The Bridge: Fall 2017 | RIA Edition

RIA INDUSTRY KNOWLEDGE FROM OAK STREET FUNDING

®

Destination: Next Generation Cross-age Mentoring Page 4

Developing a Leadership Roadmap Page 10

a first financial bank company

FEATURES

RIA Edition With multiple generations sharing the workplace, what can each generation learn from the other? Review the workforce graphic below and learn more on page 6.

Fall 2017

Publisher Oak Street Funding Editorial Director Meghan McNulty

Millennials:

Contributing Editor Sharon Robbins

Born 1978-2000

44%

Art Director/Designer Aidreen S. Hart

Baby Boomers: N bo ex rn te af rs: te 1r 2 3% 00 0

Born 1946-1964

Graphic Contributors Beth Winchell, Beth Rogers

27%

Generation X: Born 1965-1977

27%

% : 1-3 lists a n itio Trad -1945 0 190

6

4 Five ways to

attract Millennials Recruit this generation as customers and top talent

in 10 Gen-X the C-Suite

How this once-overlooked generation is making a move for the top

ahead of 14 Get wealth transference Connect with Generation Now to secure your future

The Bridge is a newsletter produced by: Oak Street Funding 8888 Keystone Crossing, Suite 1700 Indianapolis, Indiana 46240 844-370-5757 Loans and lines of credit subject to approval.

Potential borrowers are responsible for their own due diligence on acquisitions. California residents: Loans made pursuant to a Department of Corporations California Finance Lenders License (#6039829). The materials in this paper are for informational purposes only. They are not offered as and do not constitute an offer for a loan, professional or legal advice or legal opinion and should not be used as a substitute for obtaining professional or legal advice. The use of this paper, including sending an email, voice mail or any other communication to Oak Street, does not create a relationship of any kind between you and Oak Street.

© 2017 by Oak Street Funding LLC. All rights reserved. Any duplication without prior written permission is strictly prohibited.

Share Your Thoughts If you have any questions, comments or ideas for The Bridge®, let us know. Email us at marketing.box@oakstreetfunding.com or visit us on social media.

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www.oakstreetfunding.com/ria-firm

LETTER FROM THE FOUNDER/CEO

Destination: NEXT GENERATION

At the end of each day, the most valuable business assets leave the office. Successful business owners believe this to be true and run their businesses accordingly. Whether you are in growth mode or starting to think about retirement, having a clearly defined plan for employee and leadership development makes the future uncertainties of your business that much easier to navigate.

In this edition, we will explore what we as leaders can do to motivate our colleagues – new-comers and longtime employees alike – to work collaboratively, to learn and grow as your business evolves, and to eventually be strategically positioned in your succession plan to become the leaders when the time arrives.

With multi-generational teams making up today’s workforce, inevitable conflicts occur over issues such as management and operational styles, the use of technology and overall decision-making. By strategically offering

Free RIA Whitepapers Our resources are packed with expert advice and best practices.

Check them out! oakstreetfunding.com/whitepapers-ria

the next generation meaningful opportunities and autonomy, managers and organizations can provide alignment, and feel confident that these employees will stick around to help the company grow today and into the future.

At Oak Street Funding we are here to help you to realize today’s dreams and also to help fund tomorrow’s. Whether you are in need of capital, are growing your business, or are planning to acquire or retire, we’ll get you there.

Oak Street Funding® Vision Statement Oak Street Funding utilizes industry knowledge, well-developed technology and passion to deliver best-in-class service and capital products to insurance and finance professionals nationwide. Our customer-focused mindset and access to capital will allow us to continue to fulfill customer needs, identify growth opportunities and provide an empowering work environment for employees.

