Covenants for Surviving a Business Transition

Journal of Financial Planning: December 2012


Ross Levin, CFP®, is the founding principal of Accredited Investors Inc. in Edina, Minnesota. His book Implementing the Wealth Management Index, published by Bloomberg Press, is now available. (

It’s been said that we are in the transition business. Our best value often comes when people are contemplating those big changes that may involve either steps back or leaps forward. We nurture these clients, help them see possibility, and let them know that we are going to be with them regardless of how the path winds.

I am in transition. I am sure that I am experiencing the same things our transitioning clients feel, but I am having a much harder time nurturing myself. Our kids going off to college was difficult, but not like this. Getting married and staying married has been at various times fulfilling and a lot of work, but it never felt like a leap into the unknown. Nothing has left me as tense or uncertain as this gradual transition of our business to the next generation.

Let me start off by saying that I believe in the people in our company. There are more than 30 of us who try to abide by our purpose of improving the lives of those we serve. While I am biased, I think that they are smart and good people. So I realize that my issue lies with me.

Transitions Are Hard

I have never been under the illusion that I am in control of our business. While I certainly have had influence, so have my partners, my clients, the environment, and a host of other unexpected events and factors. But because my role in the company was one of strategy rather than operations, I felt that we could be nimble enough to adapt to what presented itself. We often moved slowly, building the company through continuous improvement rather than great leaps. But this transition is difficult because I feel that while I will be gaining other people as partners, I will be losing the partnership that Wil, Kathy, and I have built together.

More people create more complexity. Things have not always been easy with the three of us, but we have operated under the premise that we can work things out. Our commitment to each other led to a willingness to work with each other through the difficult issues. While our new owners will hopefully have the same intent, I am not naive enough to think that the relationships among five or 10 or 20 people will have the same glue as those of three. I therefore need to let go of my dream that all of our eventual owners will have great careers that end at Accredited. I am sad just writing this.

Ego Gets in the Way

I try really hard to keep my ego in check. I try to explore my role in relationships, share my vulnerability with my partners and the staff, and really believe that no one person is bigger than our firm. But at some level my ego is getting involved in the transition planning process. I know that my skills in building an organization have probably reached their limits. There are certain things a bigger organization needs that I am not the best person to offer. So in some ways, I am struggling with my relevance. I don’t believe that I am no longer important to the firm, but I believe my importance, as it should be, is continuing to dissipate.

Like the aging quarterback with the bad knees and the sore shoulder, I can’t scramble for the next first down. Instead, I have to be comfortable using my wits and experience for the dump-off passes and sweeps that others will execute for forward progress. I can lead, but I can’t be in charge. There are too many things that need to be done, by too many people who are far more capable than I am. So I have to try to figure out what I can do to contribute.

We hire staff whom I have not met, retain clients with whom I am not involved, and form relationships with outside professionals who may be aware of me more as a picture on our office wall than as the pulse of the firm. I am excited to watch the success of others and to help them grow. The shift in the firm is not for me to get smaller, but for others to get bigger. And I need to create the space for them to do so.

We Don’t Really Need Entrepreneurs

We create a false choice when we say that the people who work for us need to be as entrepreneurial as we were. There is a difference in betting the farm when we had nothing to lose and managing and growing a business rather than a practice. My instinctive decisions now need more structure. In fact, the next generation of leaders is probably more muted in their skills—and they need to be. The risks that we took in growing the business are not necessary. Risks still need to be taken, but because the stakes are higher the risks must be tempered.

The argument that we can’t turn over the business because the next generation can’t do what we do needs to be turned on its face. I wouldn’t hire me to work in my firm today, so why should I think that my future partners are going to bring what I brought to the organization? Our future leaders will develop relationships with clients and the community that will be different than those that I have formed. And that really is enough.

The Best New Business Comes from Taking Care of the Old Business

We have a $2 million minimum account size. I am 53. I am in relationships with people who meet our minimum. When I was 35, our minimum was $500,000. I was in relationships with people who met our minimum. While it is certainly possible for our younger planners to bring in accounts at our minimum, the majority of people with whom they will be involved probably will not have accrued that kind of capital. But our existing clients and outside advisers trust our wealth managers to act in their best interests. I believe that our younger planners will get new business from old business—either working with more of our existing clients’ assets or getting referrals from those satisfied clients.

I will still bring in community business. Because our firm is over a billion dollars, the outside clients that I engage should begin to pale with the inside referrals we obtain. Also, because I don’t intend to retire in the next 15 years, the staff will catch up to me with their personal situations and they, too, will be in community with those who meet our minimums. It’s unfair of me to criticize them for doing things that I was unable to do at their age.

The Firm Needs to Grow for the Transition to Work

I am not worried about my net worth. I believe that if we abide by our mission and take care of others, I will be taken care of. I have been taken care of. I am more concerned about creating enough opportunity for those behind me to be part of an enterprise that will allow them to have the financial success they would like while also living lives of meaning. In order for this to happen, we want the firm to continue to grow by adding value to the lives of the right clients.

We need to continue to contribute to the community because our success is aligned with our surroundings. The more vibrant our community, the more attractive it is to employers—and future clients. The more we help those less fortunate, the more we can realize that regardless of what we have, it is enough. This is not subtle. When we move from the scarcity thinking of always wanting more to a view of abundance, we can be happier in our jobs and do better work. When we recognize the contributions of our co-workers, we accept our interdependence and promote future growth.

My Next Steps

I have some covenants I need to make in order for my transition to go more smoothly:

  • I need to talk about what I am experiencing with others who also are going through this. My study groups provide a great source of support.
  • I need to be open with my issues and own them. I also need to encourage our future owners to be open with their concerns.
  • I need to believe that the best thing we can do for our clients is ensure that the firm will exist long after my involvement wanes.
  • I need to accept that things are going to be different than I planned.
  • I need to be as grateful to those behind me as I have to those ahead of me.
  • I don’t need to work on our culture but rather work on our purpose—improve the lives of those we serve. If that is in the forefront of all of our decisions, then our culture naturally follows.
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