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Jason Carroll: Succession Planning Pioneer — The 2016 IA 25

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One evening, Jason Carroll came home from work and told his wife that he wanted to work for a bank — preferably on the East Coast, where they both were raised and where they wished to raise their children — that lent exclusively to financial advisory businesses.

At that time, Carroll was working for Charles Schwab in Denver as a program manager for investment advisory lending products and platforms. He did not know whether a bank dedicated to investment advisory lending even existed, nor could he have imagined that very soon after expressing his career wish to his wife, Wilmington, North Carolina-based Live Oak bank would come knocking at his door.

Since 2012, Carroll has served as managing director and senior officer for investment advisory lending at Live Oak. Today, he oversees a portfolio of around $300 million loans made to independent advisors, 65% of which, he said, have funded succession planning deals.

“Whether it be strategic acquisition or a retiring advisor who wants to either fully exit their business or develop an exit plan that should be capitalized at a particular point, we do it,” he said.

Before Live Oak’s entry into the financial advisory space, the average independent advisor had no recourse to a national bank presence with a dedicated lending platform, Carroll said. It’s no secret, too, that succession planning is the industry’s bête noire, and that despite the number of owner-advisors across the nation who are fast approaching retirement age or are already there, the rate of succession planning remains alarmingly low. Studies also show that few advisors even have a written plan in place for what they wish to do with their businesses when they retire.

A large part of the problem has been the lack of funding for succession planning. The typical 30-70-5 structure — with a buyer putting down 30% in cash and a seller carrying 70% of the value of the deal over five years, has been the prevailing model — but it’s an onerous proposition for many advisors, Carroll said, both sellers and buyers of firms.

“Our addition to the market has resulted in a paradigm shift: Now, an advisor can borrow the capital that they need to execute a transaction at higher advance rates versus how transactions were done in the past,” he said.

Live Oak’s dedication to investment advisory lending and the longer-term, low-interest loans guaranteed by the United States Small Business Administration (SBA) it provides are helping to alleviate the industry’s capital concerns when it comes to succession planning and buyout deals. The bank has steadily been making itself more well-known in the business as a dedicated lender, Carroll said, and is on track this year to close another $175 million in loans.

In his view, though, Live Oak’s expertise in and dedication to the investment advisory space, as well as the other verticals it lends to, are much more important than the loans themselves.

The bank only hires domain experts who have had solid experience in each of the industries it lends to, Carroll said, whether that’s in the veterinary space — where it first started out — in craft beverages or in poultry farming, the most recent addition to its roster.

“I’m the equivalent of people in all those different areas,” Carroll said. “We look to go into cash-flow rich, recession-proof industries: You’re always going to take your dog to the vet, you’re always going to buy beer and you’ll always need someone to plan your finances.”

Having an in-depth knowledge of a particular industry not only gives Live Oak’s professionals a sound understanding of where they’re lending to but also enables them to perform rigorous due diligence.

That holds true for the investment advisory business, too: “We’re not speculative lenders,” Carroll said. “We want to see the financials of the past two years, even if [financial advisory] businesses are so cash-flow definitive that you know what you will get, even though they’re very well planned and are, for the most part, well-run firms.”

— See the full 2016 IA 25 in the May issue of Investment Advisor, and find ongoing coverage of the honorees, including extended profiles, all month on the IA 25 homepage.


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