Navigating Succession Planning That Doesn’t Turn Out As Expected (Even When You’re Doing Everything Right): #FASuccess Ep 501 With Rick Kahler

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Resources Featured In This Episode:

• Rick Kahler: LinkedIn | Kahler Financial Group
• Ellevate Advisors
• "The E-Myth Revisited" by Michael E. Gerber
• FP Transitions
• #FASuccess Podcast Ep 001: Rick Kahler on Entrepreneurial Persistence & Building a $200M AUM Practice

Full Transcript:

Michael: Welcome, Rick Kahler, to the "Financial Advisor Success" podcast.

Rick: Thank you, Michael. It is good to be here.

Michael: So I'm very excited to have you on the podcast. I should really say, to have you back on the podcast was for the hardcore binge listeners, Rick. Rick was episode one, the original episode almost exactly ten years ago. So now we're back for episode 501, because part of the journey that we shared on the very first podcast, Rick, you had built this wonderfully successful million-dollar practice. You were $1.2 million of revenue at the time, had been working for 30 years, team in place, eyeing towards the journey of succession planning. "This is what I'm going to do over the next decade."

And so, now, it's a decade later. We've gone through the succession journey, with all the ups and downs and bumps and bruises and things that come along the way. And I think it's an important conversation because, I know, the ideal for a lot of advisors is trying to figure out, "Is there a way I can craft my own internal succession plan?" Because they want to see the legacy of the firm continue. "This is what I built. This is the team and the culture we created. This is how clients are served," and hoping to see that continue beyond. But almost by definition, if we're getting ready to exit a business we spent a lifetime building, we've never done this part of the journey before. And ironically, I find a lot of advisors, once they go through a transition, they kind of exit stage left because they've transitioned on from that stage.

So I'm excited to get to catch up on...you've done the 10-year journey. How has it gone? How did all of this play out since episode one a decade ago?

Rick: So I'm a little grayer than when we spoke ten years ago. Probably even more gray hair added in the last three years. And it has been a journey. It has been a journey I would have never scripted, never would have imagined. Because what you said about most founders, folks in my position are wanting an internal succession, and they're wanting what they have built and the culture they have built to continue. And I think that's pretty ubiquitous. And it certainly was the case, what was true in my case, and what turned out was quite different from that and something I've really internally had to come to resolution to around my legacy being passing on my firm.

Rick's Original Succession Planning Vision [05:14]

Michael: So if I can start this off, I'd love to basically go back ten years and maybe just repaint the picture of, where were you? Where was the business at the time? And what was the vision? How did you want to go about this succession journey that you were queuing up? What was the plan?

Rick: Yeah. 10 years ago, I'd come through a rather rough period. I remember you asking me to be on the podcast and talk about where I was, and not about all your successes, a little bit about the bumps. And at that time, I think I told you, "All I have right now are bumps."

Michael: I still remember very vividly asking, at one point, a few years prior, I think you had six team members, and 5 of the six team members left for various circumstances in about a month. And I'd asked, "What do you do in that situation?" I think you said, "Just crawl into the fetal position and go to sleep for a little while." What else can you do? It feels like the world is ending. And then it was, "And then I came forth and hired a consultant and figured out how to rebuild this and had actually rebuilt to a very good spot at the other end of it."

Rick: Yeah, absolutely. As you said, we're at 1.2 million. I think, when I sold, I was around double that or maybe 2.2 or so. And the plan was, at that time, I had an associate, Sarah Swantner, and she was brilliant, had a double master's in engineering, and just a fantastic financial planner. And she was getting her degree in counseling, her two-year degree in mental health counseling. And that was the plan, about that time, was for her to become my successor. And we ordered all the documents from financial transitions, and we're ready to go. And we were doing some counseling just with the two of us, with a therapist, getting ready for succession, making sure everything was being discussed. We're being very proactive, right?

Michael: So talk to me a little bit more about what you were actually covering or trying to discuss there. Because I know you have deep roots in financial therapy world, but I don't necessarily hear a lot of advisors saying, "Went to counseling with a therapist to prepare the succession relationship." I'm not saying it's a bad thing.

Rick: No. Do as I do.

Michael: There's a lot of folks that get better with some therapy. But tell us a little bit more about that.

Rick: Yeah. It's do as I say, but not as I do. And it's surprising, probably, how many financial therapists have never done their own financial therapy. So she was a therapist. I think maybe she had graduated by that time. But to us, that's a positive. To us, this is a great way to explore a potential partnership and really get in and uncover issues and things that might present themselves. So we took that very seriously rather than just wade in.

Well, I've only had one remarriage, and on my one remarriage, we entered the prenup conversation, right? And we both agreed, "Yeah, yeah, this is a great thing. Yeah, we'll do a prenup." And as we did that, it became not such a great thing. And we discovered some things, and we ended up not getting a prenup, which is a story in itself. But it was kind of like that between us. We were doing the prenup planning. We were doing that planning. When you're going to go into partnership with somebody, that's really important, the discovery period. "Let's look through this. Let's decide what the divorce would be," the buy-sell agreement.

Michael: Yeah. Well, that's a powerful point to me unto itself. I've talked to a lot of advisors that I think just struggle. "We're working on a partnership, but do we really have to get a lawyer and do all the things and go through all the complexity of all the ways that you can craft partnership agreements or shareholder agreements?" Because it feels like a drag when we're so psyched about this partnership and coming together and building a thing. The agreements aren't there if it goes well. The agreements are for being there if it doesn't. In that vein, to me, it's very much like, it's not a marriage contract. It's a prenup in case there's a divorce. It's not a partnership.

Sometimes it can help to have the partnership agreement just to clarify expectations about the partnership. But a lot of that stuff is...it's the "in the event of divorce" parts that no one really wants to think about going into a positive relationship. These things do happen.

Rick: Exactly.

Michael: It's an important conversation.

Rick: And it's more acceptable in business to do the buy-sell agreements, the dissolution agreements upfront than it is in a marriage doing the prenup. But that's exactly what we were doing. And as a result of that process, Sarah says, "I don't think this is where I want to go," which is what can happen anytime somebody starts doing interior work. I had this happen on my staff all the time where I encourage people to do the interior work. I encourage, of course, financial planners to do their interior work. And they would come out with, "You know what, I've discovered I don't want to be a financial planner."

Michael: So Sarah goes...you start going through it with a therapist to talk about all the issues that can come up with succession. And Sarah's conclusion at the end of therapy was, "I'm actually realizing I don't want to buy into this firm."

Rick: Yes. Okay. So, how disappointing was that? Huge, right?

Michael: Where was this in the process? How far are you in going down the succession road with Sarah at this point?

Rick: We're several years at this point where this started surfacing. And so it wasn't like, "Oh, I woke up last night, and I don't want to do this." It was a long, thoughtful, introspective process. And so my reaction was much the reaction when somebody on my staff would go, "You know what, I decided this is not what I want to do." It's like, "Oh, man," this, that, "I am so sad. And I'm so happy for you. And I'm happy for us." Because the worst thing to do would be to continue to work here, continue in this profession, when it really was out of obligation, fear, whatever it might be, right?

