Assess your team, determine its strengths, build your exit strategy
by Lisa A.K. Kirchenbauer, CFP®, RLP®
The average age of FPA members is 521. Many are beginning to consider exiting their businesses. The challenge that they face does not appear to be widely understood. I would argue that the people many firm owners hired to build their firms and support their marketing efforts may not support their exit strategies-at least in a traditional way. By taking a critical look at the types of people who are drawn to dynamic and pioneering firms, we may start to understand what it will take to make a successful exit.
An Inherent Conflict
Let's start by considering the profile of your typical early planner/business owner. He or she likely came from the "sales" side of the financial service industry, perhaps an insurance company or brokerage firm. He or she was (and still is) successful at finding and securing business through his or her sales skills. He was willing to take the risk to go out on his own, taking on business debt, networking, etc. He was likely used to a more transaction-oriented approach, whether it was commission sales or flat-fee planning.
After he reached a certain point, he realized he needed more support to continue to grow. Either through assessment tools or by instinct, he knew he needed to build a team that would be detail-oriented, thorough in their follow-up and willing to help him build the strong processes found in most successful, stable businesses.
Rather than being paid on a commission or incentive basis, staff members were salaried with perhaps a bonus as the business grew. These employees became accustomed to a very different kind of business and a very different kind of approach to their work and compensation than which their boss had experienced at the beginning of his career. Already you can start to see the inherent conflict and challenges.
Fast forward to today. We hear stories of employees at planning firms who don't seem "hungry." They have a hard time bringing in business like the firm's owner does. They seem reluctant to invest in the company or take on the risk that often comes with business ownership. And yet, this is the next generation of planners in our country.
The business owner has finally decided to consider an exit and begins looking to the next generation to buy him or her out while continuing to move the firm forward. Can this next generation of planners take the risk of business ownership, invest in their firms and take on debt to buy the current owners out? Will they want to?
As I see it, the answer at its base level may be "no." So what will the pioneering generation of planning and wealth management business owners do besides sell to private equity firms or huge consolidators?
Assess Your Team
I believe that by taking the time to assess the team you have built, you can determine the talent of your team and identify its inherent strengths, so you can build an appropriate exit strategy, while also designing marketing programs that will work for the next generation.
In my work with the Kolbe® assessment, I have been able to identify the strengths of a number of planning firms and businesses, predict where the conflicts may be, and advise them on how best to grow the business as well as what they may need to look for in replacing the owner.
The Kolbe assessment was developed by Kathy Kolbe about 40 years ago to assess instinctual strengths-how we take action and solve problems. It is not a personality assessment like Myers-Briggs, and an individual's results generally do not change over his or her lifetime. The assessment consists of a profile of four numbers that cover four action modes:
- Fact Finder (how we gather and share information)
- Follow Thru (how we arrange and design)
- Quickstart (how we handle risk and uncertainty)
- Implementor (how we handle space and tangibles)
It's not unusual to see a traditional, late-stage planning firm owner have a high score in the Quickstart arena, while his or her associates score lower on that "mode" but higher than the owner on Fact Finding and Follow Thru. Not only can that create potential conflicts on a day-to-day basis, it also can create disconnects regarding the expectations for younger associates to bring in new business (they may be uncomfortable with the risk and persuasion required in selling).
Further, if the younger associates are not as comfortable with risk, they are less likely to seek funding to support a buyout. Those same differences in strengths have often helped the business owner build a firm with strong analytical skills, great processes and solid advice to the client. So what is a business owner to do? If you find yourself in this kind of situation, here are some steps to consider:
Steps for Creating Synergy
- Determine the team you have. By using an assessment like Kolbe, you can begin to clearly see the strengths of your team, potential conflicts and which strengths may be missing from your team.
- Decide the kind of firm you are building. A lifestyle-based business that will not be sold doesn't require the same kind of analysis and strategy that an equity-based business does to allow the owner to eventually exit. (See my article, "What It Really Means to Run Your Practice Like a Business," in the January/February 2010 issue.)
- Consider adding the strengths that will be missing if the owner leaves. If you realize you will be missing certain strengths, such as Quickstart, plan in advance to add someone with those strengths.
- Consider changing your marketing/client acquisition strategies to meet the strengths of your current team. If you don't wish to add anyone to fill the gap of the owner's strengths, then you will need to take steps to help the younger associates market and develop business in their own ways and/or consider a different strategy for growth (more on that in a minute).
Take the time to go through these steps and you will have a stronger firm, potentially less conflict and better synergy, as well as a thoughtful and strategic plan for growth and succession.
Rethink Your Growth Strategy
What happens if the team members are not traditional business developers like the owner? Different kinds of marketing and growth strategies can allow those associates to contribute to growth in their own ways, building the number of clients and increasing revenue for the firm. Here are some ideas:
- Consider marketing strategies that are more about long-term relationship building, perhaps with centers of influence, smaller seminars and educational programs versus large-scale social and business networking or outright prospecting.
- Consider the acquisition of solo planner firms (we are seeing some of this already-is it by design or happenstance?) that will allow the team to gain a number of new clients and assets without traditional marketing or prospecting. It may be a great value proposition for those clients to get a whole team working for them rather than relying on a single adviser. Keep in mind there can be some pitfalls here, too, as far as managing client expectations about the relationship and service.
- Consider hiring a business development specialist who will bring clients to the firm. Be careful here, because clients may be attracted to a charismatic rainmaker and less comfortable with the more deliberate, analytical planner with whom they will be working. If set up properly by the rainmaker it can work, but expectations and ideal client profiles should be clearly communicated.
The key to success lies in understanding the business and team you have, as well as what you want, and then creating a conscious and thoughtful strategy to take the firm to the next level. The issue of succession will remain a crisis for those firms that don't understand the strengths of their team and don't take steps to maximize those strengths to support their business.
Lisa A.K. Kirchenbauer, CFP®, RLP®, president of Omega Wealth Management LLC, has been in the financial services industry for 27 years. She is a trainer and mentor for the Kinder Institute of Life Planning, an affiliated adviser with the Sudden Money Institute, a Kolbe Certified Consultant and part of the Strategic Coach coaching program. She is a frequent contributor to Practice Management Solutions.
1 According to demographic information as of Oct. 10, 2012. Statistic supplied by FPA.
Webinar Event with Planner and Author Lisa Kirchenbauer
Lisa Kirchenbauer will present the FPA webinar "The Succession Crisis: Have You Built a Team That Can Take Your Business to Next Level?" on Dec. 12 at noon Eastern. Visit FPA's virtual learning platform, FPAnet.inreachce.com, to register.