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What I learned from four failed attempts to find a successor for my $1.5-billion AUA RIA

Dennis Gibb finds that replacing himself after 40 years is no easy task -- and he may not try again

Wednesday, February 27, 2013 – 5:04 AM by Dennis Gibb
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Dennis Gibb: There is a snake in the garden.

Brooke’s Note: Dennis Gibb is old-school. He knows it, and you’ll know it when you read this article. What’s fresh and new here is his expose of his own tough experiences in trying to pass on his business to a successor — including one stretch where he was simultaneously battling cancer. He’s intimated to me that at 66 he is likely to call off retirement and may, in fact, find new ways to build his business. See: Two senior UBS brokers pass on retirement to pursue aggressive breakaway plan. He says: “I do 3.5 hours of aerobics per week, cross-country ski, hike and fly-fish. My maternal grandmother lived to 105, and my mother is 96 and voluntarily gave up driving last year. I expect to be here for a while.” Dennis previously wrote this article: One RIA in Seattle confronts Occupy Wall Street and writes a tough-love letter

I am a dinosaur in this business. I started in 1973 and I built my business by pounding the phones 100 times per day for years, learning the business as I went along. My practice in those early days was just that I was practicing on people’s trust and money so I could learn my trade.

Almost 40 years later I truly have a practice where my firm and I contribute to the betterment of a series of very loyal clients, We have $400 million of high-net-worth assets and we advise $1.1 billion of Native American assets. We have 35 tribal clients and 75 client relationships with 125 to 135 accounts.

Uninvited reptile

But there is a snake in the garden.

When I turned 60 (I’m 66) I began to think seriously about the transition of my firm. I had given it some thought before and actually given the thoughts some actions but turning 60 was the beginning of really serious focus. See: UBS brokers break away Mississippi style and a bass-fishing ex-Merrill broker comes out of retirement.

When I started my current firm I decided not to name it after myself so it would be easier to transition to a new owner. As I began to study the dynamics of my business I realized that it would have to be a different sort of action. The firm’s business is made up of consulting work for Native American organizations and high-net-worth individuals. The Native American business was most identified with me personally, as opposed to the firm, and was likely not to have any value to a new owner. So the trick was to find a person or person who could continue our standard of care with individuals.

I have made four attempts to find a successor. The first, in 1995, was a friend with an engineering background who was trading his own and his family’s money. It didn’t work; he did not want to do the hard work that comes with financial advisory, he conceived of himself sitting in front of a screen trading all day, so it was a mismatch of needs and wants. See: Have an aversion to succession plans? Consider a continuity pact as a vital baby step.

The second, in 2000, was woman in her late 40s who was a CFP and wanted to complement my clients by adding a financial planning component to our palette. We negotiated for some time about the terms of an arrangement and at the last minute she decided to get married and run her own financial planning practice from her home. Neither the marriage nor the practice survived.

Crumbling partnership, marriage, markets

The third, an effort that spanned 2006-09, was the biggest disaster. This was a man I had known for 25 years and worked with at the now-defunct Bear Stearns. He was a highly successful fixed-income sales trader who had retired but then realized he was bored without the stimulus of the markets. He did not want to go back to the sell-side and contacted me about joining the firm to develop a fixed-income management product.

At the time I was in contact with some very large fixed-income investors in the form of my Native American clients who needed help. I was blinded by confirmation bias — I saw what I wanted to see and heard what I wanted to hear and I rejected or ran over anything that differed. He joined the firm and the Native American bond business did not develop because of the conflict between me acting as their investment consultant and the firm also being an asset manager.

When the fixed-income idea did not work, I realized that he had no desire or capacity to develop a business. He just sat there looking at his Bloomberg screens all day. His uncertain and expensive private life also became an issue. All of these things I should have seen but for my confirmation bias. Things got a lot worse in 2008 when he lost all of his personal money by being invested in Freddie Mac and Fannie Mae preferred and being unwilling to sell despite constant pleadings from me.

In the end, I had to fire him, and an employment contract that we jointly modified and signed without lawyer review led him to litigate me. I should point out that this came right after I had finished treatment for bladder cancer, watching my 33 year marriage dissolve and that little problem in the financial markets in 2008.