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ways to attract Millennials recruit this generation as customers and top talent Millennials, defined as individuals born between 1981 and 1997, are the new darlings of the modern economy. As spenders, Millennials represent more purchasing power than any other generation, so capturing that market share should be of top concern to any growing company. As a working force, Millennials bring the right mix of passion and engagement to the corporate environment, so employers looking to thrive in the digital age should consider this group in their recruiting efforts. But Millennials won’t respond to traditional ways of marketing that worked on the Boomer population and Generation X. As an RIA firm, how can you get Millennials to buy into your services, as well as consider financial services as a worthy profession? Here are some strategies for success:

Attracting Millennial Customers to your RIA Firm:

Below are five ways you can win over more Millennials as clients:

 Go Digital: Millennials are often

described as “digital natives,” meaning that they grew up using technology that previous generations had to learn later in life. In other words, Millennials use the Internet and social media to communicate and interact with their world. This generation can seamlessly navigate between devices - texting, shopping online, blogging and using social media with ease. As a business, you need to not only be visible to these digital natives to attract their attention, but you need

to be able to communicate and market to them digitally in the form of unique online content, digital advertising and other online channels. Your RIA firm, at a minimum, must have a good website presence, capable of delivering value and providing self-service capabilities such as online quotes.

to make your company stand out.

Implement a referral program or discover other unique ways to drive awareness and interest among the Millennial crowd. If your firm does not have any Millennials on staff, consider the benefits of generational diversification within the workforce, and the benefits that hiring a Millennial could bring. At the very least, consider outsourcing contracts to Millennials.

 Be Searchable: Gone are the days

of yellow page advertisements and other directory listings. Along with a solid digital branding effort, your new Millennial customer needs to be able to find your company via a web search.

Most Millennials rely on Internet searches to research products and services before purchasing, and if your company doesn’t show up in search results, it is left out of the decision set. Search engine optimization (SEO) techniques to ensure your website is listed among the top RIA firms in your market will give you an edge over competitors. One way to do this is to modify your existing website content to focus on popularly searched keyword phrases, and initiate a comprehensive content marketing effort, which includes tactics such as weekly blogging and social media marketing. If you don’t have the staff to do this, hire or outsource it.

 Look Within: Does your company

have Millennials on its team? If so, find out what makes your company attractive to their generation, and use this information

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 Mind your Mission: Millennials are

a very cause-driven generation. When they make a purchase, they tend to favor companies and brands who want to make a difference in the world. Is your company involved in the community in some way?

How can you highlight your community efforts to get the attention of the Millennial generation?

 Service Sells: While excellent

customer service is important to every generation, Millennials demand 24/7 information and support, because they are accustomed to the speed and efficiency of the digital era. Make sure your firm offers some type of round-the-clock service, whether it’s an instant online quote, a chat feature or a mobile app. These features may make a difference when the Millennial chooses a provider.

Attracting Millennial Talent to your RIA Firm:

One of the best ways to gain a large Millennial customer base is to hire more

of them as team members. Here are some suggestions on how to recruit and retain Millennial employees:

 Offer Flexibility: More than any

other generation, Millennials value flexibility in their careers over other perks such as salary or benefits. While they are passionate about their work and personal interests, they want to live a life outside of the workplace. Offering flexible schedules, telecommuting or other perks that encourage a work-life balance will be more appealing to a Millennial job candidate. Also consider flexibility in job responsibilities to make work life more interesting to Millennial talent. This flexibility may be key to retaining Millennial candidates, with average Millennial job hopping every 18 months, according to the U.S. Bureau of Labor Statistics.

 Feed the Culture: Fun is nearly as

about open positions and to market your fun, flexible atmosphere and company culture.

 Give Back: Helping clients manage

their investments is about helping people, so Millennials will likely be drawn to this type of profession as a meaningful career choice if you highlight this aspect in your recruiting. Millennials like companies who are actively involved in causes, so be sure to tout these efforts on your blog and social media pages.

Millennial to your staff, make sure you offer them guidance through a mentorship program established with more senior advisors in your firm, and pay for continuing education to sharpen their skills on the job.

Millennials: The Key to Firm Growth

Millennials might be a vastly different generation than their predecessors, but they can also bring a unique value to your customer and employee base. By understanding them better, you can find ways to attract them as customers and team members. Doing so will set your firm apart and help bolster its growth into the next decade.

 Mentor Them: Contact college

campuses in your area and consider starting an internship program to recruit potential employees from the accounting, business or marketing departments. Consider speaking to students to help them understand and visualize a career in the financial services industry. When you hire a new

important as flexible to the Millennial employee. Creating an enjoyable atmosphere with a unique company culture can attract good Millennial candidates to your RIA firm.