Michael: Fair point. If, at the end of the day, her heart was not in succession and taking over this firm and running it and doing the things in the future, it very likely only would have been worse had this not gotten surfaced at this stage and instead gotten surfaced as partnership dysfunctions afterwards, necessitating said earlier discussion about partnership divorce paperwork. So I guess, good news, headed off worst problem. Bad news, we were years into this already, expecting this was the succession plan.

Rick: The sunk costs felt significant. So she decided to leave. And I will say we have a great relationship today. I had coffee with her this morning, and she's doing great in her practice as a financial therapist. It was the right call for her.

Michael: So she didn't even stay directly on the planning side. She opened a financial therapy practice.

Rick: She went into financial therapy. The timing was great. Maybe around 2020-ish, the demand for therapists was out of sight. And she's very successful today. So it was the right call. So that was failed succession attempt number one. And, Michael, I've been to all the succession planning workshops, three-day workshops. I've attended succession planning at every industry convention, retreat, conference there is. And so I knew you start ten years ahead of the time that you want to retire, or you think you might retire. So this was part of my ten-year window, and I thought, "Okay, this is going to plan."

Michael: When did this happen, I guess, just relative to when you joined us ten years ago?

Rick: It probably happened shortly thereafter. It was kind of in process because Sarah had been with me three or four years when we talked. So it was probably in development maybe about that time.

Rick's Second Attempt At Succession Planning [14:23]

Michael: So it's frustrating because you thought you were on the track, but there are still 10fru-ish years left for you to pick up and go to version number two and play this out.

Rick: Yeah. And even if you started the clock ten years ago from when we talked, so maybe all that happened three or four years into it. I had to regroup. It's like, "Yeah. Yep, this is the blow-up. This is going according to plan. This is why you start early."

Michael: Okay. Okay.

Rick: So I continued with the staff I had. In 2019, I brought on Nathan Gehring, joined us from Florida, and we became a hybrid. We became a hybrid firm before hybrid was cool, before the pandemic.

Michael: Hybrid work environments.

Rick: That's right.

Michael: Hybrid remote work, not hybrid brokerage RIA.

Rick: Thank you.

Michael: I thought you had some deep, deep roots on the fee-only side. Okay. So hybrid in-person/virtual pre-pandemic when not a lot of us did this.

Rick: Exactly. I was like, "I can't have somebody in Florida meeting with my clients in Rapid City. Are you kidding me? No client is going to sit still for that." Well, I was wrong. In one of my study group, people said, "Oh, so you're going to turn him down because it won't work?" I said, "That's right. Yeah." "Oh, that's good to know. We've been doing that for eight years." That kind of changed my mind.

So Nathan came on, a highly skilled planner. Alison had been with me around at that time, maybe around ten years, and always wanted equity. And so I'm looking at the two of them, and Alison was pretty brilliant at running the firm. And she was operations, and this is kind of still back in the day, Michael, when you don't sell your operations person equity. An operations person doesn't become a partner.

And I thought, "I think it would make a lot of sense for her to become a partner." And Nathan was open to that. He wanted to be part of a team ownership. I looked, at one time, Michael, at selling a little bit to everybody. Let everybody have 1% or 2%. I played with that a lot. It fit into the holacratic culture that I had built, which is more of a purpose-driven culture, which is more about it's not corporate in structure. It's more circles of responsibility. And it fit into that ownership of your role on steroids. Be an owner. But I could never really pull the trigger on it and make it work within the legal framework and all of the complications.

Michael: Was the idea of doing this because you wanted to start doing small slices of equity to others to begin the transition of equity or just because it's a retention engagement "we want to keep them on board" thing?

Rick: Both.

Michael: Both. Okay.

Rick: Yeah. It fit with my management style. I do not like micromanaging. It's one reason that I adopted holacracy and gave people a lot more liberty to direct their roles and make decisions. I've just never been a micromanager that loves holding people accountable and doing that. So it was both retention and a way of potential succession.

Michael: And what was the blocking point that made this not work for you?

Rick: It was sitting down with, "Okay, how are we legally going to do all this?" and some saying, "Really, you should be giving phantom shares," and other research saying, "No, people really don't respond that great to phantom shares." And just all of the complexity in making that happen was the stopping point of establishing everybody. And we even looked at that as early as a couple of years ago, Nathan and I kind of reviving that idea that, once you've been here, you're going to be able to buy in 1%, 2%, or 3%, something of that sort. But it's a heavy lift. It's easy to talk about, but it's a heavy lift to put into motion. So I went down the path of selling 10% of the company each to Nathan and Alison.

Michael: So Nathan is the other lead advisor, and Alison is in charge of operations at this point?

Rick: Correct. And I think it was January of 2023 that that deal was inked.

Michael: Okay. So we're trying to start shifting a material slice of equity. How did you navigate all of the valuation, financing, those types of dynamics? It sounds like this was a...they got to buy. It wasn't a grant. So, how did this work?

Rick: Correct. Yeah. It was pretty ubiquitous. I think I had FP Transitions work on it. I think they put 10% down and then I financed the 90% on a 7-, 10-year note. All the payments came from dividends. It was a sweetheart deal.

Michael: Okay. And you just ran with whatever valuation FP Transitions says is appropriate here?

Rick: I ran with their valuation to the extent that I used their cash valuation to establish my price, which was probably closer to 1.5-ish.

Michael: Okay.

Rick: Maybe two-ish. I don't know. But it was on the cash price. So it was a good deal, and I wanted it to be a good deal.

Michael: If they're going to buy more in the future, at some point, you have to at least seed the buying power initially to get the flywheel going.

Rick: Yeah, yeah. And I wanted to reward them. So I think it was kind of a normal way to sell, and it was non-recourse. It was kind of one of those things, if you had the 10%, how could you say no, right?

Michael: Yeah. So, at worst, if it doesn't go on, they can't make the payments. Your only recourse is you get the shares back that you were trying to sell in the first place, and we're right back where we started.

Rick: Exactly. So that was being developed in the middle of the pandemic, which, again, I talk about the black swans in my journey, and the pandemic was the first black swan that changed a lot of things for me.

Challenges In Hiring And Retaining Staff [21:39]

Rick: I talked about already being a hybrid firm as far as having some virtual. Well, we went very hybrid during the pandemic, and that started this pattern. We had planners. I've always had a really nice…stream of potential planners that have reached out to me and wanted to be associated. And so now it's like, "Wow, you don't have to be here to be a planner." It used to be the joke at FPA Retreat that I would stand up and say, "And by the way, I'm looking for a planner." And they're like, "Rick, you are always looking for a planner."

Michael: Oh, I remember this over the years. "I'm looking for a planner," and people are like, "Oh, that person's hiring. Let's go talk to him." You're like, "Yeah, you have to move to..."

