State of the Industry Podcast: “My succession plan needed a succession plan.” – Audio Transcript

Scott: Welcome to Allworth State of the Industry. I’m Scott Hanson, co-founder here. And appreciate you taking a little time to chat. We’ve got one of our partners, recent partners, actually a very recent partner, who’s gonna be joining us today and talk about her journey and her story, and why she chose, for a succession plan, to be part of Allworth, as opposed to other routes she could have gone. So, Laurie Ingwersen is joining us. Laurie, thanks for taking some time today.

Laurie: Scott, thanks so much for having me.

Scott: And first of all, your name, it is pronounced “Ingwersen.” Is that correct?

Laurie: That is correct. Good job. Yeah. Not always easy for everyone, but you’re pronouncing it correctly.

Scott: All right. Because it’s one of those that, is that W is supposed to be like a V, but anyway.

Laurie: It sounds just like it’s spelled.

Scott: So, Laurie, we’re recording this right at the beginning of October. And when is it that you officially closed to join with Allworth?

Laurie: We closed on June 30th. So, right before the 4th of July holiday, which was a little, we thought the timing would be difficult, but it actually ended up being fine.

Scott: Okay. So, maybe we’ll talk a little bit about that as well. So, give us a little bit of background on what the firm Harvest Partners, how is the firm organized, what’s the size, what kind of clients you served, etc.

Laurie: Absolutely. Yeah. So, it’s a family team. My father, Roger, started in the industry in the early ’70s, and I joined him in ’98. And we came from the wirehouse world. We were actually with Prudential Financial, eventually UBS, and then we went independent in September 2016. So, it’s a relatively small firm. There’s three advisors, Roger, myself, and Tim Mazanec, a relationship manager on the team. And then we had investment, financial analyst, we had an operations person, and two admin professionals. So, relatively small, $250 million assets under management. And our real niche was just working with the millionaire next door on making sure that they had a financial plan in place, and then implementing some advanced planning strategies that we would recommend, through tax mitigation, wealth transfer, wealth protection.

Scott: And the process you guys went through, maybe give a little background of when did you and Roger start discussing, like, what’s gonna make the most sense succession-wise? And what was that journey like?

Laurie: Yeah. So, we did have a succession plan in place for Roger, which, of course, was going to be me. And Roger is extremely active still in the business, and loves working with his clients, and has no plans to retire, but time marches on, and so we knew we had to make sure that we both were comfortable with what the next steps were going to be. So, as we were talking about, potentially, him slowing down, we decided that it was important for us to do our due diligence to see what other options there were out there for us. And so we talked to a number of different firms, and we got a very good education on what options are out there, what aggregators are… Sorry.

Scott: That process, sorry to interrupt you, but did you hire a consulting firm, or a banker, or someone to do a valuation?

Laurie: So, actually, we didn’t, and I know a lot of people do go through investment bankers, and they kind of put out offers, or they wanna get offers so they understand, you know, what is available to them. But I think what was more important to us was to find a company that had a similar culture to ours and that we wanted to work with. So, we didn’t wanna just have some numbers on a paper and that was going to be what made our decision. And so we talked to a number of firms, either through word of mouth, or going to different conferences. And I believe Roger learned about Allworth through the CIMA. There was a CE event in Arizona, and somebody spoke there. I apologize. I don’t know who it was, but he came back and he was very excited about Allworth. And so then we just started on this journey of meeting after meeting, and just determining who we felt, as I said in the beginning, culture-wise was a good fit. And Allworth was just at the top every single time, and not only just from the professionalism, to the responsiveness, to just, every meeting that was scheduled was so organized, and the follow-up was so great. We really, from the very beginning, Allworth was the top contender.

Scott: And I imagine you’ve had some thoughts and discussion in the past about just buying your father out…

Laurie: Absolutely.

Scott: …versus joining us. Maybe tell us kind of that journey, and why you ultimately decided to partner with us as opposed to figuring out how to buy your dad out.