Consider posting on social media activities such as company outings, parties and get-togethers to give candidates a feel of your company culture. Highlight your employees’ stories on social media too, which will give job searchers a chance to visualize working with your team.

Use Technology: The Millennial generation not only uses technology to communicate in their personal world, they prefer to work for a technologically-savvy company too.

To attract new talent, ensure your company’s online presence is solid and your website is searchable. Start incorporating technology in your firm and use it to streamline efficiencies within the organization.

Use social media to communicate

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Brewing the

d n e l B t c Perfe

Silen Generatt ion

B Bo aby om ers

y Bab ers m Boo

Gen.

X

Gen

.X With multiple generations sharing the workplace, X . what Gen can each generation learn from the other?

The multi-generational workforce has become the new reality, with many Baby Boomers and even a few pre-Boomer Traditionalists delaying retirement in favor of staying in the workforce, and the Generation X and Millennials making up a majority of the workforce. With this environment comes many challenges, as each generation has differing values, attitudes, approaches and working styles. So how can all generations come together and work cohesively toward a common company goal?

And what can each generation learn from the other?

Understanding the unique characteristics of each generational group can help RIA firm owners effectively manage their team, its individual needs and expectations.

Understanding the Generations:

Firms today can comprise of three, four or even five generations of employees. Today’s workforce consists of the following age groups, according to Emsi (Economicmodeling.com): •T raditionalists/The Silent Generation: Born 1900-1945: 1-3% of workforce •B aby Boomers: Born 1946-1964: 27% of workforce •G eneration X: Born 1965-1977: 27% of workforce •M illennials/Generation Y: Born 1978-2000: 44% of workforce •N exters / Generation Z: Born after 2000: 3% of workforce These percentages are constantly changing, as traditionalists and Boomers reduce their working hours and eventually retire, and as Nexters become of working age and join the working class. With each generation comes different working styles, attitudes and behaviors that will surely transform the work environment. Along with globalization, technological 6 | w w w.oakstree tf un di ng.com • 8 4 4 - 3 4 3 - 1 4 1 1

advancement and a fluctuating economy, generational differences will create a new workforce of the future.

Employers that don’t prepare for the relationship management expectations and challenges that come with managing a diverse generational workforce will face significant obstacles in the future. Considering this new reality, how can firms sustain a successful work environment that accommodates all ages?

Views of the Workplace:

One of the first keys to developing an intergenerational workforce is to understand how each generation views work and life. The Traditionalist and Boomer generations view their careers in a much different light than the Millennial and GenX populations. Having been impacted by the Great Depression and world wars, the older generations launched their careers in an era where jobs had longevity and employees spent decades at one company.

Generation X workers, many of whom saw jobs impacted by an economic downturn, show much less loyalty to companies, and have been forced to become self-reliant due to lack of uncertainty in the marketplace. Millennials, many of whom were sheltered in their youth, came of age during economic expansion and are more entrepreneurial in nature, and tend to be more open to positions which offer personal fulfillment rather than a steady paycheck.

Both Millennials and GenX value flexibility and work-life balance over traditional perks such as title or hefty paychecks. What does this mean for your multigenerational business? Knowing how each generation values different aspects of their careers can help managers hire, motivate and retain employees.

Overcoming Stereotypes

While managers can seek to understand how each generation “ticks,” employees must also come to an understanding of how they see themselves as well as how they see other generations. Each generation tends to have pre-conceived notions about another generation, and if this is not kept in check, it can seep into corporate culture, leading to misunderstandings and dysfunction within the

team. For instance, Millennials often feel like the older generations view them as “entitled” or “lazy,” while they see themselves as most productive. Older generations are often labeled as “tech-challenged” or “workaholics” and “uncooperative” but they instead view themselves as “friendly and helpful.” To avoid these negative stereotypes, leaders must communicate that they respect and value what each generation brings to the table, and encourage diversity, flexibility and acceptance among all employees.

Integrating the Generations

To create a positive and effective inter-generational workforce, companies should strive to create a work environment that suits all generations’ needs, preferences and values. For instance, older generations might be more accustomed to working longer hours, while younger generations might place more value on results.

Companies should be flexible to meet the needs of both sides. Leaders should incorporate the management style, organizational process and group team-building exercises that foster cooperation and joint participation.

