A 32-year age gap exists between the founder and outgoing CEO of an RIA firm and his successor. The story of this firm’s succession plan began when the firm (with $1.4 billion in AUM) received an acquisition offer by a larger firm in another city. The offer was rejected, but it served as a catalyst for an honest discussion of “where do we go from here?”
When most firms work on a succession plan, they usually look to the next generation, not to someone two generations away. Yet this is exactly what happened. The firm’s founder and principals had frequently discussed their future and refined their five-year plan. The next year, though, it remained a five-year plan, not a four-year plan.
The acquisition offer was lucrative. All the firm’s principals would have profited nicely, especially the founder, Stan (not his real name). It was when they declined the offer that the true five-year plans were discussed in concrete ways. The acquisition would have given them a plan for their future, but now that the acquisition was moot, what was their future?
It was at this point that the notable personalities that make up this firm began doing notable things. At the top of the list was Stan. He agreed to a buyout offer from his principals at a much lower multiple than he could have received had he decided to sell his company. Stan believed that to best serve the needs of the firm’s clients and to best care for his employees it was necessary to remain independent, even if it meant many fewer dollars in the sale. The principals were humbled by Stan’s decision but not surprised—Stan’s focus was always on the well-being of the client and his employees. The principals were the same way because Stan had personally recruited each one of them to the firm, and he only recruited people who shared his client-centric outlook.