the G-2 and G-3 as far as the operating agreement. Is it, you know, do you understand it's a member-managed firm or a manager-managed firm that you're entering? And whoever can answer that, that type of structure. So who's making the final decisions? Or is it really one person that's the primary head, I would say? And what would be your expectation? Yeah, I think that's a great question, and I think that that was one of the things that we talked about, the difference between there's ownership but then there's also management. And those two things are separate. So, you know, as an owner, to some extent I have a voice, but we're not equal partners. So they are the ones who are still managing the day-to-day of the business. And I am an owner, so I have oversight of that to an extent. But it was clear in the process, and, you know, we signed a new operating agreement and we were very clear and all the cards were on the table because we thought, you know, if we're going to be doing this for the long term, then everybody needs to understand it and be on the same page going into it. Yeah, I think similar. I think it's a conversation that, like, you have to have with those people, those G2 or G3, about the expectations for it. Because if the conversation isn't had, then they might just think that they get say in everything. At our firm, we do a lot of collaboration. So, I mean, there are people who have kind of the final say, but they only make the final call once everyone feels good about it. So they make sure all of the partners feel good about the decision and they hear all concerns first. But we all have different kind of job areas that we do, and then most of the time we recommend something and they're just like, that sounds great, or can I ask questions about it? Yeah. I'm going to be talking about this question again tomorrow afternoon, so again, I'm not going to try to go deeply into it now. But the point that Stephen made is that management and ownership are two separate things is a really, really important distinction. And a mistake that a lot of first generation founder owners, CEOs, make is to assume that those two things are identical. And that if you transfer ownership, you are automatically transferring management authority, and it doesn't have to be that way. And once people have the light bulb go on, oh, I can transfer ownership, but I don't have to transfer management? Yeah? You don't? Then all of a sudden it becomes much easier to begin transferring the ownership. And so in the ownership and management transitions, the transition of ownership should start first. So I'll stop there. And you may be getting to this too, but when you were mentioning about how do the finances work, especially with a bit of a larger firm, and without letting the multiples get out of control, but even still, two times revenue can be a lot of money. And I'm not saying that has to be included. Well, yeah, it certainly can be a lot of absolute money, but if the structure is such that the payments are arranged over a long period of time, and if there's third-party financing, then under reasonable commercial terms, then the affordability can be accomplished. It's not an impossibility. It's like anything else, if the debt service is manageable. And notice what happens when someone becomes an owner. They have a claim on some portion of the profits of the firm, and those profits of the firm can be part of what services the debt. And if the debt is serviced over eight or ten years at reasonable rates of interest, and if the firm is growing, again, why growth is so important, if the firm is growing, that means the profits are growing, that means the share of the profits are growing. So eventually servicing the debt ceases to be a problem. Any other questions? Yes, there is one here. You mentioned that you're making obvious that the sale to Q3 and internal transitions wasn't going to work. Can you talk at all about why that became a barrier and what were the challenges there? Sure. So, again, three of us who purchased the firm starting in 2011, and by the time we had finished paying off the notes for our purchase, it was toward the end of 2017. And as we started thinking, and we started thinking about internal succession right away, we had one person that we would have brought in as a partner who essentially decided to do something completely different. And then we struggled to find, you know, who we thought would be the next generation. And one of my partners is, you know, now at retirement age, and a couple years ago we, you know, thought we really got to get on this. And as we started to think about his situation and, you know, allow him to exit the business, and I'm, you know, not that far behind, and our third partner is, you know, right around the same age. And then, you know, we started trying to figure out who we would need to have in and how long it would take to, you know, sort of pay off. Even if we gave all kinds of discounts, it was like, this is going to take, you know, 15 years. And it just, you know, I still remember the day we all looked at each other and were like, this seems an impossible task. And at that point we were working with, I won't say who they were, but they were a company that does a lot of valuations in the business. And they suggested, you know, do you want to try talking to some other people because maybe the way that you get this, you know, group of owners is through a different business or by bringing in others. And that was kind of what led to us meeting the Mather Group and deciding to go that way. Go ahead. What do you think is one of the bigger mistakes you see the original founders make as they think about requirement and transition over clients so that the next generation potentially buying into something doesn't all of a sudden lose a ton of AUM? Sorry, say that again. Was it for me or was it for anybody? Not losing clients because of the transitional responsibility. Yeah. I mean, again, I think so much of what we do is the relationship with our clients. So in our case it's been pretty easy because right now we're all staying. And actually when we purchased from the original founder, it was a very, you know, multi-year getting them to know us. So, you know, we just didn't lose anybody because of these transitions. But