advisor firm acquisition

A Path to Firm Ownership

A Story of Perseverance

Elizabeth (Beth) Bennett’s story is one of perseverance. It starts when she was 7. Her father, a mechanist died of lung cancer at age 42. Her mother, a slipcover factory worker, was ill-prepared to deal with the family’s expense management—which resulted in bankruptcy for the family. Beth never wanted to be in her mother’s helpless situation; she wanted to understand how money worked, and to be able to help others, too. So, Bennett, a hardworking self-starter, put herself through college and graduated from Penn State University in 1991 with bachelor of science in accounting and later received her MBA from Meredith College in Raleigh, NC in 1998.

Since then she spent time in corporate America working for Merrill Lynch and PNC from 2007 to 2012. In 2012, Bennett earned her CFP designation set out on her own as an independent advisor affiliated with National Planning Corporation. As Bennett puts it, “she found her home” in the financial industry—working as an independent advisor speaks to her experiences, education, entrepreneurial spirit and desire to help people reach their goals.

For two years, from 2012 to 2014, Bennett grew her book of business organically, but it was a slow process. She knew it was time to purchase an existing firm to accelerate her growth.

The Dating Period

“Do your due diligence. Knowing and understanding the business you are looking to buy is key.”

In January 2014, a CPA, Dan Conkling, introduced Bennett to Norma Finkner, owner of Chesapeake Financial Planning & Tax Services, Inc., who was interested in selling her practice. Finkner and Bennett liked each other immediately and knew that this deal would be a good fit.

Norma had recently dealt with a health scare, which was the wakeup call she needed to realize that she wanted to execute a succession plan, both to take care of her clients and to monetize her forty years of investment into the company.

Norma had very specific ideas about how she wanted the transition to go. Several of her conditions included remaining with SagePoint, the business’ current broker-dealer, and keeping the office staff of three employees on board. David Goad, founder of Succession Planning Consultants, Inc., helped to get both parties on the same page and work through any compromises needed to move forward.

The Transition

“It’s a very emotional process, the seller is handing over their baby to you. Thus, there needs to be a clear understanding between the buyer and seller.”

In March, 2015 Bennett initiated the transition by purchasing 5% of Chesapeake. She also started working for Chesapeake Financial, making small changes to the business structure such as changing its structure to a member-managed LLC and shifting the focus to serving federal employees. Bennett and Norma began meeting with all the clients together, so they would have time to get comfortable with Bennett and ensure a smooth hand-off. Over the course of a year Bennett transitioned to meeting with clients alone.

“Selling a firm is a very emotional process,” recalls Bennett of the transition experience. Norma had spent forty years building Chesapeake Financial. During the transition, it became clear that some of Norma’s initial desires for the business were not going to be possible. For one thing, there were significant issues with the original staff that forced Bennett to let two of them go. Also, the plan was to purchase the business incrementally over time. That ended up not being practical and the transition process was expedited.

Closing the Deal

“A succession is really Relationship 101 – it’s a marriage and a divorce all in a fairly short amount of time. Know it’s probably not ALL going to go your way. Have your ideas but be flexible and pick your battles, and have a great attorney!”

Just over a year after purchasing that first 5%, Bennett purchased the entire firm. “Getting a deal done is really challenging. This process is not for the faint of heart,” says Bennett. “Sometimes things don’t work out the way you envisioned them so it’s important to be flexible and have good partners.”

Finalizing the sale of the company was a challenging process. Chesapeake Financial had experienced some short years and Norma, who did her own taxes, had put a lot of expenses through the business so they had to dig for the organization’s real numbers. SagePoint also went through a sale during the process which proved to be a disaster for Bennett because she was not able to get the help she had anticipated and had to handle a lot of the paperwork that would usually be taken care of by a BD. Also, she had to register to become an RIA in Maryland and didn’t get approval until September of 2016.

Luckily Todd Fulks of SagePoint, David Goad and Live Oak Bank were there to help Bennett through this trying process. “It took a team of people to make this deal happen in a short period – don’t try to skimp on your transition team,” says Bennett.

