Employee ownership can create a deeper commitment to the firm and align incentives, but it doesn’t automatically motivate employees, according to registered investment advisors speaking at the Wealth Management EDGE conference at The Boca Raton resort in Boca Raton, Fla., this week.
Kyle Glenn, chief operating officer at HB Wealth, said economic incentives can be a cultural touchpoint and allow a firm to put its money where its mouth is. But it’s not everything, and it’s not an excuse to ignore culture.
For HB Wealth, shared ownership shows people that they want them for value creation, not value capture, Glenn added. If you take good care of your clients and people, the economics will naturally follow.
The RIA has 342 people across the organization, including 86 employee shareholders and about 200 with some kind of economic participation.
Moneta currently has 68 partners, and intends to remain independent, said Eric Kittner, CEO and chairman of the RIA. Kittner said that when thinking about talent, the RIA is coming at it through the lens of the practitioner. There’s no third party, such as a private equity firm, involved. For example, when the firm decided to enter the trust business several years ago, it launched its own trust company. And the firm has partner capital to invest in the company’s infrastructure.
The RIA has a tight ownership group, with 1 out of every 10 employees holding equity. That’s by design; Moneta wants to make sure the ownership group is investing in the business.
Rob Mooney, CEO of Snowden Lane Partners, was majority-owned by private equity until very recently. Last year, the New York-headquartered RIA acquired a “significant portion” of the ownership stake in the firm held by Estancia Capital Partners. Estancia still owns a one-third ownership stake.
Mooney said the employee ownership creates a deeper commitment to the firm and resonates with clients, many of whom are business owners themselves.
But the firm is now considering cutting back on the equity available to new joiners to protect other shareholders from dilution. Snowden Lane also wants to put that equity out on a time horizon to be earned. Equity is a vital currency, so the firm wants to make it dearer.
Mooney had positive things to say about having a strategic investor, which he said can provide a great benchmark and governance point. Strategic investors provide opinions and perspectives on running a firm, given you get the right one. “For that reason, I’m not averse to seeing another investor,” he said.