Last-minute jitters

When all the dust settled, the litigation cost me about $100,000, which I considered a victory given what his initial demand was. I had fronted him a lot of salary for 24 months, and had a very expensive Bloomberg contract that had two more years to run.

I took a break from this self-flagellation until the middle of 2012 when I was approached by a woman I had known for many years; in fact she had once worked for me. She had gone on to be a successful representative at a major wirehouse but was tired of the compliance restrictions and the lack of freedom to practice her business.

For six months, we talked and discussed the nature of my firm, her business, her reasons for wanting to go independent, what our joint expectations were. We met with an organizational psychologist to see if we were compatible.

After all that we actually set a target date for the transition and began to work with our custodians about how to transfer the assets with the least trouble. I canceled all personal and professional travel for the first quarter of 2013 to work full time on the transition.

As the weeks passed, problems developed: Some assets might not transfer; she would not get mutual fund trail commissions, so those share classes would need to be changed; she had a retention note and her pay would be interrupted for a short period during the transition and so on. All of these are normal in this type of movement, and I thought I had given her assurance that the pay and note issues would be covered by the firm.

Finally, in the first week of February she freaked out and laid out a whole raft of false trails about why this was not right. They were all false as they were cover for the real issue: that she could not find it in herself to take any risk or to place any faith in either me or the future. She lost sight of the forest for the trees. While the breakup was not financially costly, it was costly in that most irreplaceable commodity — time and it was devastating for me psychologically, to be so close, want it so badly, to see the benefits for her and then to lose it.

Lessons learned

These days, I am rethinking the whole strategy at this point and not actively seeking a successor — I may go the toe-tag route. So what have I learned from this that might be useful to myself and others?

1. To be controversial, women have a more difficult time with entrepreneurial decisions than men
While ego is part of all humans, big ego is distributed more to males and nurturing to females. In the end, the decision to go out in your own direction is based in an ego that says that you will do this or die trying. In many cases women get to the precipice of the decision that will introduce uncertainty and risk to their lives and they opt to be less bold. See: Eavesdropping on the Women Advisors Forum: Rainmakers share their secrets. Hint: They revolve around finding a niche.

2. Financial advisors at major wirehouses are no longer as entrepreneurial as the past
For many of those of my vintage, the investment industry was one of only a few choices of occupations. It was a classic forced entrepreneurial situation (although most of us couldn’t spell the word). We had nothing except a desire to make a living and a place to sit from which to build a business.

Yes, the firms helped with their support and advertising but they also got the lion’s share of our commissions. Sometime in the mid- 1990’s there seemed to be a change, and wirehouse reps started to move from being investment experts to becoming more client- facing with strong incentives to turn money raised over to experts and spend their time cultivating clients. This trend accelerated after the bull market ended in 2000. Today, many reps have inherited a good portion of their book, and since they did not develop it by their own personal efforts have less of an equity feeling about it. Many of their assets are encumbered by various wirehouse programs designed to insure the assets at least remain in-house.

The result has been that many wirehouse reps are not willing to give up the certainty of a large firm for the daily battle for survival of the independent; more are unwilling or unable to give up the compensation arrangements. This was the problem with my second and fourth attempts.

3. The more impressive the current business owner is, the more difficult it is to find a successor
I will not be arrogant and say that I am so special that no one can replace me, but in all of our cases we have found ways to do things that work for us, and they might not, if fact will not, work for others. The more unique the skill set, traits, intellectual capacity and ethical value system, the more difficult the transition will be just because fewer people will feel they can succeed. See: What to make of Mark Hurley’s latest prophesy that most RIA firms will go out with a whimper.

4. There are few good options for those of us who built these firms
You can sell to a conglomerator, but to get a good value you need to have commodity-type accounts. You can bring someone in to succeed and buy you out over time, but valuations are an issue, as is the fact that the departing person is essentially getting paid with the fee they developed, so there is little new money in the firm. You can attempt to sell off individual relationships over time, which seems sort of cheap, or you can run it until you leave with a toe tag and just make as good a living as possible and leave the big payday out of your plans. Most independent businesses do not survive the first generation of owners; why should our businesses be different? See: Favorite succession plan of RIAs remains the same: none at all.