Sarah Deasy and Eric LeRay of Live Oak Bank worked tirelessly with Bennett for the first four months of 2016 to close the deal. Bennett’s experience with Live Oak Bank was second to none, she says. “Sarah came out to meet us and really understood my business. The financing side was the easiest and least painful part of the entire process,” she recalls. “Live Oak’s technology was great and enabled us to check off all the boxes quickly. The team was very responsive. They pushed the deal forward even amid snags, and everyone rose to occasion. They truly pulled off the impossible. Live Oak has given me a dream I never could have accomplished without them.”

At Live Oak, there are no prepayment penalties on loans under 15 years. Because of this Beth plans to pay off her loan in 5 years to free up more working capital for business growth.

The Future

“As a buyer you have to have a vision of what you’re looking to do and share that with your team as much as you can. Involve the owner and staff in the process in a reasonable time frame. Having the owner’s blessing is key!”

“Communication, communication, communication” is essential, according to Bennett. “It’s important to keep everyone informed and to communicate clear steps so your staff and clients know what’s going on – Norma was a huge help with this.” Bennett decided to keep a lot of things the way they were, and is starting with “baby steps,” she says to transition client money where she believes it needs to be. Almost all the original clients have stayed with the business, so she does not want to “rock the boat” too much and scare people away. A few of Bennett’s initial changes are her focus on federal employees, the implementation of a referral program and an increased emphasis on educating clients.

In the coming year, Bennett also plans to revamp the businesses by investing in new technology and by streamlining more processes. She also has her eye out for additional books of business to purchase to continue to accelerate her firm’s growth.

Norma has been slowly transitioning out of the business and plans to retire completely around the one-year anniversary of the final sale. “Set proper expectations for the original owner’s exit plan. This timeline is different for each business and you have to determine what is best for you,” Bennett says.

When reflecting on the past year, Bennett says she has grown in her confidence as an advisor, which was helped by the support she received from all the clients that have stayed and been excited to work with her. She has also been able to increase her revenues during this transition year.

The Right Partner: Live Oak Bank

“Have your own vision but don’t go in thinking you know how to do everything. You need to have people that you respect in your industry, whom you can ask questions.”

Live Oak Bank, an FDIC-insured bank with a national footprint, was founded in 2008 with one goal: to provide business loans to independent business owners in niche industries. Most of the industries that Live Oak Bank services have historically struggled to find financing owing to a variety of reasons, such as lack of collateral, the typical situation in the wealth management industry.

Live Oak’s Investment Advisory team has lent over $400 million to investment advisors since it debuted in late 2012. With financing in great demand in the industry, the Live Oak has made significant investments in educating both advisors and corporate home office execs on how to best use financing. Our latest effort to provide education to the industry can be seen in our Investment Advisor Knowledge Bank, which provides resources for advisors looking to grow or sell their business.

Live Oak Bank’s acceptance within the industry as an innovator, thought leader and a trusted lending source are evidenced in the numerous industry awards we have received over the last few years including: two Wealth Management Industry Awards, one in 2015 (Industry Innovator) and another in 2016 (Succession Planning), Investment Advisor Top 25 Most Influential People, Rep Magazine Top 10 People to Watch in Financial Services Industry, the “Angel Investors” cover story in Investment Advisor Magazine, Wall Street top 50 in Irish America Magazine and significant additional media accolades and coverage.

Our lending team guides clients through the lending process with industry knowledge and experience. Our relationship with our clients extends beyond closing to ensure a lasting relationship focused on the success of the business. Loan purposes include: merger and acquisition, succession funding, partner buy-in/out, expansion & recruiting, operating capital, refinance, loan payoff, start-up/transition and real estate.

The Investment Advisory industry is starting to see significant asset movement amongst advisors. Live Oak can help advisors achieve new levels of growth and, in many cases, help advisory firm principals realize the liquidity event that will finance their retirement via succession plan execution. If you are considering a succession or acquisition, contact our dedicated investment advisor financing team to learn your options.

Visit the Investment Advisor Financing web page and contact the Live Oak Bank team for more information: