Succession is an emotional and overwhelming topic for many thriving businesses, but it can be particularly difficult for wealth advisory organizations, which typically operate with a lean infrastructure and deliver intangible services that are heavily based on relationships. Despite the emphasis placed on up-front planning, many fiduciary professionals are still woefully underprepared, placing their livelihood, their legacy and their clients at great risk.
Ballentine Partners, a New England multifamily office with nearly $7 billion under advisement, is one of the few independent firms that is tackling the issue head-on. These days the founder and chairman, Roy Ballentine, remains active in client-facing and strategic matters while the appointment of two longtime employees to key roles—Drew McMorrow as president and Coventry “Covie” Edwards-Pitt as chief wealth advisory officer—has allowed him to hand off the firm’s day-to-day operations to a younger generation of leaders. Recently, I met with the three of them at their Waltham, Mass., headquarters to discuss what they’ve learned during the multi-year planning process and the positive impact it’s had on the human and intellectual capital driving their business.
Grove: When did you start thinking about succession and why?
Ballentine: I began to tackle it in earnest about three years ago. I knew there was a lot at stake and it would be irresponsible to do it under pressure. The perfect time to begin these types of long-term initiatives is when there’s no immediate need for it.
McMorrow: We’d been helping clients with their succession issues for years, so we would be remiss if we didn’t apply that same thinking to ourselves.
Grove: Succession planning can often get intertwined with the retirement goals and post-career identity issues of the principals. With all the moving parts, how did you prioritize?
Ballentine: For some business owners, it’s an issue of exiting, other times it’s more clearly an issue of succession. I was committed to doing what was right for the company, not just me. And I wanted to stay involved. That pointed to a succession.
Grove: Was there a structured process you followed?
Ballentine: In its simplest form, I think of our succession process as having five steps: defining our goals, studying the best practices gleaned from other organizations, developing the plan that was right for us, implementing that plan and following through. We’re in the iterative stages of implementation and follow-through now, and have been for more than a year.
Grove: What are the basic components of your plan?
Ballentine: It’s a continual process that involves codifying roles and responsibilities, recruiting and incorporating new talent, figuring out how to institutionalize our knowledge base and preserve it for future employees, and the continuity of our client relationships.
Grove: You were able to fill a number of critical roles with internal candidates. How important is getting the right people into the right roles?
Ballentine: The best plan would’ve failed without the right people. I committed a huge chunk of time to assessing employees; it was the longest part of the process and required my full involvement.
Grove: What did the assessments entail?
Ballentine: The senior team was given a chance to demonstrate their interest in shouldering more leadership responsibilities. During that time, we matched each individual’s skills with their interests and used a number of consultants with specific expertise and perspectives to help us with things like executive coaching and interpersonal dynamics. We also conducted a series of interviews and Web-based tests on things like communication, EQ, intelligence—not just technical aptitude that can often eclipse the softer skills during the hiring process.
Grove: Drew and Covie, you’d both been at the firm for years but in different roles. What needed to change when you took on your new responsibilities?
McMorrow: We needed to develop a new kind of partnership that would bring out the best in each other as well as the rest of the firm’s staff. And we needed to manage our transition into new roles while continuing with the firm’s core business of advising wealthy clients.
Grove: Drew, what was your first priority as president?
McMorrow: When I assumed the day-to-day responsibility, I first focused on figuring out the organizational chart, doing it in a way that would keep people happy, engaged and enthused about the job we had in front of us. It meant adapting to changing needs and behaviors as people assumed their new roles. For instance, what works at one level, such as a senior role working with his or her peers, may not be what’s needed in another situation. We had to undergo a fair amount of trial and error.
Grove: And how about the biggest challenges?
McMorrow: Finding the right balance between our client responsibilities and climbing the learning curve in our new professional roles. It’s important that we remain as proactive and anticipatory as possible, not just with clients but for the welfare of the firm. And making time to recruit for disciplines such as human resources, investments and business development, all while sustaining growth.
Grove: In such a bespoke business, it’s very difficult to find scale because each step is different and requires thoughtful oversight. How do you manage that along with growth?