Rick: You have to move to Rapid City, South Dakota.

Michael: You have to move to South Dakota. It was like, "Okay, that wasn't a planned life transition."

Rick: Exactly. Caleb Brown once said, "Rick, if you were in Boulder, I'd have a line out the door. But Rapid City, South Dakota?" And I actually paid for his trip to come up and fly fish here so he could actually see that the place exists, and it's a lot like Boulder.

Michael: I'm told it's absolutely beautiful.

Rick: It absolutely is. So now we could hire virtually. Well, I started hiring planners virtually, and I got into...I should say, I realized that my unique genius is not being a manager or necessarily running a business. Yes, I kind of happened to run a business successfully. I'm not sure how that happened. At my heart, I'm a planner. I'm client-facing. I'm the typical E-Myth guy.

Michael: Okay, yeah.

Rick: And so I had 4 planners come on during this time, say between '23 and 2026, that all had the average lifespan of 18 months.

Michael: Okay,

Rick: So we started having a revolving door of planners.

Michael: So, what was the problem? What was causing it?

Rick: That's a good question, Michael. I can go back to each one. I can say, well, this happened or that happened. I can't...in some cases, it was wanting more money because now we're playing to a national pay scale, not the Rapid City, South Dakota pay scale. In other cases, it was competence. I tested people. I gave people an average of 6 to 7 personality tests, the DISC, the Emergenetics, the Enneagram, the Myers-Briggs. And if they all lined up, if they were like, "This is a rock star," the chances are still about 50% at best that things will work out.

So I think part of it was the challenge of running virtual relationships. Nathan once said, who still works for the firm, "The problem with being virtual is you're not part of the hallway discussions." And so it's a whole different dynamic of bringing people in. And just where those insights can happen when you're together having a cup of coffee, I think that may have been a bigger challenge than anything.

Michael: Okay.

Rick: So we had that going on where we have this rotation of planners. We didn't lose any clients over that, but it kind of started some instability in the firm. It wasn't that this person has worked here 5 years, or 16 years, or 8 years, like a lot of my staff had, which was still in progress when Nathan and Alison bought in.

Michael: Okay.

Rick: And so for three months, things went swimmingly. I was like, "Yes, I've got my successors in place. They're great, competent people. I can just focus on turning things over and teaching them a little bit more on how to run things."

Michael: And was the idea when they did the 10% each that this was a first of more purchases to come, "We are succession planning. You two may be the ones that take all of this eventually?"

Rick: Yes, that was the intent. There was nothing signed. There's no intention to sell tranches. It was, "Let's do this. Let's see how it goes."

Michael: Okay. At least the expectation, goal was this isn't meant to be a once-and-done, and we're going to go find someone else for the other 80%.

Rick: Correct.

Michael: Or we're hoping that this is the plan.

Rick: Yes.

Michael: And if this is going well, we'll do more deals, and eventually, you'll own all of them.

Rick: Absolutely.

Michael: Okay.

Rick: Now, one thing we didn't do, Michael, is we didn't do any counseling.

Michael: Okay. So I got to ask, all seriously, is that because last time we did this, it did not end in a desirable way?

Rick: Yeah. Maybe subconsciously I was like, "No, no. We don't want to do that." I got bacterial pneumonia in January of '23, right after I sold to them. I was really out of commission for two months. And the pandemic was "getting over" at that time. So it was ironic that it was certifiably bacterial pneumonia. And I was just getting over it in April-ish. And in April of that year, Alison calls and says, "You know what, I'm being headhunted, and they're offering me a really great salary. And I don't think I'm going to take it, but I just wanted you to know." Within 30 days, she accepted that offer. That was the biggest blindside of my career. I was devastated. I was confused. It just laid me flat.

Michael: Because the whole idea was, "We just did an equity purchase," literally make this officially not a risk.

Rick: Exactly. We just did this agreement. And she didn't see it coming any more than I saw it. As I said, she didn't go looking for anything, but she was headhunted by a firm.

Michael: She really wasn't looking. Just phone calls come in. It happens.

Rick: No. Came in, and it was two, three times the salary she got. And she obviously didn't see the benefit of being an owner versus getting two to three times the salary. And this was by a big wirehouse firm that can pay the big salaries, right?

Michael: Right.

Rick: And unlike a lot of planners that work in this space, and this space, meaning, certainly, life planning, it's more of a...it's a calling. How many financial planners are working for far less than what they could get from a Wall Street firm? Because it's important to me to be making a difference in the lives of people and a real heartfelt difference. It's not uncommon to me for planners to be headhunted. And in the past, Nathan said, "Yeah, I probably get…often calls, and for more money, and that's not what I want to do. I don't want to be a hunter-gatherer. I want to make a difference in people's lives." Well, when you're in operations, I don't know that you can expect as much, when somebody is in operations and they get an offer two or three times.

Michael: Yeah.

Rick: So I can't fault that. If I can fault anything, it was my inability to present or make the case for the value of ownership. But nevertheless, we had to undo everything four months later. We were in the middle of a transition to Schwab, a transition out of Worldox, and another software transition at that time. Three major transitions. And we had a young lady kind of pick that up and run with that. And it was a hellacious six months of trying to hold everything together when a partner of 16 years, I mean, 16 years, she worked for us, leaves. And she left in the best of ways. She gave us two months' time. We had coffee after that fact several times. We're still on good terms. And yet it was just devastating to the staff. In fact, a lot of the operations staff threatened to quit with her because they couldn't see how would life be without her.

Michael: Did you actually lose more operations?

Rick: I didn't. I didn't.

Michael: What did you do to keep them on board?

Rick: I threw money at them.

Michael: Okay. We do what we need to do.

Rick: It's a faster...

Michael: Raises for everyone to cover down for the fact that Alison is leaving, and everyone's going to need...

Rick: Yeah. Somebody else said, "I've really wanted to go home and be with my family." And I'm like, "Please, hang in there." So I did give some significant raises.

Michael: As a temporary coverage in transition, or just permanent to keep them on board?

Rick: It was permanent.

Michael: Okay.

Rick: It was permanent to keep them on board because my focus wasn't on the bottom line. And I say that, and I do not want to impart that profitability wasn't important. It was very important. And I am not...it's not uncommon for me to have to invest and hurt the bottom line to get ready for growth or to prepare to cover things so that the damage doesn't get worse. So I made those decisions, and we did dig out after six, seven months. I got COVID in June of '23. So I just...

Michael: We're three months after getting over bacterial pneumonia in '23.

Rick: Yeah, about five months and a couple of months after Alison gave her notice. And before she actually left, I had COVID, and I developed long COVID, brain fog, lightheadedness, fatigue, that is still with me to this day. So on top of all this, another black swan of just my own health and parents, 4 parents in their 90s, all in failing health, my wife having to close her business to take care of them, all the stress on a partnership that comes when she's spending 43 hours a week taking care of elderly parents. And I'm just giving this as context, as this was just a hellacious time of trying to stay afloat. And I looked into my succession planning material, and there's nothing in it on how to get through this.