The more each generation interacts with one another, the more they will come to understand and learn from one another.

When leaders create new projects or teams made up of multiple generations, this can help their employees overcome initial stereotypes, gain respect for one another, and in the process, learn valuable skills from one another. As they learn about each other’s strength and abilities, the team can build upon those and blend ideas and tactics effectively for the greater good. And when it comes to perks and incentives, firms should consider incentives and retention plans that take each generation’s needs and desires into account. This, in turn, will minimize conflicts related to hiring and retention, impacting the company’s bottom line.

Communication Style

With each generation comes a distinct and preferred style of communication.

In the workplace, this can present many challenges, as generational groups are expected to work effectively together.

As older generations tend to be less comfortable with technology, they may rely more heavily on face-to-face meetings

and traditional ways of learning and communicating. GenX and Millennials tend to be more independent, preferring to use technology to learn and interact, as well as to multi-task and improve efficiency. For multi-generational employees to communicate well with one another, each generation needs to be open to communicating in a style that benefits the entire group and its needs. This could take some experimentation to find the right mix of communication methods to meet everyone’s needs, as well as the efficiency of the organizational process. A culture of flexibility will ensure that older generations adapt to using new technology to communicate, while allowing younger generations to recognize the value of some face-to-face interaction. Again, seeing the world from another generation’s perspective can help employees learn and grow from one another.

Management Style

Leading and managing each generation is another challenge business owners must face. In some cases, GenX and Millennials are taking the leadership helm for companies and must learn to hire, manage and retain employees of all ages.

If leaders consider the benefits, company culture and even management style preferences of each generation, it will ensure that they create a diverse workforce that feels challenged and valued. In addition, these employees will be more effective on the job. Traditionalists and Baby Boomers value rules and procedures and tend to stick to the status quo, with less flexibility in new ways of doing business. GenX and Millennials are open to new processes and innovative solutions, particularly when it comes to automation and efficiencies. Older generations prefer personal feedback and interaction as a management style, and are used to a traditional hierarchy of structure in an organization. Younger workers are used to flatter organizations where all layers contribute to the success of the company, and they desire to be respected and valued for their achievements, regardless of their age. While these are generalizations about each generation, it helps for managers to have an idea of an employee’s view of authority and leadership preferences to properly communicate as well as motivate and reward them for their efforts.

Working in Harmony

Offering some sort of multi-generational training within your organization will allow employees to learn and understand each other and discover better ways to communicate, problem-solve and improve employee relationships. Another way to ensure inter-generational workforce success might include starting a formal mentorship program. Pairing an older and younger worker may provide an opportunity to encourage acceptance and mutual respect, and allow each generation to learn skills and experience from the other. Aside from work-related projects and tasks, help your inter-generational employees get to know one another on a personal level by offering opportunities to interact in a non-working environment.

Some ideas for doing this include hosting company luncheons, regular social outings or even team-building exercises or seminars. Such activities bring the generations together and can help employees see each other as people rather than as separate groups. Consider seeking ongoing feedback from employees to ensure that all an employee’s needs are being met, and to encourage new ways of interacting and doing business.

Benefits of CrossGenerational Teams

Despite the challenges of a workforce spanning multiple generations, the benefits of having a diverse team far outweigh the trials. With generations working together, firms can improve positive communication and company morale, which can boost company performance and can even trickle down into customer satisfaction. These healthy, cross-generational teams can also boost the company’s bottom line, reducing turnover rates, and lowering the hiring, training and retention costs needed to maintain staff. When each generation is valued for their contributions and respected for their unique perspective on the business, companies can thrive as productive, successful team members working toward a common goal.

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:industry news

Another round of great networking, speaking, and making deals with Echelon Partners Oak Street Funding recently attended the 2017 Deals and Deal Makers Summit hosted by Echelon Partners, which provided an unrivaled educational experience for all deal makers in attendance. Key takeaways from the event include: •W hat makes a great buyer: Finding an appropriate acquisition partner is as much a culture/integration process as it is a numerical, accretion-seeking one.

•K eynote Debate - Capitalizing on Market Cycles and Secular Change: Two industry stalwarts, Mark Tibergien and Dan Seivert, faced off in a riveting debate in which each took a side on some of the most polarizing issues facing the industry today.