Ballentine: We’re not trying to build a massive business. But we have found ways to be incrementally scalable that have added value and profitability to our business. We’ve found efficiencies in delivering solutions, in the implementation process and in developing an infrastructure that enables us to expand.
McMorrow: I think the degree to which you scale is reflective of your priorities. We place an emphasis on knowledge management and transfer so there is continuity between the employee base and the customer experience.
Grove: How would you characterize your employee base?
McMorrow: We like to bring people in from other industries that can contribute fresh perspectives and skill sets. We also want the firm to be as multigenerational as our clients, so our hiring has begun to reflect that. We place an emphasis on homegrown talent so we can manage the learning and development process to greatest effect.
Edwards-Pitt: Most firms our size are lacking in strong second-tier personnel. Roy’s always known we needed bench strength and that’s something Drew and I both believe in as well.
Grove: You’ve all mentioned learning, knowledge transfer, continuity and skills, much of which is dependent on a strong internal culture and curriculum. Let’s talk training.
Ballentine: We’ve been in business a long time; we’ve got decades of experience and expertise. We have an obligation to document it, make it learnable and help others acquire it. I also believe in having clearly stated values and a code of ethics. Everyone must have the same priorities if we are going to work together effectively as a team [see sidebar].
Edwards-Pitt: As a result, we have an extensive internal training curriculum, especially around values which are key to how we operate, but also on financial basics, income tax planning and similar technical topics.
Grove: Any interesting stories or “aha” moments?
McMorrow: We learned quickly that there was very little information available on how to manage mistakes. Most examples were situations to avoid, so Roy looked at the medical field where hospitals tended to have one of two policies regarding mistakes: confess or cover it up. We wanted to use mistakes as a chance to learn.
Grove: That’s a unique approach in an industry where small mistakes can often add up to serious dollars.
McMorrow: It’s all part of the process of making incremental improvements. The more we can learn from our missteps, the more likely it is we can avoid those same missteps in the future. In-the-moment teaching opportunities are very powerful.
Grove: Covie, the wealth advisory group is a new initiative under your leadership. Can you tell us about it?
Edwards-Pitt: We’ve always had a function to provide strategic advice on the non-investment aspects of wealth management. Now, it’s a group of 25 people that lead client engagements and all that entails. We are involved in things that range from staffing requirements and morale to career progression advice to reporting, delivery and thought leadership and generally staying at the forefront of the industry. Getting everyone’s participation in the process was critical to bringing focus and specialization to our roles and helping employees move from the mind-set of being a sole proprietor to a partner.
Grove: Perhaps the most important part of your role is engaging regularly with clients. What can you tell our readers about your client base?
Edwards-Pitt: The firm’s clients have an average net worth of close to $50 million, ranging as high as $1 billion. Most have the kinds of complex interests and needs that require professional assistance and some oversight of their entire balance sheets, not just their liquid assets. Many of them are entrepreneurial in nature, with a whole or partial stake in an operating company, direct investments in other ventures and highly illiquid balance sheets.
Grove: Business owners can present unique challenges to advisors, especially when business and personal issues collide.
Edwards-Pitt: Yes, they can, and in those situations we try to get involved and add value where possible. Ballentine Partners has helped its business-owner clients do things as diverse as restructure a company and change dividend policies to minimize tax implications.
Grove: I understand that you have a number of professional investors as clients too. How does that work?
Edwards-Pitt: Yes, many of our clients have amassed fortunes in the investment field and now are focused on stabilizing, diversifying and protecting their assets, all of which requires us to be extremely confident when engaging with them, making recommendations and challenging ideas.
Grove: Is there a pattern to when you begin working with clients?
Edwards-Pitt: It tends to be around trigger events such as liquidity, death or divorce. People are aware that their financial situation and responsibility are changing radically and they seek involvement from an objective third party.
Grove: How do you interface with clients?