Laurie: Yeah. So, it was in the plan from years ago, our operating agreement, we had the succession in place, and what that buyout would look like. But as time went on, we really just realized that we needed also a succession for myself. I’m not in my 20s anymore, and at some point, I’ll need to have somebody take over for me. And we felt that we would be in a better position to do this together, than to, God forbid, something to happen to one of us, and then we’re scrambling at that point to make sure that, not only, most importantly, our clients are taken care of, but also our staff is taken care of. So, they are depending on us, just like our clients are depending on us, and so that was the main reason that I felt that it was important for us to go outside of just the traditional succession with me buying him out. I also really liked the opportunity to de-risk myself. You know, buying him out is a risk that I am going to…

Scott: Yeah. You’d be doubling down at this stage in life, right?

Laurie: Correct. Correct. Doubling down where, to be honest, I really liked the idea of maybe unwinding a little bit myself, and reducing some of my responsibilities rather than increasing my responsibilities. And if I was going to reduce my responsibilities, that meant hiring more people, and increasing the size of the company, which at that point, I really wasn’t too motivated to do that.

Scott: Yeah. I get it. I was there at the same exact spot when we sold a majority stake to private equity about six years ago. And you get to a point in the business where you wanna keep growing, but you don’t wanna have to dip in your piggy bank to help finance the growth at this stage in… At least that was me, right? Like, you get to a certain stage in life and more money is not gonna make anything different, but less money could certainly change things.

Laurie: Yeah. Absolutely. That, and then just the cost of technology. I think the tipping point for me was having our annual cybersecurity assessment. And I’m on this assessment, and we just had one the year before, and every time we go on it, our IT professionals are there, and they’re talking a language I don’t understand, and all of a sudden costs are going up by $4,000, $5,000 a month, and I’m thinking, I’m going down the line, and I’m thinking to myself, “Well, this is just gonna happen annually.” And so, what happens to our profits at that point, when we’re putting it all towards cyber technology? So, being able to scale that technology with a larger firm, and partnering with a larger firm was very attractive to me as well.

Scott: It’s the cost and the complexity, right? I mean, you would think that with technology, things would be getting more simplified, but it feels like this industry gets more and more complex.

Laurie: I would agree. And also, I’m not an IT expert. I’m not a cybersecurity expert. I’m relying on these professionals that every time we have an assessment, every time we have a phone call, there’s always extra costs. And so, it’s a little frustrating to me to not know, am I doing the right thing? Am I not doing the right thing? Should I do it? Should I not? Now, I don’t have to worry about that because Allworth is taking care of that for me.

Scott: Someone else’s problem, right?

Laurie: That’s right. Exactly.

Scott: What are some of the other things that you felt good about offloading, that maybe you’re still in the process of, but looking forward to not having to deal with it again?

Laurie: Yeah, we’re still in the process. Yeah, I think some of the HR can be time-consuming. And even though, for a small company, there’s…actually, even in a smaller company, I think you rely so much on each person on your team that if somebody is sick or somebody’s out for an extended period of time, that can really hamper your ability to just run things efficiently. So, now we have backups that are just fantastic, and you have your own HR. Allworth has their own HR department that will be handling all of those assessments, and then they have leaders in the operations areas and the client service areas. And so, that kind of day-to-day management is still there because I’m on-site, but the more extensive work that goes on behind the scenes is being taken care of. And, you know, like, a healthcare plan, every year we have to assess these healthcare plans, and it’s very time-consuming. Or your payroll, going through a payroll assessment. And we’ve made changes over just the six years we were independent, and I think we changed three times for various reasons, and that was just such a time suck, when I really just wanna be working with clients and future clients, and networking with centers of influence.

Scott: Let’s kind of back up a second, because you were with a wirehouse. You left six years ago, seven years ago, right? Seven years ago.

Laurie: Seven years ago, yeah.

Scott: Seven years, established a business, of which you were able to get pretty good value for, right?

Laurie: Mm-hmm. Absolutely.

Scott: With cash and some Allworth stock, right?

Laurie: That’s right.

Scott: So, if you were still with the wirehouse today, and you wanted to do something similar, what would that look like?

