Advisors balance work, life and succession planning by hiring their children. The intangible rewards can be extraordinary and the near-term strategic benefits aren’t bad either.
“I had reached a point where I could not grow anymore,” says Malcolm Liles, whose Nashville-based financial advisory firm currently manages about $600 million in assets and is affiliated with R.W. Baird.
“I didn’t have enough time in my day.”
Enter Liles’ son, William, a graduate of University of Georgia and Vanderbilt’s MBA program who, in 2010, became his employee and eventual successor.
“William’s got this existing book, this great safety net,” Malcolm Liles continues, “but he also understands that he’s got to go out and build relationships. You have to continually get new clients. William has been terrific at that. While we always had a steady stream of referrals, that stream has picked up very nicely since he’s joined us, because we’re out making contact with centers of influence and clients who continue to send us business.”
Liles is not unusual. In a ferociously competitive market, successful advisors are scrambling for young associates who can help them maintain and expand their businesses.
A junior partner can be critical in ensuring the continuity of the firm — and can bring in new business from next-generation clients.
Even so, last year, only 32% of financial advisors had a succession plan in place, according to a survey by investment consulting firm SEI.
Fewer than half had planned a strategy for attracting younger investors.
Those looking to hire younger professionals face daunting odds. That same SEI survey found that only 3% of advisors are currently under the age of 30.
As a result, a small but growing number of advisors are finding that the search for talent begins at home.
For instance, Matt Blattmachr worked for his father Doug’s company, Alaska Trust, summers and part-time all through college and high school.
When the firm’s three-person operations team left, Matt took over and streamlined the company’s back office. His father says he made it work better than it ever had before.
Still, joining his dad’s firm was never a foregone conclusion. When Matt graduated from the University of Alaska with a degree in logistics, he got an attractive offer from BP in Anchorage.
About to lose one of his star employees, Doug Blattmachr went to his board.
“I said, ‘He’s got a really good offer from BP and I’m sure if you really want him to work here, you’re going to have to match that offer,” he recalls. “They said, ‘fine.’”
Brandon Crooks also had other options than working at his father’s company, Counsel Trust in York, Pennsylvania.
After majoring in finance, Brandon went to work for Bank of America Securities.
He was an investment banker working in the mortgage-backed securities business.
As the mortgage market soured and Brandon was moved into the corporate side of the bank, however, he began to talk to his dad about joining him.
“I think in the back of my mind, I always wanted to do that,” says Brandon.
“The truth is that it’s a family asset. The decision point I came to eventually was that I would regret it if I didn’t try it.”
All three father-son partnerships — the Liles, the Crooks and the Blattmachrs — seem to work unusually well.
When asked how they were able to balance family dynamics, work relations and the touchy issue of business succession, they gave us the following advice:
1. Be objective about your child’s ability
All three of the dads we talked to said that they would have hired their sons even if they hadn’t been related.
The first hurdle, then, is making sure that your son or daughter is qualified.
“You have to look and see whether your child is really capable of doing the work, and is he doing the work?” says Doug Blattmachr.
“Is he taking things for granted because he’s the son of the president and therefore he has some elite status? That’s one of the things that you have to worry about and, fortunately, that’s not my son. It’s very easy to work with him. He’s just a great employee.”
“One of the reasons that our business relationship works is that I was qualified for the business,” says William Liles.
“I’d spent some time previously in this environment. I knew that I was cut out for the work and I liked the work. We have other friends who work for their fathers where it didn’t work because the child didn’t have the personality for it. Clients don’t appreciate walking in and being told, ‘Oh, this kid is going to be your advisor now,’ just because he’s related to you.”
2. Communicate
The father-son pairs we spoke to started talking about the business at an early age, around the dinner table and after school.
That easy give-and-take pays dividends when the son comes to work for the father.
“We communicate with each other all day every day,” says Malcolm Liles.
“We talk about strategy and tactics. We discuss client relationships and investments we’re looking at. I’ve always been able to talk to William. Always.”
3. Define expectations
Different family businesses have different structures.
Malcolm Liles describes himself as a ”benevolent dictator” with ultimate say over business decisions.
Edward and Brandon Crooks make decisions together, along with two others on their executive committee.
Whatever the management style, fathers need to make sure their children are comfortable with it before joining the business.
4. Take advantage of each other’s strengths
Sons at all three companies bring their own strengths to the partnership.
Matt Blattmachr understands the operations side of Alaska Trust better than anyone else.
William Liles has a strong analytical bent, which he brings to bear on researching stocks, bonds, funds and wealth planning strategies.
And Brandon Crooks has taken the lead on developing a directed trust business at his father’s company.
Their fathers have made an effort to recognize and put their sons’ abilities to work, allowing them the flexibility to find their own particular niches within the overall company.
A broadening experience
Yet while sons and daughters may specialize, they also need to gain an overall understanding of the business so that they can take over one day.
None of the fathers we spoke to were ready to retire yet, but all three had started thinking about the skills their children would need to succeed them.
“I wanted to make sure that there wasn’t chaos in the event of my death or disability,” says Edward Crooks.
“I wanted to make sure that Brandon was going to be able to continue on, on the management side of things. It was imperative for him to get his arms around the accounting and bookkeeping, for instance. Given Brandon’s financial background, I wanted him to have a very good feel and a view and control of all the finances and the money flow. I also got him involved in the regulatory side of our business — we deal with five or six different audits.”
For Malcolm Liles, the goal was to make William and himself interchangeable to clients.
“I want my clients to understand that if they call and I’m out, that he can handle it,” he says.
“They know if something were to happen to me, then William could step in. They wouldn’t miss a beat. They like the succession element of it, because in many cases, we’re working with second and third generations of the same family.”
Letting go the reins
This final element of family and business succession is, perhaps, the most difficult one, and one that none of the three fathers we talked to were ready for quite yet.
Still, at some point, the older generation will have to step aside, however gradually, to make way for the next one.
“At my age — I’m 63 — I’m not really looking at it as a transition,” says Edward Crooks.
“I’m feeling good. I love what I do. I enjoy coming in every day. There probably will be a slowdown in the near future, and I think that’s particularly true as we grow this new element that Brandon’s been working on, the directed trust business. But I see coming in here and being engaged as important to maintaining my health. I want to be able to do that. I want to be able to slowly move out of the picture, but very slowly probably, there’s no particular plan there.”