So Nathan and I decided, "Well, we need to come up with a plan." Nathan was really clear. He didn't want to take the firm by himself. Never did.

Michael: So he was still on board, just not to be on a solo successor.

Rick: Yes, he was still an owner in the firm.

Michael: Okay.

Working To Rebuild A New Succession Plan [33:42]

Rick: And so we hired. Again, we hired a succession planner, Brooklyn Brock and Tiffany Lee, Ellevate. And we started working through it very methodically, very intentionally, looking at all of the issues. We had charts. We had, "Here's our must-haves. Here's our hope-to-haves." We were doing the work. Who within the firm could we identify as a potential successor? Should we sell a little bit to everybody? We were just looking at all of the possibilities during this period of time. During this period of time, we had identified, number one, we want an internal sale, if at all possible.

Michael: Okay.

Rick: Number two, if that's not possible, we want to bring on a managing partner kind of to take Alison's place because we knew the managing partner wouldn't be me. It needed to be a GM [General Manager] of sorts and maybe somebody with...well, hopefully, somebody with some equity desire. But that's kind of saying, "Well, we're going to go out and look for a spouse." That's a search.

Michael: Hard to find.

Rick: That's a search. That was number two. Number three on our list was a merger with a like-kind company.

Michael: Okay.

Rick: We made a couple of inquiries, but they really didn't go anywhere. And number four on the list was a roll-up. That was the last thing that we wanted.

Michael: Okay.

Rick: So we were really clear, really intentional about what we wanted.

Michael: Wait. So, how did you then rank these or weight these overall?

Rick: We had a weighting to each. I think internal might have been an 80. A managing partner might have been a 71. A merger might have been a 65. A roll-up might have been a 50.

Michael: Okay.

Rick: So we had done the work in ranking all of these so that we're really clear. We had touchstones.

Michael: Okay.

Rick: We had touchstones as to our top five must-haves. It has to be fee-only, would be one.

Michael: Right, right, right.

Rick: So we had that. So we were doing it right. We were following Michael Kitces' advice, I think.

Michael: So, what happened as you try out these roads? What did you even try next? Do you start building towards internal? Do you start marriage hunting for a managing partner? Are you calling a bunch of like-kind firms to see who might be interested? Are you doing a little bit of each? What did you do?

Rick: Yes, a little bit of each, still with the understanding... I just recently sold a building, and oftentimes, a commercial building, my touchstone is I'll put it up for lease or I'll put it up for sale, and whichever comes first wins. It was something of the same attitude that we're not going to just close down anything, but we're going to put most emphasis on the internal sale. We had a couple of people earmarked for an internal sale. They failed to show a lot of interest in it. We floated it to a couple.

And while we're doing that, I'm approached by my accountant. This would have been in November of 2024, who said, "We're looking for an RIA. We're either going to start it ourselves or buy one." He's been my accountant for nine years. The guy is brilliant. I call him a Little Michael Kitces.

Michael: I appreciate that.

Rick: He has a list of stuff behind his name. He passed the CPA exam at 16. He's just brilliant.

Michael: So they want to buy or build an RIA business. I'm assuming this is local. They're actually in the Rapid City area.

Rick: Yep, yep. Local here.

Michael: Okay. Okay.

Rick: And he went from himself to a firm of 30 in the course of 9 years. And so we started talking, and I said, "Well, okay, we'll explore it." I had talked to one other firm in town that approached me, and I'm like, "No." He says, "Why are you so hung up on fee-only?" And I just couldn't see our cultures matching.

Michael: For someone who's been involved in that for 40 years, for you, if he has to ask, he probably doesn't get it.

Rick: I was doing fee-only planning before NAPFA was formed. So we started talking and having coffee, and I'm like, "Yeah, they wanted to move quick. They had urgency. We're going to do this."

Michael: Well, it's November 2024 for tax firms. You have two months to get this deal done because then we're going to vanish for tax season.

Rick: And their clientele was typically a lot out of South Dakota, a lot of high-net-worth people. They were running into Goldman Sachs all the time and just not happy with what they saw, their clients, the service they were getting in the investment advisory area. And they said, "Why don't we bring our integrity to the table and do this ourselves for clients rather than watching them being," in their term, "taking advantage of in so many situations?" So I appreciated their look, but they did have this urgency. And I'm just like, "Dudes, I'm not ready to retire. Nothing is on fire here." So we're moving through this.

And then March 1st of 2025, what I would call the fourth black swan hit. And I had just come home from two weeks of retreat, and by that, I mean personal retreats, therapeutic retreats, things like this. I'm just in this wonderful space. Monday morning, I walk into the office. The first person into my office was Rose. She says, "Rick." And Rose is a death doula, to give you an idea of how comfortable she can be with difficult conversations. She was a CFP, trained death doula, just an amazing financial life planner. She didn't hold herself out to be a financial therapist, but she fit the mold. And this is the type of person...it's like, this is the type of person I want to associate with here.

And she says, and she'd been with me a year, she says, "I'm going to have to leave. My mom is...I need to be with her." And from the beginning, she was like, "How can I plan for people who are in the process of dying?" That was her calling, was to help people in that space. And I'm like, "Well, let's see if we can make that happen." But she gave her notice, and that broke my heart.

Michael: So, was she a longer-term team member or one of the folks in the "Were hiring virtually, but having trouble getting them to stay?"

Rick: Yes, she was in both. She came in and trained with us in person for three to six months. And then she went virtual. She was out of Montana, in Colorado at the time. And I use Rose's name because she was in the audience when I gave the keynote to SHIFT, and we're really good friends, and she's a great person. But to me, she was kind of the future. She was one of those that we're like, "She could be a great owner."

Michael: Oh, so she was one you had mentally earmarked.

Rick: That we had earmarked.

Michael: Could be another person.

Rick: Yep. And that was the reason that there was resistance from her. "Yeah, well, let me think about it." And one hour later, Nathan comes in and says, "Rick, I just want you to know I'm being headhunted by a very large multibillion-dollar firm."

Michael: Okay. This is concerning because we went through this once before.

Rick: A little PTSD, you think?

Michael: Yeah. So Alison's script is now playing.

Rick: Oh my God. I was laid flat. My head is spinning because, what, we had, not including me, six FTEs [Full-Time Employees], maybe seven FTEs, this is two-thirds of the firm, and my current partner, and another planner that's the heart of the firm. And it was just as stunning as you get a call that says your spouse has been killed in a traffic accident.

Michael: Wow. Wow.

Rick: And I remember going into the office of the lady that took over from Alison, saying, "I'm done. I'm done." It's like, "How am I going to get ready?" And both of them...Nathan wasn't gone. He just told me he was being headhunted, and he's waiting for an offer. And Rose, I think she gave two or three months' notice. So nobody walked out.

Michael: It's very good of them. Those are gracious transitions.

