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United Capital Launches Liquidity Program for Advisors

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United Capital announced Monday a liquidity program that allows advisors who have been with the firm for at least six years to convert up to 25% of holdings in company stock to cash.

“We’ve been growing the company now for going on nine years, and virtually all of the advisors who join us, join us through a sale of their previous business,” Gary Roth, CFO of United Capital, told ThinkAdvisor on Thursday. He noted that those advisors typically take a portion — “sometimes a very substantial portion” — of the purchase price in stock.

“We thought it was the right time to start a program internally to create some liquidity for the people who have been holding the shares for at least six years,” he said.

United Capital announced the program to its advisors in the fourth quarter of last year and began the first round of liquidity in January and February.

Clive Cholerton, a managing director with United Capital based in Boca Raton, Fla., was one of the advisors who participated. He joined the firm in February 2007.

“When United purchased my independent practice, part of the deal was I took stock in the company,” Cholerton told ThinkAdvisor. “Now, this event gave me the opportunity to realize some of the actual investment that I had in the company.”

Cholerton said that he first heard of United Capital when he hired Angie Herbers (who is a writer for Investment Advisor and ThinkAdvisor) as an independent consultant as he tried to separate his partnership with accounting firms who were minority shareholders. “We started to realize that our paths were going in different directions, so we looked for a way of unwinding the partnership,” he said. “What was so appealing to me was here was a company that was doing exactly what I wanted to be doing, only doing it better, and with bigger and better toys.”

Roth, who is based at the firm’s headquarters in Newport Beach, Calif., noted that the firm recently acquired a round of private equity capital. “The vast majority of that is earmarked toward other acquisitions and new growth strategies, but we all agreed to use a portion of the money on our balance sheet to create a liquidity pool for our advisors,” he said.

Advisors can only cash out up to 25% of their holdings in United Capital stock because, as Roth said, “the goal isn’t to cash people out, per se, it’s just to allow people to take some chips off the table and diversify if they need to take care of some things in their lives.”

In fact, United Capital advisors are fairly young and not nearing retirement yet. Roth estimated the average advisor at the firm is likely “mid- to late 40s.”

Most advisors eligible for the program took advantage of it, but Roth said that the majority of those didn’t take the maximum allowed. “It’s a good validation for us that we were creating the flexibility for people to be able to create some liquidity, but when people had the option and did their own analysis, people felt really good about continuing to hold onto the stock,” he said.

Roth said the program will be an annual event. “Each year, a new group become eligible based on their tenure with the firm, so that the next priority will go to people who haven’t had a chance to sell anything yet and we’ll go from there.

“We’ve had terrific feedback from the people involved and terrific feedback from the people who will be eligible in the future. So far, it’s been one of the best-received programs that we’ve ever had.”

Cholerton noted that one of the benefits of the liquidity program is confidence in the firm. “Any time you go into any of these deals when some of it’s being paid for in stock,” he said, you have to ask yourself, “is that going to have value in the future?”

In the case of United Capital, he said, “Here’s a company that went through the financial downturn, still found a way to continue to grow revenue each and every one of those years, still has continued to build shareholder value at a very impressive rate. For me as a shareholder, when you take that leap of faith going into it, it’s nice to see it realized.”


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