Laurie: So, what that looks like is, as my father likes to call it is [crosstalk 00:11:23]

Scott: Because always perplexed. I’m perplexed why people still stay at the wirehouses. I’m like…

Laurie: I know. Because you spend all this time building a business, and you really don’t actually have the ability to sell it in the same way, right? So, as my dad likes to call it, it’s a POW exchange, basically. So, what it looks like is, you have a offer. So, they’ll give you a multiple, and everything is done, of course, very secretly. You can’t notify anybody. You’re not really supposed to be taking any information. So, there’s broker protocol information that you’re allowed to have on a spreadsheet. So, that takes a pretty decent amount of time to get that information together. And then you essentially get a promissory note. And that promissory note, you have to pay back interest on that promissory note. So, when you receive the offer, it looks extremely attractive, but when in reality, you are getting a pay cut to your cash flow, and you are not really receiving that true value as you thought. And if you have a team, where there’s multiple advisors and if you have an older advisor that shifts a percentage of his production to a younger advisor, well, then he’s taking an even bigger haircut. And then you’re locked in for a certain period of time. Typically it’s seven to nine years, and you’re paying that back over that period of time. But there are advisors, this is what they do to make a living. I know many of them that they go from firm to firm to firm, and they wait that period of time, and then they get another buyout, and so they get a kind of influx of cash. And then they’re just living on that over the course of a year.

Scott: And that’s the POW exchange.

Laurie: That’s a POW exchange, exactly. I coined my Roger Ingwersen. I don’t wanna take that.

Scott: That’s pretty good. But, I mean, it’s just amazing the value you guys created by setting up your own shop and going…

Laurie: Absolutely.

Scott: Yeah. And I imagine when you left the wirehouse and set up your own shop, the vast majority of your clients followed you.

Laurie: Absolutely. Yes. Really, we do a great job of being proactive with our clients. We’re in touch with them at least on a quarterly basis, but really, much more frequently, from monthly to every other month. And that means that we become really an extension of, I don’t wanna say their family, because that sounds kind of cheesy, but we are somebody that they confide in. We know a lot of personal information that they’re just not gonna share with everybody, because we’re in touch with them and we have close relationships with them. And I think that it does… You know, when you see the success we’ve had with transitioning, from the wirehouse to then going independent, and now independent to partnering with Allworth, you know, we had a very, very high success rate.

And so, I think that, for us, with Allworth, because we had Charles Schwab as our custodian, that made that very, very simple for them. Their statements didn’t change. They’re still using our old performance software. So, their client portal, and that transition will just, you know, I think that will be seamless once we go over to Tamarac. And so, for them, it was signing a few pieces of paper and understanding that now the name “The Harvest Group” is no longer, and now we’re Allworth Financial. And funny enough, we were sentimental about that, for sure. That was one of our maybe kind of angsts around the decision, was losing our name and losing our identity. And there were some clients that felt the same way. But, at the end of the day, they know that we are their team in Waltham. And as long as we’re still in communication and they still have access to all of us, they’re happy, because they’ve been happy with how we’ve worked with them up until now, and they know that’s not gonna change. In fact, we have more resources, a deeper bench on the investment management team, and all of those are just pluses for them. So, they understand that we did this with their needs in mind.

Scott: Did you lose any clients in the transition?

Laurie: We lost a couple. One was unfortunate because they had really just taken a turn health-wise, and their daughter took over the finances. And they lived in New Jersey and they had their own advisor, and so that was kind of easier for them. And then another client, which I am sad about in a way, but they weren’t necessarily an ideal client because they were not responsive. They were not responsive to us over the years. And when you’re making recommendations and you’re trying to…

Scott: They don’t call you back.

Laurie: …implement strategies… Correct. And they don’t respond to email, it’s really not an ideal client.

Scott: We’ve all had those.

Laurie: And at the end of the day… Yeah, exactly.

Scott: It’s like, wow.

Laurie: At the end of the day, they were more… Yeah.

Scott: You need to care about your life savings a little bit more, because…

Laurie: Exactly. Exactly. I have a strategy here that will help you save a lot in taxes. Let’s implement that. And it’s like, you know, they don’t call you back. But they were really performance-chasers, to be honest. And that’s not an ideal client for us either. We wanna manage the assets according to the risk they need to take. We’re not trying to have a hit-a-home-run and beat an index every year. And that’s just not the way that we work with our clients anyway.

Scott: So, we closed on June 30th. When did you notify your clients? And how did you notify your clients?

Laurie: So, we called all of our clients. So, we reached out…

Scott: Every one of them?