5. Regardless of how qualified the person(s) are that you are thinking of bringing in as successors, and how eager you are to realize the value of the firm, the most dangerous thing is confirmation bias
If you don’t think you can avoid it, find a dispassionate third party to work the deal. This is a very tricky thing, filled with people of high self-esteem and ego, and the chances of something blowing up are higher than those of success.

Final Note: Dennis Gibb says that he is one test away from being considered clear of cancer. Here is an interview I did with him for InvestmentNews in 2006.

During his 37-year investment career, Dennis Gibb has held senior positions at DuPont, Walston, Dean Witter, Morgan Stanley and Bear Stearns. In 1989, he founded Sweetwater Investments Inc. of Redmond, Wash., which currently advises in excess of $1 billion in client assets.

Mentioned in this article:

Sweetwater Investments, Inc
RIA Welcoming Breakaways
Top Executive: Dennis Gibb

William Stanert

William Stanert

February 27, 2013 — 10:24 PM
After many years as a wirehouse rep, I recently started an RIA firm.

The question of succession planning is an interesting one. I know RIA owners who have said they plan to die with their boots on and not worry about ever selling the practice. That is a decent fallback option but my thought is to build a sustainable practice that would have value if I sold it 15+ years down the road.

It might take some work to sort through candidates who might not genuinely care about the clients who have entrusted their financial future to you or who don’t match your personality and work ethic.

I would keep an open eye for the right fit. I will guess that there is someone out there who appreciates the work you put into building your practice and who you are comfortable with.

William Stanert
Moondance Investment Advisors LLC

Elmer Rich III

Elmer Rich III

February 27, 2013 — 9:44 PM

We are doing more M&A work and have been successful – so far. Except one client said “Sue me for your fee.” after they got their check. So we are.

Frankly, the succession situation is a mess. It is a whole other skill from running a shop. No one is prepared. Our clients are often their worst enemies. They undervalue their firms. They fall for silly promises e.g., the roll-up failures of the past.

But it has to be worked thru. We represent buyers and sellers and sometimes both on a transaction – fully disclosed, of course. It is critical that sellers maximize the value of theri lifetime investment to fund , now extended, retirements and family goals. It is equally important that buyers optimize return on the investment.

If a transaction is not set-up as win-win for both sides with similar incentives — something is wrong.

But it is hard, specialized work.

Maria Marsala

Maria Marsala

March 3, 2013 — 10:24 AM

I never looked at myself as a dinosaur. Only as a gal lucky enough to have worked at ML, Reynolds and Bear Stearns at a time when “your word was your bond”. And as you said, chances are you have many more years to run your business, etc.

The women you’ve been dealing with unfortunately have lacked the entrepreneur spirit — but so have the men.

Entrepreneurs will seek you out to partner with if they know you’re look’n . Most I know are fairer than fair.

As I read your story, I thought about the perseverance you’ve had. It’s evident that you really care about your clients, and honestly, no one else will do so the way you do…. at least not for many years as they build their own relationships with them or others.

There are many ways to exit a business; I think I’ve come up with at least 15 ways. I don’t recommend the “drop dead at your desk way”. That will only hurt your business, clients and whoever in your family has to clean up the mess of owning a business, but not being ready to do so.

I didn’t understand why a Native American financial advisor… or two… couldn‘t be added to your firm and keep the legacy you started alive and kick’n. Junior advisors who you hire to help you build your firm, you mentor (and work less) and if you want later on, you create an ESOP.
And as someone mentioned, your firm can be sold.

Lots of other options then taking on a partner, who buys you out.

If you’re ever on the Peninsula, look me up. I’d love to reminisce. Just never call me a dinosaur and always call me a New Yorker.

Karen Huey

Karen Huey

March 2, 2013 — 2:41 PM

First on your observation regarding women, I wish people would get over the idea that the expression of personal opinion is somehow inherently “sexist” or “racist” or whatever. People are different, and in this case one particular difference, present in some of your specific interactions, had an impact. I am not offended by you including that in your observations.

That said, you have taken the approach of looking for someone to take your captain’s chair. So far, no luck. Have you considered looking at it from a different direction; perhaps take your firm to another firm. I own a compliance consulting firm and have a lot of dicussions around succession planning. There are many firms out there looking to grow by acquisition. The basic model is that you could take your entire practice in a sort of 'pod’ underneath the 'mother ship’ of another RIA. You would continue to operate for some time as a separately identifiable business unit of XYZ Advisory. Other portfolio managers of XYZ would begin to work with you in managing your clients’ assets. This gets the managers familiar with your clients and your clients comfortable with the new firm. Over time you gradually step back further and further, until you are finally able to retire.