•A chieving Greatness in Your Negotiations: When engaging in M&A negotiations, one must remember that the parties will work closely once a transaction has been consummated.

•M astering the Use of Debt in Deal Making: Oak Street Funding CEO Rick Dennen spoke in this session, which explored the benefits of utilizing debt financing for M&A and other transactions within the wealth-management industry.

•H uman Capital in Deal Making: With human capital being one of the most important assets in a wealth-management business, it is an area which must be handled with the utmost care in any transaction scenario.

More consolidation anticipated and broker-dealers seek niche markets

10x company growth can be achieved through digital marketing Digital marketing strategies can often be overlooked

From 2005 to 2015, the number of independent

or underutilized by RIAs. But in an increasingly digital

broker-dealers has decreased 28%, and profit

world, clients and potential clients expect a certain

margins decreased from 12% to just 3%. The decline

level of engagement through digital channels. “Digital

in independent broker-dealers may be attributed to the credit crisis, where low interest rates eat into

marketing has proven to be the next way to interact and engage with prospects

the bottom line, or perhaps new regulations have

and clients,” says Jeremiah

increased the pressure on firm finances. Whatever

Desmarais, digital marketing

the cause may be, independent broker-dealers need

consultant. Still skeptical?

to contend with changes in the market, and adapt to survive: either focus on a niche or specialty market, or consider consolidation.

Consider one of his clients who was able to fill their Social Security seminar for $20.19 by using Facebook.

RIAs can learn from the 2016 Trump-Pence presidential campaign Whether you love him or hate him, President Trump enacted a very specific strategy to win the Republican nod (and ultimately the Presidency). He differentiated himself, in what may have appeared as a sea of nominee clones. RIAs must consider that as competition grows stiffer, you will need to appeal to clients as doing the job “better,” or by being “different.” It can be difficult to prove that you are “better,” so consider how you can stand out by being “different.”

Millennials prefer traditional advisors over robo-advisors More than 46% of surveyed Millennial investors indicated they sought advice from a human advisor, compared to the 24.3% who’ve used a robo-advisor either exclusively or in addition to a human advisor. Because Millennials are known for their tech-savvy, the results were interesting, and indicate that the future of investing advice still relies on human instinct and the personal relationship developed between advisors and clients.

RIAs should heighten efforts to mitigate hacks in light of increased data breaches SEC Chairman Jay Clayton issued a statement urging advisors to increase their efforts to prevent cyberattacks, given the recent Equifax data breach and the hack of the EDGAR electronic filing system. “Malicious attacks and intrusion efforts are continuous and evolving,” says Clayton. “Cybersecurity efforts must include, in addition to assessment, prevention and mitigation, resilience and recovery.”

https://www.dealsanddealmakers.com/ http://www.investmentnews.com/article/20170921/FREE/170929982/with-margins-crashing-broker-dealers-look-to-merge-report http://insurancenewsnetmagazine.com/article/10x-your-online-marketing-3345#.WckbvtVSzmE http://www.thinkadvisor.com/2017/09/18/trump-found-his-niche-you-can-too?t=rias&slreturn=1506354183 https://advisorhub.com/millennials-still-gravitate-toward-human-advisors-robos-survey/

https://www.financial-planning.com/news/after-equifax-edgar-hacks-sec-chair-jay-clayton-warns-on-cybersecurity?brief=00000153-6773-d15aabd7-efff45d10000 844- 343- 1411 • w w w. o a k s t re e t f u ndi n g.c o m | 9

GEN-X in the C-SUITE

O

ne leadership group that is poised to jump to the forefront as the Baby Boomer generation retires is Generation X. Born between 1965 and 1977, this once-ignored and underappreciated generation has slowly emerged to take over the C-suite. With multi-generational teams making up today’s workforce, inevitable conflicts occur over issues such as management and operational styles, technology use and overall decision-making. Can Generation X provide the leadership qualities to merge the generations? And what are some of the most influential qualities that Gen X leaders possess that can help take our organizations successfully into the next decade?