they do have to be thought out, and, you know, it's important that your client relationships be very strong. We work as a team approach, so we always have multiple advisors in the meeting, and we stress that to all of our clients up front. So we tell them, even in the prospect meetings, they're going to get to know three or four people on their team. So it's not a surprise when the owner or the lead advisor might transition out and the younger advisor transitions in. It just happens over time. And just kind of over time it kind of seems more seamless as they're building trust with the younger advisor, and at the same time that younger advisor is getting a little bit older. Clients aren't stupid. They know that these kinds of transitions are going to have to happen. They expect that they will, and they expect the current leadership of a firm to do a good job of orchestrating these transitions by the process that Asha just mentioned as an example. And the reality of the situation, unless you really screw up badly, you don't lose clients. That is one of the wonderful things about the business that we're in, is the client loyalty is so strong because they feel they appreciate the value that's being provided, and the inertia factor is enormous. Could you imagine being a client of a firm for 25 years and then having to pick up and transfer all that information and develop a relationship of trust with strangers? No one wants to do that. So the loss of clients is almost zero. I was going to say, one of my partners and I bought out Gen One. Our retention was 97%. We lost six clients. Bill didn't die. We were going to lose that anyway. We recently bought an advisor and sort of a forced retirement sale, so we did four years to transition with our original founders. The forced sale that we entered into with this other advisor, we had about a month and a half. I think the retention was close to 60%. There just wasn't the time to build relationships, and I think to Tim's point and Carlos' point, it's that time. You start early, you plan, you have those conversations, and you'll invest in the client. I'll just add that we even do smaller things in meetings, like for the younger advisors, newer advisors, they will field the questions from clients first, and then the older advisor will jump in if needed. That way they can build that relationship with the client. Or emails, too. They'll email the whole team, and whoever we're working on taking over that case is going to be given the first opportunity to respond. While you're thinking of other questions, I'm now gonna ask all three of you to talk a little bit about the mechanics of these transitions, ownership transitions, in your firm, to the extent that you can divulge. We're not asking you to say anything that is going to be proprietary or violate secrecies that you're expected to maintain. But what you can share, would you share, please? Please. Sure. This was one of the things that I appreciated the most, is this was the first time for Evo, obviously it's the first time for me, buying in. So we brought in a consultant to help us make sure that we didn't step on any landmines. And then in terms of how we actually structured it, it was, I mean, I feel like the owners didn't make a whole bunch of concessions just to make me happy, but we really came to a place where it really worked for me and it really worked for them. So we pushed out, we were initially looking at doing external financing, and interest rates are not kind to that right now. So we were willing to be flexible, and we are doing seller financing instead, because we can go with a much better interest rate for the person who's buying in. And then they were also flexible on the length of repayment. So some of the firms that we were talking to had kind of one idea, and they said, this is generally what we see, and this is what we think is best. And so when we brought it inside, and said we're gonna do seller financing, then we kind of sat down with a pen and paper, and just rolled our sleeves up and said, what do we need to do in order to make this work? If it's a long-term partnership, let's not start things off in a rocky way by butting heads over something when, like if we're all on the same page, we're all gonna build this thing together, and then we'll all be better off. We do seller financing as well, but ours is a little bit different. So hypothetically, say you're offered 3%, the partners would distribute 3% of profit, and then you pay taxes on all of that, because that's how taxes work, and then you, or so I'm told, and then you pay 50% of the gross distribution back to the partners until your loan is paid off. So it really incentivizes us to want the business to grow really fast, because that means we get more profit distributed, and our loan gets paid off faster. Yeah, our internal succession was exactly as you're describing, and I am gonna say the taxes suck for years, yeah. I felt we were really fortunate in that we were in extraordinarily good markets when we were paying off our loans, so yeah, it makes a difference. I think an observation I would make is that seller financing is very, very common in smaller transactions in smaller firms. As firms grow, get to be a larger size and the number of participants in the ownership transitions gets to be large, then third-party financing, even in a somewhat uncomfortable interest rate environment, is much more likely to be the structural approach. There are a couple of questions here. If you'll wait to follow up, for, again, G2, G3, buying in, is there any approach for having skin in the game? So this purchase, the buyout that you're talking about, if it's all seller finance and it's stretched over time and you have a bad year, then the profit distribution, I'm assuming then that the payment is pushed towards the reader, but then you set more at least to treat them as an owner, and then say, we still want some dollar amount towards it, it's a flat amount, it doesn't have to be a dollar, it's just a minor amount, to show that they understand that they're in a buying and moving business, be mindful of that, have reserve capital, however you're gonna manage your personal finance, but just know that we're not a business owner, we're not just an employee that gets this bonus every year that's gonna