Rick: They're gracious. And it's something...it's an expectation I asked when I hired somebody here, "Let's talk a little bit about the divorce. When you get ready to leave, I would really like you to make as much of a commitment as you can that you'd give me two months because I have had..." When I was a sole practitioner, I needed two months for the person going out to train the person coming in. And I was very successful in making that happen in 80% of the cases. So this wasn't unusual. I've just hired great people over the year. I really have. But to me, it's done. How am I going to dig out of this hole?

Deciding To Make An External Deal Amidst Significant Stressors [44:29]

Rick: And so I said, "Wow, I've got a buyer." I'll call it a gray swan or a white swan in the wings, that I told them this, "Listen, you probably need to know that I have two really key people leaving. And how does that impact your wanting to continue to have discussions?" They're like, "Yeah, not much." I was like, "Hmm, okay."

Michael: Fascinating. I might have expected them to be more concerned, but hey, it's their business.

Rick: Yeah. It's kind of like, "Well, okay, but we can pick up the slack. We can make it happen."

Michael: Just imagine these are CPAs who envision, "Well, I just need someone else who's trained to prepare the return." That's not really how wealth management works.

Rick: I think, in retrospect, yes. Although the one, the main buyer of that firm loves investments, he was managing $100 million himself, and this is the Little Michael Kitces, and very brilliant, very brilliant on investments and things. So I said, "Okay, guys, we can talk." And the reason I stress their urgency, now I had an urgency that matched theirs.

Michael: Okay. So I'm trying to think of timeline. So they asked you in November of '24.

Rick: Yep. This was March of '25.

Michael: Okay. So we're only five or six months out. So I guess the conversation is still fresh.

Rick: Yes. We're still exploring cultures, and we're exploring values, and we're doing all of the stuff you're supposed to do. And so we've had a lot of those conversations. I knew they were honest, reputable, integrity…obviously, he was my accountant. I really trust him, and he was very brilliant. So I started going down that path with him, "Okay, let's get more serious." And we didn't have...we had a very light structure discussion maybe in December. It would kind of look like this, and we would kind of go with your appraised value. And it would be...

Michael: The preceding December, December of '24.

Rick: Yes, yes. Yeah, exactly. And we had an idea, kind of a loose idea, I'd carry back preferred stock and whatnot. So we didn't get into hardcore financial discussions until April. So we've spent about 45 days there. Now, Ellevate is still part of this picture, Brooklyn and Tiffany.

Michael: So Ellevate is the firm giving you consulting and guidance about succession planning.

Rick: Correct. And so they're aware of this all along. They even did some sessions with the buyers. They kept me from jumping out of the first story window a couple of times. We hit some bumps. Ultimately, the value I got was a lot less than what FP Transitions would say, the three times, two and a half, three times. And I didn't have any other option. The one firm that had courted me and made me offers in the past, the roll-up, I reached out to them, and their response was, "Well, Rick, we don't even think we're going to make you an offer." And the reason was my payroll was so heavy because now I'm ramping up. I hired three people in April, May of that year, to prepare for Rose and Nathan leaving.

Michael: Okay.

Rick: Because I didn't know what was going to happen.

Michael: Right.

Rick: I'm in this liminal space. I've got to prepare to be running this thing, continue to be running this thing, because this buyout may not happen, right? So I couldn't stand by. So I really loaded up the payroll.

Michael: Okay. But then you contact the roll-up, and they say, "Great, send us your current books." And they look and say, "We don't like the profitability."

Rick: Come back in a year.

Michael: "Because you look too staff-heavy. Come back in a year," which you're not sure yet.

Rick: I'm not sure there'd be a year. So we moved through it with the accounting firm. We put it to ink the middle of May. I think it was the middle of May, we inked it.

Michael: All this got done in two months.

Rick: Oh, yeah. Yeah, yeah. It was. And we had been talking, but yes, it was. I was in a place, yep, I need a safety net somewhere.

Michael: So, was there an update through this about whether Nathan's headhunting offer or headhunting exploration was becoming an offer, or is he still in limbo through this?

Rick: Yes, yes. So I'm at retreat, and Nathan had set a date of May 1st to get a firm offer from these people or not.

Michael: Okay.

Rick: And Nathan is of the highest integrity, right? Super integrity to come to me and say, "Hey, I just want you to know," right? That's all you want in a partner. And so I remember, I think I'm at the retreat dance, and Elissa Buie is there, and I get the call from Nathan that says, "I've decided to stay."

Michael: Okay.

Rick: I'm blown away. I am elated, and I did a happy dance.

Michael: Because the only existing script on this was Alison who came back 30 days later and said, "I'm leaving."

Rick: It was not in my realm of possibility that he would stay. I've never had anybody headhunted that's seriously considering something that didn't go. And there'd been others, but it just...and I remember Rose kept telling me, "But he's not gone yet." "Rose, look at reality. Come on. This is a multibillion-dollar firm. They're offering him far more than we can pay him." But when he added everything up, it all favored staying for him. But I was down the road a lot. Nathan also was super supportive of the new buyers. Really liked it. He said, "Rick, of all the transitions I've seen," and he'd seen a lot, "this is the best one I've ever seen."

Michael: What made it so appealing or compelling from his perspective?

Rick: It just felt like a really good match to local firms. These guys have great integrity, great intention, fee-only. One of them is a CFP. He said, "Of all the buyouts, the roll-ups, everything I've seen, the internal successions, I think this is a great option." So he was all on board with it. And that was such a huge relief that he stayed because it was going to be rough without him.

Michael: But at the same time, the fact that he was staying did not change your mind to say, "Okay, then maybe I don't need to do something imminently here." If he's not actually leaving imminently, this didn't put you back to the market for other paths.

Rick: No, it didn't. And where I was with Ellevate and with Nathan and our discussions, it was that this is a good way to go. There was a lot of support for that. And still with Nathan staying didn't solve the problem. If I didn't sell, it didn't solve the problem because we're still having to deal with this succession, but I've been two months in this place of gearing up, getting ready to do something to save the company. So the wheels were pretty much in motion at that time. So we went ahead. We did the deal.

The fifth black swan was, three days before closing, they walked the operations director that took over for Alison out the door, because they just didn't feel that they wanted to...we did a sale of the company to a new company, and they didn't want to give an offer letter to someone that they said, "I just don't think she fits."

Michael: Okay.

Rick: That was shocking to me. It was another bombshell when I got that call, "We've got to walk this person out the door."

Michael: Even though, technically, the deal hasn't been closed.

Rick: The deal hadn't been done. It was three days from closing, but they're like, "We've got to get offer letters out, and this has got to happen."

Michael: This feels strange to me. I get, "We're not giving an offer letter, and when we close on the deal, this person will no longer have employment because their old firm is going the way. We're not giving an offer letter for the new firm. But, "And we don't know any yet, but we walk them out," feels just odd in that context.

Rick: From their perspective...

Michael: Because once you don't get the offer letter, you know you're...

Rick: She was not happy. She was not happy at the firm.

