Whenever a financial advisor is starting a new firm – whether it is because they are breaking away to the independent channel, or simply just starting a new firm from scratch – there’s a lot to deal with, but one seemingly simple question that tends to stump most advisors is what to name their new advisory firm. Of course, clients will still be hiring you – the financial advisor – because of your skills and capabilities, not your firm because of its name. But nonetheless, the name represents the identity of the firm, and the brand that you will build. Which raises the question: if you are the primary advisor, should you simply name the advisory firm after yourself? And if you plan to build an advisory business beyond yourself, does that mean you need to avoid having your name on the door of the firm?
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss when it is good idea to go ahead and name your advisory firm after yourself, the scenarios where it can create challenges, and why ultimately whether your advisory firm grows into a business or not is much more about the mindset you have for your business, than whether you put your name on the door (or not)!
From the perspective of getting clients and building business, one of the greatest challenges we face in financial planning is that we sell an intangible: “advice”. Financial advice isn’t something the prospective client can pick up and look at in a store, and consequently he/she has to look to other intangibles to decide whether to work with you as a financial advisor. Large national firms can rely on being a recognized brand to attract new clients, but most advisory firms are too small to rely on national branding alone. Instead, they get their clients by building a personal relationship with them, to become someone the client knows, likes, and trusts. As a result, most solo financial advisors simply put their own name into the advisory firm name… as in the end, if you’re John Smith, and you call your firm Smith Financial Planning, it simply helps connect the consumer to you!
Indirectly, however, this actually illustrates the second key issue when it comes to naming your advisory firm, and whether it’s a problem or not to name it after yourself. The question is: what are you really trying to build? Are you trying to build a real, standalone business? Or is your business simply an extension of yourself? If your firm is meant to be founder-centric, then by all means call it Smith Financial Planning. But if you want to build a business that is bigger than just yourself, do you need to have a more “generic” name? The prevailing view out there is “Yes”, but the reality is that there are a lot of big businesses named after founders, that have had no trouble being successful even though the founder’s name is still the company name – including Ford, Dodge, Chrysler, Deloitte & Touche, Merrill Lynch, Morgan Stanley, Edward Jones, Raymond James, and Charles Schwab, just to name a few. Ultimately, the founder’s name wasn’t just about the founder, but became a brand that represented the company itself… and in most cases, the company named after the founder has already outlived the founder themselves!
What really distinguishes companies that grow beyond their founders into businesses is not whether the founder has their name on the door or not, but whether the founder has a mindset to build a business beyond themselves. In point of fact, many advisors who do want to build big businesses ultimately create a name for the business that is not their own… but not because it’s necessary to build the business and attract talent. It’s simply that the naming decision reflects what is already their mindset to build a business. By contrast, many/most advisors who name the business after themselves have a desire to create an owner-centric practice in the first place… and so naming after themselves is only natural (but it is an outcome of the mindset, not a cause of whether the business grows or not!).
There’s also the common question of whether a founder-named business limits its ability to be sold in the future… and whether an advisor who wants to sell the firm someone needs to not have their name on the door. But the reality once again is that the answer to this question comes down to mindset – in this case, the mindset of the buyer, and what he/she is looking to do. Does the buyer want to build their own owner-centric firm? If so, then they may want their name on the door, and it is possible a generic name will make that transition easier. But if the buyer is interested in buying and growing a business, the reality is, the buyer buys the business, and its brand, not whether the founder’s name is on the door. For instance, Edelman Financial has been bought and sold more than once over the past 20 years. It still has Ric’s name on the door, but that name is not a limiting factor when buying an institutionalized business… and in fact, the brand is the asset to the buyer!
Ultimately, the fundamental point here is that what really matters is not whether the founder’s name is on the door, or whether there is some neutral name instead. But rather, what matters is your mindset as an advisory firm business owner. Are you trying to create a business that’s bigger than yourself? Or are you trying to create a practice that’s built around yourself? For many who are trying to build a business bigger than themselves, they will often pick a neutral name, but it’s really not a necessary factor for success. Instead, it is simply a signal of their intent. Because in the end, if you want to build a business that’s bigger than yourself, you can absolutely do it… “even if” your name is on the door!