There are many ways to work out the compensation arrangments so that you and the 'mother ship’ firm are both protected and so that both benefit.

Just a thought you might want to consider. I hate to see the “toe tag” approach to succession planning. The clients are not well-served, your heirs are not well-served; no one wins in that situation.

good luck!

E Forbes

E Forbes

June 3, 2013 — 4:25 PM

Does dying with your boots on really hurt your clients anymore than a succession plan? In the end your clients are not dealing with you, the original broker they selected.

When a broker leaves a firm to start an RIA or to go to another firm, the clients are often shuttled to a broker they don’t know. Some stay, some don’t, but in the end all manage to quickly find another broker that is a good fit after a few consultations with the many fine brokers out there.

I think hope is a good thing, too. All the best doctors offer their clients hope while managing their expectations. Hope in many cases can make or break a situation, particularly a healing recovery.

Hope is just another way to stay positive.

As for dying and leaving the business to an unprepared family member. Well, it doesn’t take a genius IQ to find a business evaluator to sell the business or the client list.

Besides, maybe learning how to sell a business is a good life lesson for children or other relatives. Challenges are always a way to grow and learn. Embrace them.

As for the observation that all the “boomers are rushing for the exit at the same time.” So what?

The cream always rises to the top. Then, too, there is theory of “natural selection” You know how it goes: “A rabbit that runs faster than others may be more likely to escape from predators, and algae that are more efficient at extracting energy from sunlight will grow faster.”

The same applies to brokers heading for the exit…...only the fittest survive.

The best and brightest survive and thrive and the less fortunate, fall by the way side.

E Forbes

E Forbes

July 18, 2013 — 2:51 PM


Re: Folk wisdom, you ask: Do doctors use it anymore?

A quick google search will show you that yes they do. Particularly the cutting edge, most progressive doctors and all medical professionals.

Increasingly research into herbal extracts rooted in folk wisdom are being investigated for use as powerful extracts in pharmacological formulations.

In addition, they now routinely use leeches to suck up blood and pus in wounds. Also, their anticoagulant properties are used in limb re-attachment procedures.

Maggots are now used to eat away gangrene infections without harm to normal tissue.

These were all original only used in folk medicine.




Life requires multi-dimensional thinking. There is always more than one way to accomplish a good end.

As for harm. Life requires risk. There is nothing in life that is 100 percent harmless or risk free. Every action has the potential to bring good or harm, depending on many factors, including a succession plan poorly handled.

There is presently no legal requirement to have a succession plan.

And, as mentioned, if the assets are held appropriately with a regulated agency. There will be no disaster.

Inconvenience…..., yes. But no disaster.

Elmer Rich III

Elmer Rich III

February 28, 2013 — 1:32 AM

Doubt a doctor, lawyer, engineer, pilot or financial advisor wants to be paid for hope. At least none I want to use.

Brooke Southall

Brooke Southall

February 27, 2013 — 10:44 PM


Hope may not be a strategy, a nice cliche, but it’s a prerequisite.


Gail Graham

Gail Graham

February 27, 2013 — 7:51 PM

Hmm….let’s see, divorce, several failed attempts to build relationships that would allow succession. Women just don’t get it do they?

Really? Funny, because I know a lot of women advisers, women entreprenuers and risk takers. Wish you luck next time.

Wendy J. Cook

Wendy J. Cook

February 27, 2013 — 8:06 PM

By the way, I thought of another good source for robust succession planning: Brian Lauzon of Advisor Assist. Check out this interesting interview recently posted: http://blogs.cfainstitute.org/investor/2013/02/19/positioning-your-firm-for-the-equity-bull-market-in-wealth-management/. His “practice versus business” assessments seem spot on to the conversation at hand.