Michael: Okay.

Rick: I knew that.

Michael: Pre-deal or staring down the deal?

Rick: Pre-deal, yeah.

Michael: Okay. Okay.

Rick: That was going on. She really wasn't happy. And yet I needed her. Others might have said, "Hey, you're not happy. We're not happy. Let's do the two-month departure thing that I had done many, many times." At that particular time, things are in such an upheaval that we couldn't bring in somebody else new. We got two people leaving.

Michael: Right. Because Rose is leaving and...

Rick: And Nathan is leaving.

Michael: ...up until the moment, you're still afraid Nathan's leaving. Right.

Rick: Right. So they just said, "This is not a person we want on our team. She's not happy. And we don't want to give her an offer letter and then have to let her go two weeks later. That's not an integrity."

Michael: That's fair. Yeah.

Rick: I'm like, "Okay. All right, I get that." Unfortunately, they didn't know what she did, and they didn't know the depth of knowledge that she did. And it just opened up a hellacious transition for a good six months of trying to fill all the holes that were left by her immediate departure.

Michael: Because no one else was back-trained into her role and what she did, which makes it hard. And then it's harder because you're doing all the actual acquisition, transitiony things that have to get done.

Rick: Yep. We already have a very new staff.

Michael: Yeah.

Rick: So that was unfortunate. And of course, you know to back-train. You know to cross-train people. And yet, with the progression and the speed of everything happening, there comes a time that there is no back-training. There's no cross-training.

Michael: Right, right, right.

Rick: So that led up to closing. Those were the five black swans that I didn't see coming and I don't think anybody could have prepared for. I keep going over, "What could I have done differently?" Well, I couldn't have done the pandemic differently. I couldn't have done getting pneumonia and COVID differently. I couldn't have done my partner being headhunted differently. I couldn't have done Rose and Nathan differently. It's just like, wow. And that's what a lot of succession planning doesn't talk about, is here's how things ought to go. And they, for reasons beyond your control, may not go that way.

Michael: And so, when I look at this from the overall arc, the original vision when we started down this path ten years ago was Sarah has been with us for several years. She's expressed interest in being the successor. We're going down this path. And where we ended up was we couldn't get to internal succession. And so we ended out in a deal with an accounting firm that was in the area instead, because it's an external buyer, but not of the PE [Private Equity], low-offer variety...

Rick: It fell into that third category of merger, even though it wasn't a merger.

Michael: Okay. And the timeline was driven by Rose and particularly the risk that Nathan is leaving. And then you're losing a key advisor, and all of the clients and equity are coming back your way, which was the opposite of the goal.

Rick: And the fact you talked about when we started, that when I lost 5 out of 6 people in 45 days or so, I had the resilience to build the firm back.

Michael: Yep.

Rick: I didn't have the resilience to do that physically and emotionally.

Michael: Okay.

Rick: So that was a big difference when I said, "I'm done." And thank God I had all sorts of support in my life to help me through this, which would be my biggest message to anybody getting ready to look at succession, would be to absolutely get a therapist in your back pocket long before you think you need it. And I didn't have just one. I had business coaches and Enneagram coaches and supervisors and Ellevate and a therapist. I had a couple of groups locally. I had a lot of support built in, and that was so key in getting me through this process that words couldn't express enough how important that safety net was.

Michael: So, what was different about having the resilience then and not feeling like you were in a place for it this time?

Rick: What was different was, physically, I still have long COVID during this time.

Michael: Okay.

Rick: I still have a brain fog. I still have fatigue. I still have lightheadedness. Emotionally, like we talked about, just having the PTSD of, "Here we go again," and I'm so tired of it. I'm tired of the 18-month window on planners because Rose was the last of that series. It was just a whole bunch of things piled on that just said, "I just don't have the fortitude to start doing stuff that I haven't done for 20 years to get back into running the plans and doing the data, just everything that would require in the trenches, along with the operations." And yes, you can hire people, and I had hired people, but my God, how much institutional knowledge had we lost or were we losing? It was, quite out of seven people, only Nathan was the longest person there, at five years. And then you went down to a couple of years.

Making The Challenging Transition From Founder To Employee [1:00:54]

Michael: So, Rick, then bring us forward today, as we're a little more than a year out from the deal. So, how did this go relative to your expectations as the place you ended up in the succession journey?

Rick: Yeah. So it's gone according to plan since closing. And I say that with a smile on my face because in succession planning training, right, you start ten years ahead of time to cover the blow-ups. And then you're trained that the first six months is probably going to be hell.

Michael: Right. Just everything changes.

Rick: Right?

Michael: Particularly when you're running your own business for decades, yeah, everything changes.

Rick: And it can be very hard in anybody that I've known, especially that has done a roll-up, just hates life for six months, and all the new systems and everything. So it has been hell for me. There's been lots of changes, lots of things I didn't see coming. And that's part of what is expected. There's somebody I'm on a panel with coming up that says, of the 200 transitions he's done with founders, he's had 2 that were happy with them.

Michael: We, founders, are a unique breed. When you try to turn us back into employees...

Rick: Exactly. I'm a maverick. I was in this business for myself. The biggest corporation, the only corporation I've ever worked for was McDonald's.

Michael: And I'm going to assume that was a good ways back.

Rick: Yeah, yeah. I think I was 18, 16 it was. So I'm a thought leader. I'm an innovator. I'm a pioneer. And unfortunately, that hasn't stopped much, to the chagrin of my new partners. And I just don't fit the corporate mold. And so we're still negotiating that as, how does life look when you've got this wild horse maverick that you're trying to keyhole into this corporate structure? And it's probably even more so because I had this holacratic structure that's very different. Very few firms follow it.

Michael: For those who aren't familiar, just, can you explain more of holacracy and that structure?

Rick: Yeah, holacracy is purpose-driven. So it's kind of a ground-up structure. Instead of departments, instead of a corporate tree, you have more circles. You refer to them as a financial planning circle or the accounting circle. And within those, you have roles, and the roles take on a lot of responsibility. It's very well organized. You know exactly what all the roles are responsible for. But there are no middle managers. There's no managers. It's purpose-driven. The people at the bottom get to sense into what is needed rather than the people at the top.

Michael: Okay.

Rick: The problem with holacracy is that only about 20% of the workforce can flourish in it, can work, because it takes a higher degree of self-awareness than what most people are comfortable with. Most people really do want a manager and want somebody giving them guidance and direction. And it's not that it's directionless, but it really appeals to the person that has a high EQ and wants to take on a lot of responsibility and is okay with that. So that's one of the problems of our revolving door, is we lost a lot of the holacracy culture because people were so new. It's a high learning curve. And so we lost that culture. So now we're poured into a typical corporate culture. And boy, that doesn't work for me.

Michael: Out of curiosity, is that better or worse for the rest of the team?