Laurie: Every one of them. Every one of them. So, we just hit the phones. And, yeah, it’s important for us. For us, because we’re in such constant communication, we wanted it to come from us, not an email. And so we spoke with everyone. And I would say that, let’s say, 85% of them were just, “Absolutely. No worries.” Some of them very excited that anyone that really has a business background or has owned their own business, they understand why you would make this type of decision. Some other people that maybe don’t like change, that was a little bit of a nerve, you know, nervous kind of phone call for them. But as soon as they had time to think about it, and maybe you had a second conversation, they were fine with that. And so I think we… I like to set records. So, we had over 100% of our assets come over. The market definitely helped with that a little bit, because of the performance in July. But I think we had pretty much all of those phone calls made within a couple of weeks.

Scott: Yeah, great. And so it’s been three months now. Let’s pretend it’s three years out. You’ve been in this industry since 1998. Like, what’s the ideal situation three years from now? What’s happened between now and then, and to where you feel really good about where you are in three years?

Laurie: I think I will be able to just focus on, as I said before, what I wanna do, which is working with my clients, and bringing on future clients, and helping Allworth grow. I mean, that’s, we all have a common goal. And being able to take a little bit more time for myself because I don’t have all of those additional responsibilities that I had before. And that part I really, really love. I mean, even just thinking ahead, we had just signed a new lease and moved our office, and all the work that went along with that. We had completed that in September. So, a year ago, we just moved into that new space. And not having to do that again is very, very exciting for me. So, yeah. I mean, I don’t see myself retiring at all. I’m gonna be here for the long term, because I really love what I do. And I’m loving it even more, honestly, now that I don’t have to do and think about all of those other areas, like compliance, and the IT, and cybersecurity, and HR, and even licensing. I don’t have to think about that anymore. I’ve got Justin that’s gonna take care of that for me.

Scott: And then, you had mentioned de-risking earlier. How has that impacted kind of your mindset on your business and future business?

Laurie: Well, it’s definitely a stress release, because, you know, we really pride ourselves on client retention, of course, and that’s still extremely important. But some, maybe older clients, that have 10 beneficiaries, and then they become an un-ideal client, or not an ideal client, because you don’t wanna have $10,000, $100,000 accounts from a one-million-dollar household. So, those types of worries, I don’t have. And then also, I don’t have to buy out my father, or his estate if, God forbid, something happened to him. I don’t have to take over an operating loan. I don’t have to take over the lease for our current space. So, you know, that de-risking has kind of just made me see a less stressful future. So, I don’t look out at the next, you know, couple of decades of trying to hold my head above water, maybe, or making sure that everybody’s needs are met. Now I know I have a team with me. I have a partner, really, in order to make sure that that happens.

Scott: Well, and my hope for you, Laurie, is that this next chapter in your professional career is your best chapter. So, I’m really excited you’re here. And [crosstalk 00:21:48]

Laurie: I appreciate that.

Scott: I’ve heard numerous times from folks at Allworth just how great the people at Harvest Partners are. And…

Laurie: Thank you.

Scott: Yeah, you guys really have a great…

Laurie: We think so.

Scott: Yeah, no, you were just all really genuinely nice people.

Laurie: Thank you. Well, we think that [crosstalk 00:22:05] about you, for sure.

Scott: Even though you’re in Boston.

Laurie: Yeah, yeah. Even though we’re Boston, exactly. Yeah. We’re watching “Winning Time” right now, so, if anybody has watched that, they know there’s a phrase about Boston in there. I won’t repeat it.

Scott: Oh, okay. Good. Well, hey Laurie, thanks a ton for taking some time today. And really glad you’re a partner.

Laurie: Yeah, Scott, thanks for having me. Yeah, this is great. I appreciate it. And again, we love Allworth, and we’ve really just enjoyed working with everyone here, so thank you very much.

Scott: Thanks a bunch.

Laurie: Okay. Take care.

Scott: Well, hey, if you wanna learn more about Allworth Financial and some of our other partner stories, and we’ve got some great white papers as well on what’s going on in the industry and whatnot, check out our website at allworthpartners.com. Again, allworthpartners.com. I think you’ll find it beneficial, and we’ll talk to you next time.

Announcer: This podcast has been brought to you by Allworth Financial, a registered investment advisory firm with the Securities and Exchange Commission.