Famed RIA industry advisor Josh Brown says that Ritholtz Wealth Management’s headline-grabbing move to overhaul its succession structure is laying the foundations to build a “forever firm.”
Succession planning is one of the biggest challenges for advisory firms, with an aging workforce effectively creating a ticking time bomb for the industry. For many firms, the solution to this is selling to outside capital. But earlier this year Ritholtz announced a succession plan that involves expanding the company’s equity structure to 29 employees.
The plan involves the firm’s chief investment officer Barry Ritholtz selling a portion of his shares to create new equity for the company’s employees.
On Wednesday InvestmentNews caught up with Ritholtz CEO Brown at the Future Proof festival in Huntington Beach, which he co-founded, for an update on the succession plan. “So far, so good,” he said. “I think we surprised a lot of people in the industry because, you know, most firms, once they get into the outside capital game, the outside capital wants to remain in motion.”
“When a private equity firm makes an investment into an RIA, the intention is not to build a multi-decade business,” he added. “It's to improve the profitability, raise the revenue, and then have a bigger exit … and that's perfectly fine - we're just in a very different game.”
Co-founded by Barry Ritholtz and Brown in 2013, the large RIA is notable for resisting private equity dollars.
Brown also told InvestmentNews that his company is eyeing a very distant horizon with its succession plan. “We're thinking about 10 years and 20 years, and we're thinking about developing the talent of the people that are starting their careers with us,” he said. “We're thinking about their runway.”
“Anybody can stand on a stage or go on LinkedIn and say that,” Brown added. “Not everybody can actually do something where they put their money on the table and align their own interests in that direction. So formalizing that succession plan was a major signal to both our advisors and to our clients that we really do think of ourselves as a forever firm.”
At the time of its succession plan announcement in January, Ritholtz Wealth Management oversaw more than $7.6 billion in assets, a figure that has grown to $9.4 billion today.
Brown spoke to InvestmentNews after a recording of his Talking Wealth podcast with Roger Paradiso, executive chairman of O’Shaughnessy Asset Management and global head of custom client portfolios at Franklin Templeton.
Walking though the throngs at Future Proof, Brown said that the number of equity shareholders involved in the plan continues to expand and will expand every year.
“We have employees who become eligible based on, in part, their tenure with us, and our goal is to create as many employee shareholders as we can,” he said.
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