A business is a lot like a baby. If it is healthy and well cared for, it cannot help but grow and, eventually, make its own way in the world. While not every parent will welcome this independence, the wise parent at least will plan for it.
My baby is growing up. Nine years ago, I sat alone in an office that once was a movie theater, assembling a desk so I would have someplace to work. This month, the 10 of us who work here today are moving to new quarters in Scarsdale, NY, to do business under the newly unfurled banner of the Palisades Hudson Financial Group LLC.
The feeling is a little like watching my eldest at her bat mitzvah. I’m proud, of course, but also a little sad to see that first big step toward the day when she will be out on her own. Not that I’m going anywhere just yet, but I have to come face to face with the inevitable.
I decided at the very beginning that I wanted my business to go on without me someday. I believed that, for several reasons, this had to be the goal.
First, if I were to take the trouble to build a business, I wanted to have my family benefit from the value of whatever I might create. That could not happen if the business were to simply end upon my retirement, death or disability.
Second, I knew that to have a diverse and stable client base, I would need to attract more work than one financial planner could possibly handle. To do that, I had to employ talented people, and they had to know that their security did not depend indefinitely on the luck or whim that might keep me involved in the business.
Third, clients have a big interest in the continuity of the business. My colleagues and I know virtually all of our clients’ intimate financial details, in many cases better than the clients do themselves. Those clients rely on us to help younger generations of their families for many years to come. Clients who came in the early years of this enterprise often asked what would happen when I was no longer around. They trusted me when I said I would provide for that day.
So here we are, with a shiny new office that can handle not only our current size but also future growth to more than 20 employees. More important, we have a new legal structure that can keep the business intact without me. I’m only 44 years old, I am in good health and I do not plan to go away any time soon, but as recent events have reminded us all too painfully, one never knows.
Most business owners avoid talking about their succession plans. I suppose that is because most do not have any such plans, at least not formalized or thought out to the degree that they would feel comfortable making them public. And I suppose most business owners do not believe that their succession plans are anyone else’s business.
I do not share that belief. I accept that other people, including my employees, clients and other professionals who refer prospective clients to me, have a legitimate interest in how I plan the affairs of my business. I may still be the sole owner, but the business has responsibilities to a lot of other people now. It is taking on a life of its own.
So I am going to make my succession plan a matter of public record. Right here. Right now.
Palisades Hudson Financial Group LLC is the new legal entity I have formed to house most of the business. The investment advisory practice will continue to be run through Palisades Hudson Asset Management, Inc., a sister company.
Both of these entities are owned by a trust I have created for my family as part of my estate plan. I also have created a separate trust for the benefit of Palisades Hudson employees other than my family. In the event of my death or disability, the employees’ trust will buy the business from my family’s trust. My relatives will act as trustees during the transition period while the business continues to be run day to day by managers I have hired and trained, augmented, if necessary, by any new employees my trustees may feel the need to hire.
After the transition period, the trustees will distribute ownership of the business to the employees who have stayed on or joined since my departure. I will leave some guidance, but the trustees — in consultation with the employees — are going to have to decide who should get how much of the equity. Some things just cannot be managed from beyond the grave, or wherever else I happen to be.
My theory is that the business needs two things to survive after I am gone: employees and clients. The employees, I reason, will stay if they know their jobs and work environment are secure, if the client-centered philosophy and collegial atmosphere of our business persists, and if their extra effort in sustaining the business without me will be rewarded in due course with a chance to earn "sweat equity." Most clients will stay if they know that the employees I leave behind are well trained and well qualified to take care of them, and especially if these are the same employees who have been working with those clients all along.
The succession plan is closely related to the professional development program we have put in place during the past couple of years. We have a systematic approach to develop the skills that our people need to be very good, very well-rounded advisers.
It will take most employees seven to 10 years of professional experience to get through the program, which exposes them to a wide range of investment, tax, estate planning, insurance and other disciplines, and encourages them to obtain professional credentials such as the Certified Financial Planner designation. The managers who work here today are well along in this program and the staff is coming up behind them quite nicely. I know that if something happened to me tomorrow, this team might have to stretch a bit, but it could get the job done. A year or two from now, it would not be nearly as much of a stretch.
Of course, I intend still to be here then. I expect my succession plan to change over time, as the business changes. But it really feels good to be prepared just in case things do not work out as I expect.
So, my heartfelt thanks, and best New Year’s wishes, to the many of you whose support has helped what I once called "the world’s smallest financial planning firm" grow to a healthy adolescence. New York’s junior senator was right. It takes a village to raise a business.