What happens when a succession plan goes right?
Barbara Williams and Gloria Foote founded Financial Focus, an independent investment advisory practice, in 1984. Although the Carlsbad, California-based firm works with businesses and couples, the partners focus strongly on women clients.
The partners worked well together. They collaboratively built their clientele, wrote a Sunday financial column for the local paper and, for 20 years, taught a class at the local community college on financial planning for women.
Williams’ and Foote’s firm profited, and their book grew, made up of mostly women clients who came to them through life-crisis events like divorce or death. Others came as referrals from family members and outside professionals. About seven years ago, nearly three decades after they founded Financial Focus, the partners came to a conclusion.
“You don’t want to wait until your backs are against the wall,” said Williams. “It was time to start looking for the next Barbara or Gloria.” Time to ensure the firm’s future with a succession plan.
Unfortunately, having a succession plan in the financial industry isn’t the norm. A 2018 study by the Financial Planning Association and Janus Henderson revealed that 73 percent of financial professionals don’t have a written succession plan, including 60 percent of those within five years of retirement.
While it’s not known what percentage of female financial professionals fall into the no-succession plan category, the Financial Focus partners would not be part of it.
There are three basic approaches to succession: an external sale, internal financial professional sale or hire and groom an associate financial professional. Williams and Foote chose option three – bring an associate financial professional into the firm and let the succession proceed over time.
An important part of a successful transition is finding the right successor, someone with a similar philosophy on advising. The Financial Focus partners had created a women-focused firm with a culture based on exemplary client service. That would lie at the heart of their decision.
“We fall in love with our clients,” Williams said. “Far beyond the usual (financial professional/) client relationship.” The partners had even guided clients into nursing homes and conducted their funerals.
Williams and Foote wanted someone with the same philosophy, along with some other, very specific, criteria.
“Being a woman financial professional, focusing heavily on women clients is our niche,” said Williams. “Choosing a woman successor would fit the mold of who we are. We also wanted a smart go-getter, someone to complement us and add value to the firm.”
They began mentioning to wholesalers that they were searching for successor candidates. “Sure enough,” said Williams, “it was a wholesaler who said, ‘I know this gal…’”
Enter Kaitlin Hewell. The millennial had more than a decade of experience in the financial services industry, a go-getter clearly on her way up.
The partners arranged a get-together with Hewell. They were upfront about why they were meeting.
“She knew we were looking for a successor,” said Foote.
The trio met for breakfast frequently over the following year. The partners would catch up on how the younger financial professional's career was progressing, sharing some of their own professional lives, the three of them getting to know each other better. The meetings enabled the three to build a solid relationship.
“It was good to meet for that year and build a rapport,” said Williams.
Hewell moved into the Financial Focus office space under Williams’ OSJ but maintained her own business.
“She had a separate phone line, printer, everything,” said Williams.
Though initially, Hewell was just housing her office in the same space as Financial Focus, “we were fairly confident of where this was going,” said Foote.
Eventually, the younger financial professional folded her own thriving business into Financial Focus and became a partner – which added an unexpected amount of complexity to the business side of the firm.
“We had to become an LLC. We each had to have a Sub-S Corporation. Accounting became more complicated – it was triple the accounting expenses – and producing paychecks was much more involved,” Williams said.
It wasn’t that the partners didn’t know change was coming. It had been discussed in all of the succession planning seminars they had attended.
“At the time you just don’t realize what it means,” said Williams. Knowing it was one thing. Experiencing it – quite another.
Integrating the staff into the younger partner’s day-to-day business was a learning curve.
Williams said Hewell had been so self-sufficient that staff didn’t automatically provide her with office support. Williams found herself managing in-the-moment, reminding staff to take over those functions for the new partner.
Next came integrating Hewell with Financial Focus clients.
They introduced her to existing clients. They included an article about her in Financial Focus’ quarterly newsletter. They introduced her at the firm’s Guide to the Markets client luncheon. She sat in on some of Williams’ and Foote’s client meetings and new clients met with two advisors, Hewell and one of the other partners.
Hewell turned out to be the right match.
“Kate is a perfect complement to us,” Williams said. Although the three financial professionals share the same client ideal and approach to service, they have different personalities and bring their own strengths to the firm.
“Kate brings a fresh perspective to the investment advisory side,” said Foote, “and insight into the younger generations.”
Before Hewell, the firm didn’t actively recruit next-gen clients. The Financial Focus book was at capacity, and Foote, though not ready to retire, was at least contemplating the next avenue in life. Hewell, however, was busy building on her established reputation.
The partners held a Next Generation seminar, handpicking 65 of their high net worth clients and inviting their children to a luncheon.
“It was very successful,” said Foote. “The younger generation clients work so well with Kate.” Being a millennial herself, Hewell is a digital native, is more in tune with next-gen culture, and she understands their approach to finance.
Although Foote continues to steer towards retirement and spending more time with her husband and grandchildren, Williams wonders what her own post-succession life will look like – and when it will happen. Now that Hewell is part of the team, the firm is yet again facing change. Their collaborative book has outgrown the three partners and, once more, they are talking about adding another financial professional.
Thorough planning done well in advance, establishing a strong relationship with their successor and honest communication between financial professionals, staff and clients all proved invaluable in a succession plan done right, said Williams.