Rick: I think that because the rest of the team was so new, with the exception of Nathan, I think it works just fine for them, because they hadn't really intuited, integrated, embodied holacracy. Nathan had, and yet Nathan is an amazingly adaptive guy, flies at a high conceptual level. And so he's made that transition just fine.

Michael: So take me back a moment in the deal that got done with the accounting firm. So I guess I'm realizing I'm not clear what the structure intention was as it pertains to you. Was this a sell-and-wind-down, they give you dollars with some contingencies, and then you're out? Was this a sell-and-stay because you are planning to still keep doing advising things longer, or you just wanted to solve for the ownership? Did you get cash? Are you now an owner in an accounting firm? What was the structure and intention of this?

Rick: It was a sell-and-stay. I had no intention to retire. The idea is that I would be involved in helping them and in leadership, that I would continue to work with a small number of clients, and that I could now be free to be me and just work on all the projects that I'm working on, especially in financial therapy, in my writing, my podcasting, things of that type. So that was the intention. We didn't ink in a hard salary. And as it has come out, I'm not in leadership, and that's due to the...they use EOS as their operating system. And in EOS, you've got to LMA it. That's leadership, management, and accountability.

Michael: And hold accountable.

Rick: Accountability.

Michael: That's the part you don't like.

Rick: Duh. And I'm like, "No. I'm a visionary." Well, the visionary part of EOS doesn't have to LMA, but that was filled by the new person that had the majority interest. I retained or I got 25% interest in the new company.

Michael: Okay.

Rick: So I'm still a partner, but I'm not managing. I'm not the controlling partner.

Michael: Okay, okay.

Rick: And there's so many things...I was always loathe to do that. I knew they wanted to do that kind of at the get-go, and I'm like, "I don't think that works."

Michael: So you're a partner in the blended accounting/advisory firm thing.

Rick: It's not...no, they didn't blend. They couldn't blend the accounting firm because I'm not a CPA.

Michael: Oh, okay. So, what?

Rick: So we just had a new RIA.

Michael: Accounting firm owns a subsidiary. And the accounting firm owns a piece of the subsidiary, and you own a piece of the subsidiary.

Rick: The two partners that own the accounting firm own a piece of the new company.

Michael: Okay. Okay.

Rick: So they call the shots. That's one thing that I was resistant, very resistant to, because they had no time to really learn the business. And come along, the idea was this was going to be a slow transition. And it's been anything but a slow transition. But I have to remind myself, this was the white swan on the table. This was the option between doing all of this myself and rebuilding. There wasn't really a middle option.

Michael: So, I guess, for better or worse, the flip side is because they do the LMA under EOS to the extent you got team and hiring and all these other issues, that's their problem. They run it now.

Rick: And so that really excludes me from leadership of having anything to do or say and in what's happening. Very unusual place for me. Very unusual. So it's probably a little more exacerbated than "normally" only because holacracy was so different.

Michael: And so the idea...I'm inferring, so a part of the deal was cash that you got out for going from the bulk of the ownership to 25%, but you left some chips on the table, as it were, because you don't want to retire and you want to keep going, so you wanted to stay partial and involved.

Rick: Just like with my previous partners, I financed most of it.

Michael: Okay.

Rick: So it was a relatively sweet deal for them on many fronts. So they're very focused on the bottom line. Well, I'm glad they're very focused on the bottom line because I've got a significant investment in it, right? So it's kind of strange for me because they're not, what do I want to say, baked in financial life planning. They kind of have an idea about what it is. It's appealing to them. And yet it's all very corporate, very structured, very focused on that bottom line, very focused on deliverables. I didn't hold people accountable to the tune that they're doing. So I think they're going to be very successful. Most financial planning firms are run this way, right?

Michael: Yep.

Rick: And I want them to be successful, obviously. It's just that I am still a maverick, and I want to do lots of stuff in the financial therapy area. And I think we've got some things that I've run on to that are at the same place financial therapy was in 2003 that are very exciting. So we are continuing to work out, how does that look?

Rick's Key Takeaways On His Succession Planning Journey [1:11:51]

Michael: So, as you reflect on this journey, what are the takeaways in retrospect for the whole arc of this progression over 10 years and how it's played out?

Rick: Yeah. I think the most important thing is understanding emotional resilience that I was going to need to get through this time, A. B, understanding...it's hard to understand that black swans could appear, because inherently, you can't plan for them, right?

Michael: Yep.

Rick: And the only way I can think of that I plan for this was in the emotional support I had baked into my life in supporting my inner life and having those places, because it was so important to be coming back and getting a perspective and perspective from other folks and helping me to really understand the touchstones, and coming back, and coming back, and coming back to that. And my message would be don't wait until your black swan happens. Don't wait till things fall apart and go, "Oh, I think I'd better go get some help."

Michael: Okay, yep.

Rick: That's huge. Another thing is just knowing what your non-negotiables are going into a deal and also knowing whether you've got the financial position to hold them. For example, my non-negotiable has probably cost me $1 million to $2 million.

Michael: So, what were those for you?

Rick: Well, it was that that person comes on that's fee-only and that my current staff would be taken care of and that the culture would be maintained. I could have rolled up months before all this, right? I could have rolled up right after Alison left. I would have made a lot more money rolling up then. And at that time, a non-negotiable was, "No, I don't want to roll up. I want to do an internal sale. I want to take care of my people, and I want to take care of my clients." And we, you and I, know all of the horror stories out there about rolling up, where neither would get taken care of.

Michael: And you still had an expectation or path then that Nathan plus someone else could still be future internal successors to make this work.

Rick: Yes. Nathan, et. al.

Michael: Right.

Rick: So that was a takeaway. A lot of cultures. What I learned is my culture looked resilient right up until the time it wasn't and overestimating the resiliency of that culture, overestimating the fact that it can be really hard to re-establish a culture when you have the type of turnover that I had during the pandemic and how that could kind of weaken things.

Michael: So you're concerned about culture resiliency. That's not in the deal to the accounting firm. That's in the speed bumps as you had turnover challenges through COVID and went more virtual.

Rick: Right. And in the deal with the accounting firm, we talked a lot about holacracy, and we talked about it enough to know it's not going to survive. They are not going to adopt it. We talked about waiting for one to two years before they did away with it, and it was really more like two or three months. But there was nothing hard and fast in that I knew it would not survive.

Michael: Okay.

Rick: That was clear to me. And I think that another really big takeaway for me is my legacy is not my practice. My legacy is not passing on a practice that continues with my values and the culture that I established. And this came as I'm working through this in the retrospection of I think so many founders think that's their legacy. Is their company continuing with the same values?

Michael: I made this thing, and it continues. This is my baby.

Rick: And it didn't. It didn't for me. I know there could be some argument to that, but no, it really didn't. And it was the realization that my legacy is in the lives that I touched in the 40, 45 years that I was in practice, all of the clients that I helped make super decisions that made a difference in their lives. The planners. Everybody that has come through my company, I'm friends with, I still get emails from. The other day, another one of those planners that left was like, "Hey, I want to put this on your radar." They're doing amazing things. I hired rock stars, Michael. And that's more of my legacy than the company surviving me. That's been a bitter pill to swallow, but it's helped understanding that that's really what I'm passing on.

