Registered investment advisor president and CEO JC Abusaid told an audience of advisors at this year’s Wealth Management EDGE that it took several years for his firm’s senior team at Halbert Hargrove to get to its third generation of advisors.
Abusaid, whose $3.6 billion RIA is made up mostly of homegrown advisors, said the team had to create a system of passing on clients to the next generation to get them started.
“The industry suffers from resistance,” Abusaid said. “I encourage you to break that. It will take courage.”
Abusaid gave the firm’s history when answering a question from WealthManagement.com Executive Editor Diana Britton during a next-gen session. She had asked panelists how RIAs could show upcoming advisors that the industry had moved on from the “eat what you kill model.”
Abusaid said the ability to share and transfer clients was the best way to “end that stigma, because the new generation can see how to build a career without relying on cold calling. The firm also passes referrals below a certain asset value to junior advisors.
“You have to keep adjusting the models and putting in different incentives so people can grow,” he said.
Jason Hanavan, President and CFO of VestGen Wealth Partners, said his firm has two tracks for advisors: advisors who want to sell can earn a percentage of revenue for their efforts, and those who don’t want to sell can earn a salary and a bonus.
“As you look at some of the next-gen advisors, some want to provide excellent client service and not go to the business development side,” he said. “If you’re on one track, you can flip to the other and vice versa—we have both tracks and ladders.”
Hanavan’s VestGen Wealth acquires business from retiring advisors, some of which can go to younger advisors. Before they leave the business, senior advisors also act as mentors and consultants to their younger peers.
“It gives them a purpose and a mission,” Hanavan said.
Lauren Minch, CEO of the CFA Society in Dallas/Fort Worth, believes shedding the old “eat what you kill” mentality will make the advice business more attractive to women, who the model may have turned off. She said the industry suffers from a “perception” issue that must be chipped away.
“We don’t need to change the private wealth profession so much as the PR perception of it,” Minch said.
She noted that women are poised to inherit much of America’s wealth and that advisors “need to be able to reflect who we are serving.”
On a separate panel focused on succession planning, industry consultant and thought leader David DeVoe said that he had once assumed advisors didn’t want to pass on business to the next generation simply because it signaled the first signs of the end of their career.
The more the founder and CEO of DeVoe & Company worked with advisors, the more he saw that the lack of action was often due to the complexity and effort required to create a good succession plan. DeVoe detailed all the questions and needs for making an internal or external transition of your business, from identifying the right people, to coaching them, to figuring out equity structure and on and on.
“The next thing you know, a simple decision actually becomes overwhelming,” he said.
DeVoe encouraged advisors to begin the process by considering their objectives and goals for themselves and their business.
“Start thinking through your professional roles and responsibilities,” he said. “What do you enjoy doing? What are you good at? And what’s better for someone else to do? What do you want to migrate to another employee? Start thinking through economic frameworks, valuation, deal structure—all these elements—and then also your life goals to a degree. When do you want to retire? What does that look like?”
During the next-gen panel, RIA CEO Abusaid said his firm will continue building for the future by building from within. Halbert Hargrove runs a year-long internship with competitive pay that has become operationalized over the years and has relationships with university programs.
“We haven’t brought in a seasoned advisors to the firm for four years,” he said. “We’re developing the hires ourselves, and that has worked for us.”
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