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March 22, 2021 at 05:19 PM
What You Need to Know
- It's important to constantly evaluate your strengths and weaknesses.
- In assessing a potential partner, consider whether they can benefit clients, employees and owners equally.
- Whenever you think would be the right time to seriously consider your succession plan, start sooner than that.
My partners and I founded RGT Wealth Advisors more than 35 years ago, steering it through myriad economic environments during the last several decades. Understandably, our connection to this RIA firm grew to be deeply personal in addition to financial, as its AUM eventually reached nearly $5 billion. While we felt the time was right last year to sell a majority stake to a diversified global asset and wealth management company, it was no easy call to make.
Through the years, our firm has been driven by three primary motivations: (1) client service, (2) combining financial planning with investment management and (3) being fee-only and remaining independent of Wall Street in sourcing investment solutions. We’ve stayed true to those founding principles as the firm’s capabilities grew tremendously from an expertise and depth perspective.
At the time of the transaction last November, we had 16 owners and about 70 employees. Our leadership structure included traditional department heads as well as a seven-person Executive Committee that balanced different skill sets and generational perspectives. With so many other RIAs across the country also contemplating succession planning, I wanted to share the thinking and process behind our recent sale.
Internal Assessment
For most of us who came into the industry and launched RIAs, we began as practitioners but now work on the business as much as we work in it. As a result, we’ve disciplined ourselves to look far down the road when planning for the future of the firm, whether we expect to remain part of it or not.
A little over a year ago, our Executive Committee conducted a three-year update on a 10-year strategic plan we had instituted in 2017. Although we came away from that review feeling good about the future, we realized the luxury of time had slipped away for some important aspects of the business. The wealth management space is an evolving business model in an ever-changing environment, and we needed to be more agile and adaptive.
It’s important to constantly evaluate your areas of strength and, while not always fun, areas of weakness. The strengths that stood out to us were serving clients and providing financial planning and investment management solutions. We were much less adept at developing state-of-the-art technology and understanding how artificial intelligence might one day enhance our clients’ experiences. Not only did we lack core competency in these areas, but we believed the cost to develop solutions would likely exceed our available budget.
In considering the remainder of our 10-year plan, we felt that quickly addressing those areas in a meaningful way would best position the business, and ultimately our clients, for long-term success. That realization led us to conclude we should consider outside capital as part of our future.
Evaluating Options
The next step was to evaluate larger strategic players in the space, including many companies that had at least 20 to 30 people in both their technology and marketing departments, as well as layers of resources in human and financial capital to provide solutions.