Mitch Vigeveno

Mitch Vigeveno

February 27, 2013 — 8:03 PM

Dennis – I sympathize with the issues you have had trying to find a successor but, in truth, I am not surprised. As an executive search professional and someone who was also in the financial services business for the better part of 15 years, what happened to you was almost inevitable. In each of your 4 attempts you tried to make a successor out of someone who was available and handy. We have an old expression in the recruiting business, “Pop-Ups become Poop-outs”. From what you have said in this article there was no attempt to define in writing the qualifications of the proposed successor you were looking for or the deliverables that were expected from the individual who took this position. You simply tried to make a go if it with people you met or knew. When businesses have a need to fill a mission-critical position, they typically turn to a good executive search firm to help them define exactly the person they seek, to help them source, identify and evaluate the best talent available in the marketplace to fill that position, and then to help them hire that person on the most favorable basis possible. Unfortunately, good retained executive search is not part of the typical venacular when trying to find a successor for an RIA. I am trying to change that. Send me your email and I’ll send you some more information. Mitch@tpisearch.com

Dennis Gibb

Dennis Gibb

February 27, 2013 — 11:50 PM

To all the ladies out there who think I am some sort of prehistoric creature I have no apology for my thoughts they are an opinion based on experience. If the characterization does not apply to you then why the snarky comments, did you read any further or did you just stop becuase you felt insulted? By the way 60% percent of our clients are women and as you can tell from my picture it is not becuase I look like Tom Cruise, so my prehistoric approach must be doing something right with some women.

Elmer Rich III

Elmer Rich III

February 27, 2013 — 10:35 PM

The idea that a good fit will come along — is old thinking — and can produce bad results or no results. Succession planning and execution needs to be made a line-item business project, like any other.

If people are serious about buying or selling they need to plan, fund and execute in a profesional and disciplined way. “Hope is not a strategy.”



February 27, 2013 — 9:39 PM

Darn those flighty women, they screw up everything !!!

Wendy J. Cook

Wendy J. Cook

February 27, 2013 — 6:11 PM

I urge any RIA who espouses or is open to espousing a passive investment strategy to be in touch with Adam Birenbaum at BAM Advisor Services to hear a very different — and considerably more productive — viewpoint on how to think about and approach successful succession planning. I would say more but, as a woman, I’m too busy nurturing a headache after reading this.

Elmer Rich III

Elmer Rich III

March 2, 2013 — 9:29 PM

Lol like the toe-tag metaphor, smart and accurate, although we see more the “ ombie” approach — the firm that is mainly the “walking dead”. Hope that isn’t unkind!

What we are also seeing is all the Boomer owners rushing to the exits at the same time. Not pretty. Then apparently there is even more of a dearth in the age cohort that will buy and run these firms than demographers were thinking.

Elmer Rich III

Elmer Rich III

June 3, 2013 — 7:18 PM

Not sure how folk wisdom sayings and aphorisms are relevant to the hard business realities of transitioning a professional practice, overseeing client’s wealth, beyond the few older original owners.

Maybe these kinds of practices cannot deliver professional services to clients beyond the effective working life of the few individuals who control the firms. In fact, since this is the first generation to face this test, we will have to see what happens.

Probably best to not be overly optimistic. We, in our M&A consulting role, have seen many more bad outcomes than good. Some shockingly destructive for clients, employees and families of the owners – and the owners themselves.

E forbes

E forbes

June 11, 2013 — 5:25 PM


Do you see no value in folk wisdom? Is your consulting firms wisdom the only that has value?

I agree that old sayings and aphorisms only hold value when relevant to a particular situation, but they are always rooted in collective wisdom culled from collective life experiences. Take what you need and let go of the rest.

If the assets are held, as they should be, with a regulated business, there will be no disaster. The sky will not fall, If the business is a run in a legitimate manner from the getgo, whether or not the owner dies with his boots on or has a succession plan in place.

I am not against succession planning, if one wishes.

In fact I am forming a consulting firm to advise people how to create one, if they wish.

Some people need to leave that legacy for their egos. The business was their creation and they want it to live on after they are gone.

Elmer Rich III

Elmer Rich III

June 11, 2013 — 7:30 PM

There are two questions about folks wisdom: 1. Do doctors use it anymore? 2. In professional matters no, not only is there no value but there may be harm. I know AA says “...leave the rest.” but for professional matters the standards are a lot higher – by law. However, folks wisdom is clearly the basis for most sales activities and media.

We have seen many instances of owners, clients, staff and inheritors hurt thru no succession planing rather than successful ones. But maybe we only hear about and see the hard cases.

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