X Marks the Spot

The power of Generation X lies in its good blend of traditional Boomer values and the technological savvy and entrepreneurial bent of the Millennial generation. As the economy continues to evolve and grow – globally and technologically – GenX can help companies evolve with fresh ideas and perspectives. The GenX employee has lived with less wealth than their Boomer parents, yet has developed a healthy balance of saving and spending, making them masters at doing more with less. GenX is used to working in flatter organizations with fewer middle-management positions, as opposed to the hierarchal structure of the Boomer generation. Thus, they are used to doing more with less, remaining agile and nimble in their quest to improve efficiencies and produce cost savings within the organization. Despite their frugality, GenXers have enormous spending power and tremendous influence in the world economy. According to the US Department of Labor, Gen X currently spends more money per household than any other generation.

Generation X workers are very educated, with more than 35% of them having college degrees. They are also great innovators and entrepreneurs. Successful GenX entrepreneurs include Elon Musk, founder of PayPal®, Tesla Motors® and SpaceX®; Michael Dell of Dell Computer®; Sara Blakely of Spanx®, and Jack Dorsey of Twitter®. Most GenX entrepreneurs were entering their careers about the time of the dot-com boom and bust of the 1990s, so they possess the innovative spirit of the new Millennials with the practical and traditional values of the Boomer generation. Many World-class brands such as Microsoft® and Yahoo® have begun placing Gen X employees in leadership positions, recognizing 10 | w ww.o akstree tf un di ng.com • 8 4 4 - 3 4 3 - 1 4 1 1

the value they bring to the boardroom. In preparing for the inevitable exit of the Boomer generation in the workforce, Generation X leaders will emerge and take over the helm successfully, while providing the mentorship opportunities for Millennials to continue to grow and emerge behind them.

Closing the Digital Divide

One of the biggest benefits and influences of Generation X is their ability to bridge the digital gap within the new, multi-generational workforce. They’re technologically savvy, like Millennial digital natives, but they can engage and reach out to communicate effectively in person as well, like their previous Boomer generation. Because of this, they are great influencers and mentors to both the older and younger generations, making them great leaders for today’s modern companies. Their management style combines relationship-driven methods with automated digital communication to balance the needs of all generation of workers, while using technology to work smarter, not harder.

Can Generation X Leaders Succeed?

The effectiveness of Generation X in the C-suite depends on their ability to manage several crucial factors, including how to: • Navigate growing cultural and generational divides • Adapt to increased globalization and competition • Utilize new technology to communicate, automate and streamline business As firms look to transition leadership to the new generation, they must embrace these changes occurring in the marketplace and in the technological world.

A Smooth Transfer of Power

Companies looking to trust executive leadership to a Generation X employee should start by creating a long-term vision and strategy for the succession planning process. They should start by identifying any potential candidates internally, and then evaluating their skills and qualifications for leadership. Following the identification process, they can put training and development programs in place to groom future leaders for taking over the C-suite. Finally, companies should start giving Gen X leaders the opportunity to manage others, take on important projects, get involved in community efforts, and gain visibility in an executive role. Ongoing mentorship with potential GenX leaders will help boost confidence and help them feel comfortable taking over the role when the timing is right.

developing a

LEADERSHIP

Roadmap RIA firm owners nearing retirement age must consider their eventual retirement and the continuation of the business without them. A family-owned business may consider passing the baton to the next generation, but choosing a suitable successor can prove to be a complicated and difficult decision. Legal, tax and business implications also weigh into this decision and require careful thought and planning.

However, many owners are so focused on their day-to-day operations that the succession plan that has been created was done in haste, without a well thought-out plan in place. Many lack the confidence that their business will go on without them. For those owners who want to preserve what they have built, a properly executed succession plan will give them peace of mind that the business will survive.

But what is the best process for starting a business succession plan? How can an owner choose the best candidate for a successor? How must a company take family wants and needs into consideration? And how can a business properly prepare for a smooth transfer of power?

