A long-time advisor in his 60s is wrestling with a host of issues related to succession, ranging from bringing in new blood able to take the practice over to getting more marketing oomph from TV appearances.
For advice, we turned to our panel of experts: Chip Roame, managing principal of Tiburon Strategic Advisors, a Tiburon, Calif.-based market research and strategy consulting firm for financial institutions and investment managers; Philip Palaveev, president of Fusion Advisor Network, an Elmsford, N.Y.-based network of advisors; and Hellen Davis, president of Indaba Training Specialists, a management consulting and training firm in Treasure Island, Fla.
For the past 17 years, Jon Ten Haagen has run his own small practice in Huntington, N.Y. — and he's loved it. He briefly had a partner, but for most of the time he's been a solo practitioner. Now, at age 68, he's not interested in retiring from his practice, which has about $35 million in assets, but knows he needs to do something about it. He's tried to bring junior advisors into the firm over the years, but his efforts haven't worked out. At the same time, he wants to leverage his regular appearances on a local TV news show to boost his book and make his practice more attractive to potential buyers or new blood. But how to go about it?
As a child growing up in Glen Head, Long Island, Ten Haagen developed a passion for sailing, especially racing. He attended college briefly, but dropped out to devote himself to his racing, supporting himself with a variety of odd jobs, from driving a taxi to working as a bouncer in bars. He also tried to make the U.S. Olympic team, but was unsuccessful. Then, he was drafted to serve in Vietnam; luckily, he was assigned to the Coast Guard, thanks to his boating skills. When he re-entered civilian life, he got a job selling yachts. The timing wasn't great. It was during the oil embargo of the '70s, so business was slow. But he got to know a successful Merrill Lynch broker, who was interested in starting his own boating company and who convinced Ten Haagen to get into the financial services business.
Ten Haagen wasn't able to work for Merrill because he didn't have a college degree. So he asked his Merrill contact for a recommendation to a firm that might hire someone without a B.A., and ended up approaching a manager at a PaineWebber office in nearby Garden City. “The manager was smart enough to hire me, figuring that if I could sell boats for half a million dollars, I certainly could sell securities to people,” he says. He got his Series 7 and, a few years later, his CFP. Then, in the early '90s, he and another advisor with complementary expertise — Ten Haagen was an expert in investment and financial planning, and his friend focused on insurance and taxes — decided to start their own firm. The partnership didn't end well, however, and about nine months later, Ten Haagen found himself on his own.
Over the years, he tried out several junior advisors. Most recent was a wirehouse refugee who came on board for about two years, around 10 years ago. But, according to Ten Haagen, who paid the advisor based on commissions while providing sales training in cold calling, it didn't work out. Since then, he's spent a lot of time at local FPA meetings and in discussions with wholesalers looking for replacements. He mostly has his sights set on former wirehouse reps who may not have made the minimum assets cut and could take the practice over in a five-year period. Ten Haagen has no desire to retire, but realizes he has to keep looking.
Part of his effort to boost the appeal of his firm also includes his regular appearances on a local TV show. He produces a five-minute segment that airs about every three weeks. He posts the segments on his website, but he figures there's a lot more he could do to leverage those appearances as a way of not only attracting more affluent clients — his sweet spot is what he calls “middle upper managers who don't have the time to become experts in investing” — -but also boosting his firm's desirability in the eyes of a potential buyer or junior advisor.
I think this advisor needs to understand what he's up against. Solo practitioners, especially those with a pretty small practice, generally find it challenging to add people and do succession planning.
Let's start with the TV show. There's definitely a lot more he could be doing to take advantage of those appearances. Reposting the shows on his website is definitely a good thing. One of the beautiful things about appearing in the media is that when you get quoted, if you post it on your website, or even on your wall, you can get a lot of mileage from it.
In this case, he needs to ask for what I'd call the order during his TV appearances. I mean that literally. During the show you say, “I'm Tom Jones and I work at Jones and Company, and here's how you can contact me.” That might mean that his phone number or website address pops up on the screen. So he needs to position this information during his TV appearance so that people know how to reach him and that he's available for an introductory consultation.