be buying and moving. Can I respond to part of that at least, and that is that the variation in the terms of these arrangements is infinite, there can be required minimums, there can be caps that permit the payments to be either elongated or accelerated, there can be installments, sorry, down payments, down payments are very common, not necessarily a large amount, but something, three percent, five percent, maybe even 10 percent, that you can't finance, you've gotta come up with that money out of your own pocket, or out of a rich uncle's pocket. I have a question for the two of you that have bought in now, has there ever been a pathway, or from where you guys started, to an expected pathway towards the future to buying and obtaining more equity, or I guess how has the experience been there, and what are the expectations of that going forward? That's a great question, that was something that we covered, was this is round one, and we were very clear with that up front, this is round one, but there is room in the future for more, right? And again, because we worked with a consultant, that was the recommendation, not just do this and then figure out how to do it again the next time somebody comes along, but we're gonna document the process from A to Z, we're gonna actually publish what our requirements are for someone who's an employee to become an owner, so that everybody else who wants to reach that same point knows what that roadmap looks like, and then also what the market looks like within the firm going forward. Because again, the whole point is for the firm to continue beyond the founders, and so when they have a retirement date, or at least a I don't wanna be owning more than everyone else date in mind, then I mean, the clock is running, we have to get from them having their ownership percentage to getting them down to something a lot less within that period of time. So is that bringing other people in, or is that you buying more equity in the future? Both. And when you say like, we talked about it, is there like a every two years you wanna have this conversation, so it's structured to happen, or is it we'll do about it in the future? No, it's every year. So it's something that there's always going to be that we're gonna come back to the same table and decide, and in some years it could be, depending on how the year went, depending on what's going on with the firm, maybe there isn't any more that's gonna be put into the marketplace. But every year we're gonna come back and have the same conversation. This is also a function of firm size. As firms get much larger, let's say multi-billion dollar firms, having some annual availability of ownership to a group of people who are available buyers becomes a routine thing. Every year this happens. So there's new equity on the market, there are new buyers or old buyers who are eligible to buy it. But again, that's a mechanical situation that it's really difficult for a small firm to manage, where the number of people involved are few, and the value transitions are just getting started. Once you're into multi-billion dollar situations with perhaps 10 or 20 owners, it can become very mechanical. I'm curious about how you navigate the compensation structure for somebody shifting from a senior branch plan to where it might be into a partner level role, because the incentives are, you used to have bonuses for new business development or achieving certain goals, and if they salaried, now you're a partner, you're an owner, your incentive is really the bottom line in the profit. But you also, I think Pallaby said it, it should be more financially advantageous to be a partner than it is to be an employee, and sometimes you wonder, how do you build this structure, and how do you look at that piece of it? We, I mean, so the people who aren't partners, they do get bonuses for new business development, or they have bonuses for different designations and stuff, goes away when you become a partner. So it's, your incentive is that you get a higher profit distribution. And I think, kind of going back to your question a little bit, the downside, if it's a year with no profit, it hurts even, like the skin in the game is that now we don't get anything when we used to get something, so that sucks those years. But I think, yeah, so we have a salary structure for kind of each position, and when you become a partner, your salary increases to like X amount, and then you just get the percentage. To pick up on your point about what Philip Pallaby, the point he's making, is that there are two ways in which people receive cash. One is compensation for labor, and the other is distribution of profits for the equity. And the labor component doesn't necessarily change, because someone moves from being a senior advisor to becoming a partner, if their job hasn't really changed, there's no reason why their compensation for labor should change. They become eligible to receive a distribution of profits to reward them for their capital contribution, having bought into the firm. But the labor component doesn't necessarily change at all. In the back. Can you define what a small-sized firm is versus a medium-sized firm? That's how I'm so inclined, that's all. Yeah, it's in, sort of in the eye of the beholder, but let's say that a firm that is under 500 million is, of AUM, is small, and five to maybe a billion, a billion and a half is medium-sized, and once you're into multiple billions, then I think you're a large firm. I had a question, sir. This is for all three of you. I'm curious about responsibilities, how they changed when you assumed this new position, and how that communicated to you. So, Carla, for example, you probably have a lot less operational work than any, whatever that was part of the transition, and did they ever say, okay, yeah, you're gonna work on this? And for Aja and Steven, I'm wondering, did the partners just say, you have a lot of energy and an ownership mentality, and we love what you're doing, you're a partner now, now we're extra responsible? So, I'm curious about that. I'll tell you, I was in the exhibitor hall, and an exhibitor I've known for years looked at me and said, oh my God, you look so much more relaxed than you normally do. Which is true. So, I'll speak to, again, going back 10 years, or 12 years, 