(Michael’s Note: The video below was recorded using Periscope, and announced via Twitter. If you want to participate in the next #OfficeHours live, please download the Periscope app on your mobile device, and follow @MichaelKitces on Twitter, so you get the announcement when the broadcast is starting, at/around 1PM EST every Tuesday! You can also submit your question in advance through our Contact page!)
#OfficeHours with @MichaelKitces Video Transcript
Welcome, everyone! Welcome to Office Hours with Michael Kitces. For today’s episode, I want to talk about names, and specifically what to name your advisory firm. I find this a topic that’s coming up more and more lately. Not only because a growing number of advisors are going to independent channels and starting firms, where they have the control and the responsibility to actually come up with the name for the business. But also, because a growing volume of advisory-firm mergers and acquisitions, as well as succession plans, this conversation is coming up more frequently.
Today’s question comes from Scott. Scott recently asked in the VIP Group for XYPN Radio Podcast:
“How do advisors decide on a name for their company? Do I lose points if I just do the common ‘My last name Financial Planning’? Or is that okay if I plan on staying solo in my career anyway?”
I love this question, Scott, because I think it actually captures a couple of different issues that are really important when you’re thinking about an advisory business, and how to hold out and represent yourself to the public.
Is It Good Business To Name Your Business After Your Name? [Time – 1:24]
So first and foremost, let’s talk about this from the client and business development perspective. Now, as I’ve written about in the past on the blog, one of the biggest challenges that we have in just trying to get paid for advice, is the fact that we’re selling this intangible thing: “advice”.
It’s hard for consumers to know which advisory firm will give good advice and which won’t, because it’s not like a thing you can pick up, look at, and manipulate in the store. Nor is it something you can test drive before buying. Which means a prospective client who’s considering whether to do business with you has little to go on, besides judging you.
Are you someone that I, as the prospective client, want to do business with? Now, for a large national advisory firm, so a company like Fidelity or Vanguard, consumers are aided in this decision about whether to do business with the firms because the firms have known and recognized brands. So I may not know the individual advisor I’m going to work with at Fidelity or Vanguard, but I feel like I know Fidelity and Vanguard. I know the name. I trust the company’s brand, and I trust that they want to serve me as the consumer, and so I’m willing to trust the advisor that I get when I go to do business with them.
Now, if I meet that individual advisor and I don’t like him or her, that’s still a problem and I may need to find another advisor at the firm. But that’s okay too. Because I trust the brand, I trust the company, and I know that they have a lot of advisors to serve me.
Now, unfortunately, for the typical advisory firm, you probably don’t have a very big brand. People don’t do business with you because they know and trust your firm’s brand name. They do business with you because they know, like, and trust you. People do business with people they know, like, and trust.
Which means it’s crucial to put the “you” into the business. This is why we try to meet with every prospect and get to know them. This is why it’s so crucial to have pictures and video of yourself on your website. This is why I don’t think it’s a negative, at all, to have your name in your advisory firm’s name. Because in the end, if you’re John Smith and you call it “Smith Financial Planning,” I think it just helps connect the consumer to you, John Smith. Because your name is on the door, people understand who’s in charge, who’s bringing in the value, where the buck stops for accountability, if they aren’t happy with the advice they receive.
So from the consumer perspective, I don’t think it’s a detriment to building an advice business by having your name in the business. With, perhaps one caveat, which is that if you’re telling clients something like, “I’m here to serve you for the long run, for the rest of your retirement,” and they can see by looking at you that you are probably going to retire, yourself, before they’re done with their retirement… Well, if it’s Smith Financial Planning and they’re clearly not going to be working with Smith for the rest of their lives, then they do want to know who they will be working with, and whether they’re really going to be working with Smith Financial Planning for the long run or not. Which means you at least have to demonstrate or explain what the continuity plan is for the client that you’re working with, and what your exit plan is.
Which means you at least have to demonstrate or explain what the continuity plan is for the client that you’re working with, and what your exit plan is, so that the client knows that they’re going to be served. That’s really a caveat of just solo practices, because it is accentuated to a client when you are Smith Financial Planning.