Building a Roadmap

While your exit may be abrupt, effective succession planning involves creating a long-term strategy, not a short-term solution. The organization and preparation of a succession plan needs to involve the entire company as well as advisors such as tax accountants, attorneys, appraisers and other related specialists. These experts can help you stay 12 | w ww.o akstree tf un di ng.com • 8 4 4 - 3 4 3 - 1 4 1 1

Planning to ensure a smooth transition

informed about legal and financial obligations and offer advice on the proper way to develop your plan. Think about who should be included in the succession planning effort, such as family or board members, who could help you make important decisions related to the plan. Also select some individuals who can provide an objective viewpoint and guidance during your planning process. Other considerations include: • Marketplace conditions • Custodian relationship • Company’s current financial position and assets • Existence of capable successors within family or current employees • Impact of other stakeholders such as family, board members, long-standing employees, key customers and vendors • Buy-out strategy and implications if a suitable successor cannot be chosen within the current family or company • Continuing role of the current owner or manager in the new company, as board member or advisor, if desired • Alternative exit strategies if new leadership fails • Estate, tax and legal implications of the succession plan

All in the Family

Family-owned companies tend to outperform non-family companies due to less bureaucracy, greater loyalty, long-standing values, and an emotional and financial commitment. In addition, employing family members in the business can help the owner nurture and mentor future generations to eventually take over the business.

However, few family-owned businesses survive past the first generation of ownership. With only 30 percent surviving the first generation and a mere 10 percent lasting through the third generation, poor planning, lack of interest and lack of proper skill set has led to the demise of the family business over time. In addition, family businesses often have a greater challenge when selecting new ownership and management because there may be multiple suitable candidates among the business owner’s family, and intra-family feuds can impact decision-making. There is also greater emphasis on preserving company value and assets for surviving heirs or future generations in a family succession plan. These factors can often lead to the demise of a family-run business. The familyowned business succession plan must carefully work through these details, leaving a clear path for future owners to follow, while considering the needs and desires of surviving family members and future generations.

Choosing a Suitable Successor

Often the hardest part of the succession plan for a firm or business owner is determining the best candidate to take over the company.

This process is both an emotional and practical decision which can have future implications on your family and even your estate, and thus requires careful consideration.

When an owner retires, dies, or otherwise steps out of the role, the immediate temptation is to find a replacement whose style and approach are similar. That’s why it makes more

The organization and preparation of a succession plan needs to involve the entire company as well as advisors such as tax accountants, attorneys, appraisers and other related specialists. sense to use the business’s strategic planning as a foundation for leadership development. The person who will serve as the next owner should be the individual who has the best skills for the business’s strategic needs. It may be that the current owner reached success through sales skills, but now that the company has multiple strong producers, it may make more sense for the next owner to be more of an administrator or a visionary.

Here are some successful strategies for choosing the perfect replacement and carrying out your succession plan: •D etermine the vision and mission of the future company • I nclude the owner’s future retirement and lifestyle goals in the strategy •G et advice from others who have recently implemented a succession plan •A nalyze the strengths and weaknesses of potential successors • S eparate emotion (love, fairness) in favor of responsible decision-making, particularly in a family-owned business • I dentify adequate skill sets required in your new leadership • S tart documenting processes and systems to transfer responsibilities •D evelop a process of training and mentorship to ready your successor over the next year to ten years •D ocument the company’s current worth as well as projected revenues and earnings for the next five years • I nclude a timetable for transition of ownership •A djust your plan regularly as the company or owner’s needs change

• Include a plan which prepares for a sudden loss of a business owner due to death or disability • Include an option to sell the company to a third party, considering family and financial considerations regarding the sale • Communicate your succession plan to current team members • Consider the structural re-organization of your company after the transition • Have a back-up plan if your initial candidate or plan fails

Asset protection

Successful business owners are given to saying their businesses’ best assets are their employees. As the industry becomes more competitive in the coming years, top-quality talent will be in high demand. By developing a leadership development program based on the business’s strategic goals, you’ll not only prepare the business for growth. Having a clearly defined succession plan and supporting it with leadership development makes the uncertainties associated with a job change less appealing. In fact, you could call it a form of insurance.

Don’t Fear the Inevitable

While creating a business continuity plan may appear to be a daunting task, ensuring that one is in place for your firm will give you peace of mind that all your hard work in building the business does not disappear when you leave. With proper planning and execution, you can feel more confident that the next generation of leadership can be well prepared to continue your hard work and preserve your legacy.

Connect with Generation Now to secure your future Forget which way the DJIA and the S&P 500 moved today. The biggest issue facing RIA firms like yours is hovering on the horizon.