This is a local show, and there's nothing wrong with being on local TV. In fact, that can be very effective. If he's appearing on TV regularly, and saying smart things, then he needs to make sure the TV station helps him to take his appearances to the next step.
As far as looking for another advisor goes, it seems to me he's taking the wrong approach — bringing in a small advisor who works on commission. An inexperienced advisor would want to work for him so he can benefit from his leads, from his book of business. I wouldn't want to join his business and work on commissions. I could work on my own and do that. What the new advisor would find attractive would be to benefit from marketing leads from this guy's TV appearances and other contacts, not immediately going out and getting more clients on his own. So that's another reason why it's important for him to figure out how to make his TV appearances generate more leads.
It means giving the advisor either a fixed salary or a revenue share. If you pay the person right, I don't think he or she is hard to find. I just think there needs to be a different model. He's not looking in the wrong places — the local FPA and so on. He's offering the wrong deal.
I don't think he has enough time and money to tackle succession by bringing in a new advisor. He can't afford to pay a salary right now, but a junior advisor needs a salary, as well as tutoring, mentoring and training experience. You can't expect the inexperienced advisor to produce revenues right away. If they could do that, they would be on their own already.
And once you bring someone in, if the person really doesn't have much experience it could take anywhere from three to 10 years for him or her to get up to speed. At the same time, there's always a risk bringing in a person to be your successor: What if it doesn't work? You spend, say, three years, preparing and then all of a sudden you find it's not going to pan out.
I suggest a very different approach. It would involve joining a larger firm he could partner with. I know of at least two or three practices in his area with guys in their 30s and 40s who would love to explore a partnership with him. He would maintain his independent practice, use their administrative support, and when the time is right to retire, they would back him up. So this advisor could keep all his own clients and revenues, but at the same time, use the resources of the firm. Then, when he wants to retire, they would just buy him out.
As for his TV appearances, they certainly can be very productive in generating leads. But it's important to make sure those appearances are happening in front of the right audience. You have to be aware that TV and radio are mass media. Generally, the shows tend to generate a cross-section of potential clients — a lot of mass-market consumers, with a few high-net-worth individuals as well. But the numbers are going to be in favor of the mass-market. So, I think he needs to examine who watches his show. Also, he has to remember that just because he is on a TV show, doesn't mean that people are going to call him when they need financial advice. Most of the time, people assume that the individuals we see on TV are more like characters, not professionals they can call.
He needs to do something as simple as buying a commercial or trying to display his website on the show. That would suggest he is actively looking for clients and is available. He needs to make a statement that he's a real person. “Hey, I practice here in your town, and you can give me a call.”
The thing about bringing in a young kid is that it takes a lot of time and energy and effort. He's bound to lose money on training with no guarantees. At this point, it may be too late.
My feeling is he should think about this issue in a new way. He needs to go to a firm with some advisors in their 40s, people who are 15 years or so younger than he is. Then he'd tell them he just wants an office there, with a view to possibly transitioning his clients in five to seven years. That means going with younger financial planners already running a practice, instead of people with little experience. Perhaps he'd find a practice with complementary clients — his market is the executive and perhaps theirs is the small business owner. There are plenty of guys out there who need someone like him.
And his TV experience could make him attractive to such a firm. Most investment folks don't have that. They don't even know how to break into that marketplace. So he can show that he's pretty well-known in the area because he's on TV. In other words, he would try to leverage his TV exposure, but not necessarily to win new clients or attract a new advisor.
To find potential firms, he should go to some FPA meetings and ask the older dogs whom they know in their 40s, what young and up-and-coming firms are there? He also should approach his broker/dealer. The regional representative should be able to suggest a few places. I'll bet he comes up with five or 10 names. Then, before he approaches anyone, he should make a list of what he's looking for in a firm. And he shouldn't go with the first one. There are a jillion practitioners out there who would be interested in him.
Still, even finding a firm that's a good fit will take a year or so. They have to find out if they really like each other, go through the dating phase, the engagement phase, the marriage phase when they feel comfortable doing joint work together and providing client referrals and he starts transitioning some of his clients over to them. So he needs to get started soon.