I am, like many owners of financial planning businesses, at an age where I need to start considering my own retirement and eventual exit from the business.

    Like many, I had always imagined that the business would be sold on to another advisory business or consolidator. However, when I started to seriously think about extracting value from the company and examining some of the many unsolicited approaches that were put to me on a regular basis (and still are), I didn’t feel happy about going down this route.

    The main plus point from my perspective would have been a nice cheque on day one, which would have seen me and my family very financially secure for life. On the flip side, I had a number of concerns, including:

    • I would have to work for people I didn’t know for at least two years to secure the rest of my money. Could I do that after over 30 years of working for myself?
    • We would probably be required to inflict a new investment proposition on our clients to secure the maximum pay-out. Would this be in the clients’ best interests?
    • Fee levels and service propositions were likely to change, which would risk unsettling clients and advisers.
    • In spite of what acquirers were saying, there was a real risk that our East Yorkshire offices, much loved by staff and clients alike, would be closed down.
    • We employ over 30 people and I thought it likely that many of them would be at risk of losing their jobs – none of whom deserved that.
    • A deal to sell the entire business would not have suited my fellow shareholders – most of them are younger than me.
    • We would lose our identity and culture after many years of building a business that has won numerous awards and is well respected by its clients, as well as the local professional community.

    For me, this wasn’t looking like a great way to end a long career, where I have always lived by the rule of ‘do the right thing’. The ‘right thing’ was to come up with a solution that would retain our identity and culture, as well as looking after the people that have looked after me – our clients and staff.

    A few years ago, I looked at the Employee Ownership Trust option, which is becoming quite popular now. I can see the attractions of this for many business owners, but it didn’t quite do what I wanted to do, namely, incentivise and reward key people (not just advisers) now and in the future by giving them the opportunity to build a substantial capital value for themselves just like I’d done. 

    Having decided that I would like some form of management buyout, I didn’t want a hefty share price to be a barrier to entry, for the business to be saddled with a substantial debt, or for external shareholders to be ‘calling the shots’.

    Having scratched my head for some time, I attended a conference on employee share ownership at the Institute of Directors in London where I met an employee share scheme specialist who put together a bespoke growth share scheme that ticked all the boxes for me. We are days away from signing up on a deal that will:

    • Freeze the value of my shareholding.
    • Protect value for the remaining shareholders (three following a recent retirement).
    • Allow five key people (two of our young advisers and our three heads of department) that we had identified to become shareholders at an affordable price for them.
    • Realise the value from my shares over a period of time.
    • Leave every other aspect of the business untouched for the benefit of our clients and staff, which is incredibly important to me.

    On the back of this, we have identified the next generation of leaders who will become directors next year, including my successor as managing director.

    One piece of advice I would give anyone considering their options is – allow plenty of time! You need to decide what you really want your legacy and recognise that these things take much longer than you anticipate, or people will tell you!

    For me personally, where we have ended up is that I can eventually retire knowing that I have done the ‘right thing’.

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