Randy Manley, 58, and Scott Miller, 57, have no intention of retiring from their advisory practice anytime in the near future.
“But we know we're not going to be working at the same pace in 10 years,” said Mr. Manley, co-founder with Mr. Miller of Lodestar Private Asset Management LLC of Alamo, Calif., which has about $300 million in assets under management.
So they've been planning on an internal transition to a younger partner, a process that should maintain client continuity and create some value for themselves.
The outright sale of a firm might work better if the goal is to cash out, Mr. Manley said, but “we're not intending to sell and bail out. Our intention is to gradually make our way out of the firm.”
Toward that end, two years ago, they hired Kevin Gray, a former broker with The
Charles Schwab Corp., with the idea of eventually promoting the 43-year-old to full partner.
“Right now, we're in the process of finalizing the terms” of the partnership agreement, Mr. Manley said. “The values, the chemistry — all that has happened. It's been a terrific match. Now the question is, how do we make [Mr. Gray] a full-fledged partner in the firm?”
Working through the financial terms is “a little delicate,” Mr. Manley acknowledged.
But with the level of trust the partners have developed with Mr. Gray, including a willingness to share financial data about the firm, they feel that an equity-sharing deal can be worked out.
“We're trying to formulate a way out on our own terms and at our own pace,” Mr. Manley said. In preparing to bring a younger adviser on board, Mr. Manley and Mr. Miller developed an incentive structure to accommodate future partners, as well as staff.
Working with consultant David Goad, they set up a manager incentive program, in addition to bonus pools, to reward those who bring new business to the firm, develop profitable relationships and deliver good client service.
“There are buckets to share the wealth,” Mr. Manley said.
Mr. Gray got a salary initially, plus bonuses from the programs.
Mr. Manley said he and Mr. Miller want to find another potential partner, but therein lies the biggest challenge they've faced in planning a succession.
“We've been talking to [potential hires] over the last six or seven years, and we've found just one really good partner to show for it,” Mr. Manley said.
In the meantime, during client meetings and events, “we're always putting Kevin on a par with us,” Mr. Manley said.
“We're not saying [to clients], "He's taking over' — that would be premature — but we're saying, "He's an adviser on the same level with us.'” Mr. Manley added.
“Over the last year or so, that message is getting through” to clients, he added.
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