What Surprised Rick The Most On His Succession Journey [1:17:40]

Michael: Of all the things, you had a lot of black swans, what surprised you the most about this succession journey?

Rick: Well, I think it was losing my partner of three, four months. That was huge.

Michael: Who would become a partner after 16 years?

Rick: Right, right, right. That was huge. And then the double resignation of Rose and Nathan, my other partner. And again, underscoring, he didn't leave. Highest integrity. It was my response that said he's gone. And that was the final blow.

Michael: I guess, sort of a disturbing, challenging corollary, I think, for a lot of us as founders who think about equity, that equity wasn't doing a lot to inoculate against headhunting.

Rick: Sure wasn't.

Michael: You had said at one point that they didn't seem to value the equity, at least at that point, in the way that you did. It does remind me just of some version of...was it the psych researchers call the endowment effect? We value much more something we're letting go off, like the person who's getting in the receiving end on the other end. The fun label, this is the Ikea effect, right? You'll never pry my Ikea furniture out of my hands because I built that with my hands. I have very vested interests in my Ikea furniture. In fact, there is this interesting phenomenon that we, as founder/owners, get very particular about the value of our equity and what it means to own it. And not everybody else actually has that mindset.

Rick: And we look at the blood, sweat, and tears we put into it, and all the struggle that we've put into it. And we've read and talked a lot about the G2, that it's a whole different ball game for them. It's viewed much, much different. And I will say that Nathan valued his equity in it, and in this whole process, he was bought out of his shares. And he did very nicely. He was rewarded very nicely for that. And he was very appreciative of that. And he knew that part of getting a higher income was through ownership. So it wasn't completely lost, but yeah, we've got the emotional wounds of going through the building to where we look at it quite differently.

Michael: So, any other, I was thinking, pearls of wisdom? What do you know now that you would go back and tell you ten years ago when it turned out it wasn't working out with Sarah?

Rick: Michael, I've asked myself that question, and in fact, I think I was having a discussion with one of my current partners. And I said, "You know what, if I knew now...not being part of leadership, if I knew then what I knew now, I wouldn't have done anything differently." And I keep coming back to that when I look at it with Sarah, and I made a lot of really good moves. I can't think of just one thing where I said, "Wow, you really blew it there, Rick." And I think that's the pearl of wisdom, is I've had people call me that they've heard about this, and they say, "Oh my God, if this can happen to Rick Kahler, it could happen to me." Well, I'm no genius, but I think that's the message, is you can do everything right. And you cannot prepare for black swans.

And you could say maybe I got unlucky, where I got five of them, not just one. And to that, what I can say is thank God I had the support in my life that I did. So I cannot land on one thing. Now, there may be some people listening to this where it's just glaring, "Oh my God, Rick, you didn't see this." And I would accept that there's a blind spot of stuff I just did not see. And like I said, management was never my strong suit. But that's all yet to be determined, Michael. That's for the podcast ten years from now. When I come back and say, "God, Michael, listen to that. I can't believe I didn't see this and that I did that."

Rick's Advice For Advisors Starting Down The Succession Path [1:22:49]

Michael: So, any other advice you would give to other advisors who are thinking about their succession plan, goals, desires, and thinking about their paths? I'm still struck by, I think, the list you framed up from Brooklyn Brock at Ellevate on this, right? We can go internal. We can find a managing partner to take over and run this. We can hunt for a like-kind to merge, or there's various roll-ups we can call and will give us some liquidity as a backstop or something. So, just other advice or perspective on this you'd give to advisors who are thinking about this path or maybe they're you 15 years ago, just starting to think, "Yeah, in a couple of years, I got to start this 10-year thing."

Rick: Yep, yeah. It's, in many ways, do what I did. Go to all the workshops. Read the books. Listen to those that are experts in it. Start early. Get a team in place. Hire folks like Ellevate and consultants that will help walk you through all of this. Be very intentional and very aware in the steps. Get outside help. Spend time on the relationships of those that you're going to bring into the practice. And I didn't even follow my own advice there, say.

I'd worked with Nathan for a long time. I'd worked with Alison, but we didn't necessarily do some more in-depth consulting. Maybe that would have brought out something that would have said, "You know what, I've asked for this, but I don't know that this is what I want," or that there could have been some things like that. But spend the time, spend the money to really get to know your partners, or same thing with the roll-up, but I don't know. With the roll-up, I can't give much advice. There's so many unhappy stories there, even when you're told everything that you think is right.

But have a team, advice. Definitely have consultants that have been through the succession journey before that are there supporting you. And we're not talking about a two-, three-, four-month engagement. We're talking about a one-, two-, or three-year engagement to really help you lay the foundation.

What Success Means To Rick [1:25:36]

Michael: So, as we come to the end here, this is a podcast about success, and just the theme, often, that word means very different things to different people. And so you've run the entire business success journey arc from founding to growth to succession and transition. And so, as the business has done its success journey, how do you define success for yourself personally at this point?

Rick: Yeah. Success for myself is...so much of this is so trite. It's really being true to my values and true to who I am and, for me, having a place to express myself so I don't have to censor myself, where I can be free to be me, to be creative, to be a pioneer, to be a maverick, to be a visionary. Right now, that's successful. That's being successful, to create that container that can hold that. I'm getting to the age, Michael, that success is being relevant of still having something to say that's worth listening to, which is important. Many will say, "Well, Rick, you have a legacy. You have success. You've been super successful. Look at all the lives you have touched." And that's true. That's true. But I'm not the type of person that can say, "Okay, I'll just bask in that for the rest of my life and just sit here."

That is great. And what is success today? What is success when I get up in the morning? What does that look like? And of course, you got financial success. Well, I've had financial success. I've had financial success apart from my company. I've said, for years, I could give my company away, and I'm just fine for retirement. So I've followed my own advice. I've walked the walk.

Michael: So you've diversified out of the company over the years as well.

Rick: Oh, totally. Completely. I never even had an idea that my company would be worth anything.

Michael: Well, for most of the history of advisory firms, up to about ten years ago, they weren't terribly saleable. You kind of hoped maybe someone would do a revenue split if you handed it off to them and got a partial rev share while you rode off to the sunset. The whole phenomenon, these are liquid, valuable enterprises. It's a very, very new phenomenon.

Rick: Exactly. And so I have a wonderful income that's coming in from the preferred shares I have. It's been financially successful from that standpoint. But it's not the be-all, end-all for my survival for the rest of my life. So I've had that success in following...drinking the Kool-Aid, eating my own cooking, and following my advice. But that's nice. That provides a base to become really emotionally and spiritually successful, which is the most important thing once you've got the physical needs taken care of.

Michael: Amen. Well, thank you, Rick, for joining us again on the "Financial Advisor Success" podcast.

Rick: Thank you so much, Michael. It's an honor.