Is Your Advisory Business A Business, Or An Extension Of Yourself? [Time – 4:40]
Now, indirectly, I think this actually illustrates a second key issue when it comes to naming your advisory firm, and whether it’s a problem to name it after yourself or not. The question is, what really are you actually trying to build, a business or a practice? Because if you’re trying to build a business, a real, standalone business… Not just something that’s an extension of yourself and part of identity, and a way to get more substance and gravitas to the fact that you’re the advisor, and the clients work with you, and the business is centered around you.
If you really want to build a business, it looks different. Right? Because if you just want to build a practice, if it’s meant to be owner-centric, you call it “Smith Financial Planning” because your only plan ever is to be John Smith, the guy who delivers financing planning at Smith Financial Planning, then I think clearly it’s a fine strategy, the practice is an extension of yourself.
Your name is Smith Financial Planning, because quite literally it’s a business where Smith does financial planning. You can immediately start making that connection for prospects the first time they see the name of the business, because it’s called “Smith Financial Planning.”
But what about those in the other direction? Advisors who want to build a business, a real business that is bigger than just themselves and their own individual ability to serve clients. If your plan is to have multiple advisors who all serve the client, do you need to have a more generic or neutral name for the business?
Now, I know there’s a prevailing view out there amongst the advisory community that, if you want to build a business beyond yourself, you can’t have your name in the firm name. I have to admit, I think it’s wrong. I don’t think making it a business bigger than yourself requires that you take your name out of the business. Because the truth is, actually, that there are a lot of businesses out there, big businesses, named after founders that have the founder in the name. Ever heard of Ford, Dodge, Chrysler, Toyota? All named after their founders. Rolls Royce, as well.
It’s called “Ben & Jerry’s,” but I think we’ve accepted that neither Ben nor Jerry actually make our ice cream. Anheuser-Busch, Bacardi, Dell, Disney, Harley Davidson. Heck, Tupperware was named after a guy named Earl Tupper who sold kitchenware, so he called it “Tupperware.”
It’s not just for products. It’s for service businesses as well. Deloitte & Touche was made by Mr. Deloitte and Mr. Touche. Arthur Andersen, and then even our industry. Merrill Lynch was named after Mr. Merrill and Mr. Lynch. Morgan Stanley. Anybody want to guess the relationship between the founders of Solomon Brothers? Edward Jones, Raymond James, Charles Schwab.
The common thread of all these business is that, ultimately, the founders named the business after themselves, and then they created a business that was much bigger and beyond just themselves. So even though it’s the founder’s name in the firm name, we all get that you’re not really going to be talking to and working with the founder.
I mean, I know the ad still says, “You can talk to Chuck when you go to Schwab.” But I think we all get that no consumer actually gets to talk to Chuck Schwab at this point. What you get to do is talk to someone that represents the brand that Chuck Schwab created, and provides the services that Chuck’s brand promises to deliver.
Growing An Advisory Business As A Business Is About Mindset, Not The Founder’s Name [7:41]
But the fundamental point here is that what really matters is not whether the founder’s name is on the door, or whether you come up with some neutral made-up name instead. What matters is the mindset of the advisory-firm business owner. Are you trying to create a business that’s bigger than yourself, or are you trying to create a practice that’s built around yourself?
Now, I will grant that most advisors I see who are trying to build businesses bigger than themselves do typically pick a neutral name and don’t put their name on the door. But it’s not because it’s a necessary factor for success.
Instead, I think it’s actually more of a signal of their intent. Because if you’re thinking about making a big business beyond yourself, there’s really not always a reason to put your name into it, at the beginning, if your plan is to make it beyond you. But not because you can’t have your name in the business to succeed. Simply because if your plan, in the long run, is to make the business beyond you, you probably don’t feel like you need to put your name in, in the first place.
Conversely, for those who want to build a practice around themselves do tend to put their business in their name, because their whole intent is to build it around themselves. So why not name it after yourself?
But the key success factor here is the mindset of the advisor, not the name of the business. Because the truth is that if you want to build a business that’s bigger than yourself, you can absolutely do it even if your name is on the door, as was the case for Ford and Dodge, and Deloitte & Touche, and Merrill Lynch, and Raymond James, and Charles Schwab.