13 years, whatever. We definitely took on more responsibility. So, again, there was the business development, but then the business has to be run as well. So, my two partners and I really ended up having very complementary skills. So, we had one who really took over what I would consider payroll budgets. We called him the facilities guy if something broke in the office, he was responsible for it. I did compliance and marketing, and then our third partner did a lot of the investment, investment research. So, there is a lot that I think you take on as a partner. One of, I mentioned that I'm a bit of a control freak I'm learning, but one of the things that I, boy, when I did not have to file an ADV this March, I was like, somebody else can do that. So, now, yeah, my job is largely being a senior wealth advisor, working with clients, but also helping the firm as a whole sort of grow and think about growing, and again, this integration is keeping me super busy as well. I got all the stuff that they didn't like. No. It was a little bit of both of what you said. To some extent was the, hey, you have the owner mentality, we think you're doing a great job, you're ready for the next step, but with the next step is also the, again, we sat down and said, these are all of the areas of responsibility that we feel a partner needs to have. So, which ones do you want? And we all have, one of the really nice things, and part of, I think, the vetting process for us was we have complementary skill sets. So, Dave is good at a lot of stuff that I'm not good at, and John's good at stuff that I'm not good at. So, we just kind of worked it out so that marketing and business development would be two of the areas that I took on more, and they got to kind of offload those and focus on other areas instead. Yeah, I think both, just like Stephen said. I think it, and maybe it's different if, because there is that difference between owner and management and it might be different if you're an owner and not in management, but for us, all of us are owners and in management positions. So, as soon as we got offered partnership, it was like, here's all of your new management responsibilities, and yeah, compliance. So. I'm a people pleaser, that's how. I have one more question for all three of you, and we are very close to the end of our time here. But before I get to that, are there any other questions from the group? Yes, please. I'm wondering, kind of what are the different ways maybe you deal with, what if this doesn't work out? From the seller's side, from the new owner's side of the, kind of, what if's the merit of it? That's an important question, because actually, even when I came in as G2, the prior owner had had at least two failed attempts at bringing in a G2. And then, of course, we did as well. So, I mean, it's a real possibility, and I think it's something that you just have to be realistic about, that there are some people who you think might want to be owners who may not be. Yeah, that's all I can say about that. All of these transactions are eventually vetted by an attorney, and attorneys are notoriously cautious about these kinds of things. So, any attorney is going to draft the documents involved here to provide for what happens if someone gets disabled, dies, retires, voluntarily leaves, and there will be provisions that the attorney is going to ask you, well, how do you want that to work? And you can be lenient, or you can be very strict about these things, but there will always be something about, well, what happens if it doesn't work out? So, my, yes, was there one, oh, I'm sorry. My last question, and then we'll wrap up, and that is similar to yours, I think. Did you encounter any obstacles that surprised you or if you had to do all over again, is there any aspect of this that you would want to do differently? I think, so I think as a firm owner, I think it's important to just be transparent and have those conversations early with people. If I had to go back, I would ask more questions, but I was just too scared to ever do that. But I don't know if you guys have met the new Gen Z. They are not scared to ask questions, so I think just being more upfront and transparent is really helpful, like what partnership looks like, what the track looks like. I was just kind of flying blind for a long time. And I'm like, they're going to do this one day. They're going to do this one day. And I think the newer generation is like, so when? When is that going to happen? What is that going to look like? And so I think just being open and honest about that kind of from the get-go helps a lot. Yeah, I think perhaps I'm still just in the honeymoon stage because ours was newer. But I think that there's not really much that I would go back and change, because I think that the way that we as a firm approached it was the right one. We came into it saying, we don't know what we don't know, and so let's bring in someone who's going to help us make sure that, like I mentioned earlier, we're not stepping on those landmines that maybe other firms are stepping on. And that was great, because then that person's able to come in and say, well, watch out for these, and you guys really need to be crystal clear about these areas. And it was all those conversations after the consultant kind of gave us all of that information that we really were able to be on the same page. And then when the time came to sign on the dotted line, I really didn't have any reservations or anything that I felt like we had not unearthed. I think I would say the same thing. Being in business for myself and then with another firm I think is very much like picking a marriage partner, in that you really need to understand who you're hanging out with. Do you believe in the same things that they do? Do you work like they do? You know, do you just feel comfortable with the people that you're working with? And I think we learned from the previous owner and ourselves that sometimes it just doesn't work out and you have to be willing to pivot and do something different. Thank you, Carla, Steven, Aisha. Thank you very much. Thank you.

video panel discussion

transitioning from within a firm

insights and experiences

backgrounds

current roles

mergers and acquisitions

ownership transitions

client retention

cultural fit