The Baby Boomer generation has had a significant impact on American lives. In the 1950s and 1960s, their numbers forced communities to erect new schools by the thousands. During the 1960s and 1970s, colleges and universities struggled to find enough housing for them. They dominated the workplace for many years, and as they transition into retirement, employers are wondering if they’ll be able to find enough replacements.

All that pales, however, when compared to the amount of wealth they are about to shift to their children. Boomers – the largest and wealthiest generation in our nation’s history – will gift, transfer, and leave about $30 trillion in assets to their heirs. While the entire generation makes up only a quarter of the nation’s population, they account for 35 percent of total net worth.1 “Studies regularly show that when wealth passes to another generation, in the majority of cases, the heirs change financial advisors,” claims Deloitte U.S. Wealth Management Chief Gauthier Vincent. Given that about 7 in 10 of the average RIA’s clients have retired or plan to within the next decade – and that 63 percent have already started drawing down their retirement assets – firms that aren’t already trying to attract younger clients need to start doing so immediately.3 Andrew Osterland on CNBC.com states, “As the ‘great wealth transfer’ accelerates, the strengths of some business models will become more apparent and the weaknesses of others more glaring.”4 14 | w ww.o akstree tf un di ng.com • 8 4 4 - 3 4 3 - 1 4 1 1

For years, experts have suggested that the best route to RIA success was to work exclusively with high-net-worth clients. But given the impending generational transfer, RIAs may need to redirect their focus. “If you don’t work with the next generation, someone else will,” cautions Peter Mallouk, CEO of Creative Planning, an RIA firm.5 Firms may be hesitant to work with the next generation because there’s little profit in doing so – at least in the short term. Kendra Thompson of Accenture Wealth Management Services explains that the key is to structure the firm’s business model so that working today for tomorrow’s revenues doesn’t jeopardize its viability. “Incumbent advisors have to figure out how to scale high-net-worth advisory services for other customer segments.”6 Investment giant Charles Schwab has identified a particularly desirable subset of Generation X and Millennials that it calls Generation Now. This group, consisting of individuals from age 32 to 47, already controls about $3.5 trillion in investable assets, and should receive another $16 trillion from their elders by the year 2050.7 Interestingly, they share their parents’ overall goals, but approach both life and money from a very different perspective.

Instead of experiencing the go-go economies of the 1960s and 1980s, their lives have included a series of events that shook the market, from the dot-com bubble, to the prevalence of terrorism, to the Great Recession. That makes them more cautious of investing in general. Their wariness extends to investment advisors, wondering whether those advisors truly place their clients’ interests ahead of financial rewards.

When it comes to RIAs, Schwab’s research concluded that Generation Now wants a

relationship with an advisor who understands and empathizes with them, and who operates transparently.

They prefer a collaborative working relationship that goes beyond investments to address their overall financial situation, playing a key role in decision-making. This group is accustomed to instant access to information they need. If they can order groceries online 24 hours a day, why should they have to wait until 9:00 a.m. to reach their investment advisor?8 Generation Now is indifferent to traditional advertising and marketing channels, and far more likely to rely on online resources and their network of friends when making choices. RIAs would be wise to develop centers of influence and a strong online presence. Plus, because this market expects diversity, firms should place an emphasis on attracting a diverse pool of talent when staffing.

Generation Now would rather do business with someone who reflects their circle of friends than with a gray-haired sage.9 Technology is increasingly important. Attracting them as clients and keeping them happy means offering multiple options, from access to online advice to 24-hour resources.

The key is figuring out how to pay for all those options with less revenue from assets under management, but if your firm is in it for the long haul, it’s the best way to ensure that you’ll get your fair share of the $30 trillion.

1 Serebrin, Frank, “21 Reasons Why RIAs Should Not Ignore the Baby Boom Generation,” iris.xyz, January 7, 2016 2 Osterland, Andrew, “Advisors brace for the $30 trillion ‘great wealth transfer’,” CNBC.com, June 16, 2016 3 Clark, Bernie, “Generation Now and the Impending Wealth Transfer,” Investments & Wealth Monitor, July/August 2016 4 Osterland, op. cit.

5 ibid.

6 Osterland, op. cit.

7 Clark, op. cit.

8 ibid.

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