They built their names into brands. They made it mean something beyond just the idea that you’re going to get your car personally made by Ford, or the Dodge brothers, or your books settled by accountants named by Deloitte and Touche, or your investment accounts personally managed by a guy named Chuck Schwab.
It’s about the mindset of what you’re building, not the name on the door. Which is why even Ric Edelman has been able to build Edelman Financial Services into a $15 billion independent RIA with more than 100 advisors who work there, who are not Ric Edelman. He sold the firm and actually bought it back, and then sold it again, repeatedly over the past 20 years.
Can You Sell An Advisory Firm Named After The Founder? [9:40]
Which brings us to the last point I actually want to touch on, from Scott’s original question. Does it matter if you plan to stay a solo advisor or not? Like if you want to sell the advisory firm someday, do you need to not have your name on the door? Do you need to not name the firm after yourself?
The truth is, just as whether or not you can build a business with your name on the door or not, depends on the mindset of the founder who’s building it, the truth is whether you can sell a business with your name on the door depends on the mindset of the buyer. If it’s a solo advisor who wants to buy a solo practice and build it around themselves, then, as the new owner, most owner-centric practices end up being named after the owner.
Which means if you want to buy a practice and make it owner-centric after you, you may feel the need to either rename it away from the original owner, or it may be more appealing to have a neutral name, because it’s easier to sell to a successor owner who themselves is owner-centric. But that’s only true for buyers who want to buy owner-centric practices in the first place. What happens when the buyer has a business mindset and wants to grow, and build, and buy a business? You’ll find the name is really not such a big issue.
I mean, look again at cases like Edelman Financial has been bought and sold repeatedly. It’s still got Ric’s name on the door. It’s not fatal. The thing’s cruising. He’s trying to IPO it for a billion-dollar market cap, is the prevailing view, but it keeps his name, because he built the business, even though it has been bought and sold by other businesses.
I mean, I think about it. Have you ever set up a screen on the stocks in your portfolio that says, “Exclude any stocks that have the founder’s name in them, because they can’t be real businesses?” Of course not. You buy the business based on the metrics of the business, and you treat it like a business transaction.
Now, a buyer does want to see an institutionalized business, if that’s their mindset. So it’s not so appealing to buy a business that will fall apart if the founder leaves or retires. But it’s not about whether the founder’s name is on the door, it’s whether the founder’s name has turned into a strong brand unto itself, and means something more to the business than just, “Here’s the guy or gal who gives the advice around here.” Then, the brand is an asset to the buyer, regardless of whether the brand name happens to be the founder’s name.
That’s actually why Merrill Lynch is still Merrill Lynch and Schwab is still Schwab, and Ford is still Ford, because they’re not just founder names anymore on the door. They’re brands, which are business assets, not liabilities because the owner’s name is in the name.
But the bottom line to all this is just to understand that what really determines business value and sustainability is the desire of a buyer to buy the firm. Perhaps as a financial buyer, or maybe even just to work it and become a successor to the firm. But ultimately what matters is whether you treat the business as a business or not. Because if it’s an owner-centric practice, that’s fine.
You can make some very good money. It may be harder to sell, though, and harder to find a successor, and harder to transition. But not because it’s called “Smith Financial Planning.” It’s because you, John Smith, treated it like a practice that was an extension of yourself, John Smith, which means there’s no business when you retire and go away.
Conversely, if you want to build a business, a real business that goes beyond yourself, then it’s still not about the name and whether your name, as the founder, is on the door. It’s about what that name means, what it stands for, the brand it creates, and whether you make the whole business (including the name) have real business value independent of you as the founder. Which you can do regardless of whether your name is on the door or not and, if you don’t believe me, talk to Chuck.
So I hope this helps a little, as some food for thought around the dynamics of naming an advisory firm. This is Office Hours with Michael Kitces, 1:00 p.m. East Coast time on Tuesdays. Although, unfortunately, due to my packed calendar yesterday, we’re recording here on Wednesday morning. Thanks for joining us here at an unusual time, and have a great day, everyone!
So what do you think? Are breakaway brokers driven by a desire to keep more of their GDC? Do they breakaway over something else? Will we see an uptick in breakaways as post-financial crisis retention deals expire? Please share your thoughts in the comments below!