Edwards-Pitt: Every client relationship is assigned a team that is comprised of five key functions: a senior client advisor, a financial planner, a senior investment advisor, a portfolio manager and an analyst. We always lead with planning, an effort that is particularly strong due to our people and the up-front focus. Not all clients want to be involved to the same degree; others simply want to hire an expert and trust us to do our job. We accommodate all kinds of approaches.
Grove: Do you have any guidelines to ensure that those interactions are high-impact?
Edwards-Pitt: We track nine keys areas for all of our clients, including their balance sheet, investments, cash flow and income taxes, estate planning, risk management and insurance, philanthropy, legacy, the wealth management process and any privately owned business interests. We discuss a range of topics and always try to help them tackle at least one big issue at every meeting.
Grove: How about some examples of how Ballentine Partners does things differently for its clients?
Edwards-Pitt: We believe that investments are central to what we do, but they aren’t the only way to add or increase financial value. A lot of money is saved for clients, and value is delivered outside of the investment process, especially through tax strategies and careful estate planning.
McMorrow: Every firm says clients come first. The difference is how those words are translated into the behavior of the senior management team. We must embody our values and our operating principles in our daily life. A key quality for us is honesty. So, it’s no longer OK to dodge client calls by saying, “I’m in a meeting.”
Grove: As it relates to succession, if you could’ve done one thing differently, or started one thing earlier, what would it have been?
Ballentine: One of the major issues to come to grips with years in advance is knowing how to attract the kinds of people that can run the firm in the future. I knew that I needed to create an environment that is attractive to high-caliber professionals. Part of that means offering career-pathing opportunities and soliciting [staff members’] inclusion in strategic thinking.
Grove: What was the hardest part?
Ballentine: There can be emotional aspects to the process, especially when the firm has your name on it. And I needed to disengage from certain processes where my presence would have been disruptive or myopic.
Grove: Everyone had been in their new roles for close to a year by the time you made the announcement in October 2011. Why the delay?
Ballentine: I was concerned that the announcement would be perceived as an outcome of winners and losers and it was not intended that way. By handling our internal and client communications first, it gave everyone a chance to settle into the new structure before putting them under a microscope.
Edwards-Pitt: It can be a process that ruffles feathers and we didn’t want to lose any of our key employees.
Grove: Retaining good people and attracting more of them can be one of the most difficult tasks a company faces. How have you done it?
Ballentine: I decided to study leadership to get some additional insights. Strong leaders attract other strong leaders, and I think we’ve made real strides there. A good example is our recent appointment of Will Braman as chief investment officer from his former post as Americas CEO of Fortis Investments. He brings more than 30 years of investment and leadership experience to Ballentine Partners, which enriches our intellectual capital.
Edwards-Pitt: Another part of attracting good leaders is finding the people that want the equity and leadership opportunities we can offer them.
Grove: Your corporate name indicates an equity partnership. Has that impacted your philosophy or the way you operate?
Ballentine: The organization needed to change its inflection point. We’d become too consensus driven and needed to get back to having more accountability and ownership for decision-making. We are a partnership of owners with agreed upon criteria that determines who we nominate and approve for partnership. We see ownership as separate from governance.
Grove: What is your ownership structure like now?
McMorrow: Ballentine Partners is majority-owned by six senior employees and we want to expand employee ownership to another eight to 10 individuals.
Ballentine: We also have some clients that we’ve offered ownership stakes to, many of whom like the idea of being involved in something that is focused on their financial security and success.
Grove: With Drew and Covie effectively running Ballentine Partners, how do you spend your time now?
Ballentine: I’ve maintained a hand in some client relationships. Other than that, my time is largely spent on board meetings and thought leadership activities that matter to our clients, the firm and the industry at large.
Grove: Of what are you most proud?
Ballentine: A client once told me that he’d never asked us anything that we had not yet considered. We pride ourselves in being incredibly proactive and thoughtful.
Grove: What are your current priorities?
Ballentine: Having been in this business for more than 30 years, I believe most people lose thousands to millions of dollars through some combination of poorly integrated advice, missed opportunities, mistakes and fees paid for value that has not been delivered. Ballentine Partners isn’t perfect, but we’re doing our best to decrease and eventually eliminate those situations.
