Moneta Group CEO Featured in Wall Street Journal

Moneta Group CEO, Gene Diederich, was quoted in the January 24 edition of the Wall Street Journal. If you have a subscription, click here to read the whole story, or see it pasted below:

Firm Shares Tips for Succession Planning

Make careful choices, provide good coaching and share clients, says one CEO

Jan. 24, 2014 9:52 a.m. ET

The St. Louis-based Moneta Group knows a thing or two about creating a lasting business: The registered investment adviser started as an insurance agency in 1869.

Still, when it realized four years ago that many of its top people would be retiring in the next decade, the firm intensified its focus on succession planning.

“If we weren’t intentional about replacing those senior people, our company’s ability to stay independent would be in jeopardy,” says Gene Diederich, chief executive of the firm, which manages $12 billion for 2,500 client households. “We think our independence is our No. 1 differentiator that allows us to optimally serve our clients.”

The firm’s chairman, Peter Schick, now 67, developed a succession plan for his advisory team, which centered on mentoring younger advisers and providing the resources necessary to become principals. Two advisers on Mr. Schick’s team were just promoted into those senior roles, and the system has become a model that the firm will use for all of its 34 adviser teams.

Based on that model, Mr. Diederich outlined his firm’s top tips for building a business that lasts longer than the founders’ careers.

1. Choose the right successor

Although it sounds basic, Mr. Diederich says the key is to find a younger partner or partners who not only have the technical and financial planning skills, but have the ability to develop business. “A big factor is the (potential successor’s) desire to be an entrepreneurial owner versus a salaried employee,” he says.

Look for people who want to pursue new clients instead of just doing technical work on clients sourced by others. They need to have a lot of self-confidence, good communication skills, a competitive personality and the ability to handle rejection.

2. Provide formal coaching

“I can’t emphasize this enough,” Mr. Diederich says. The firm created a formal training program for the firm’s younger associates who aim to become principals. The program spans five years and includes extensive coaching on business development and other topics, delivered in a classroom-like setting. For instance, the firm’s principals play the role of prospective clients and have younger advisers in the program do mock interviews with them. They videotape the interactions and then provide feedback to help the less experienced advisers be more successful in their first interviews. One common lesson: Many younger advisers get right to selling with new clients, says Mr. Diederich. But the firm trains them to focus on asking questions and listening intently before suggesting any products or services.

The intense coaching also comes with expectations. Participants in the program are required to bring in 20 new clients that generate more than $10,000 in annual fees over the five-year period.

3. Share clients

In addition to sharing their knowledge, senior advisers also should open their books of business to allow the junior advisers to tap their clients for referrals. “That is part of the secret sauce,” Mr. Diederich says. “The senior person can’t hoard their client list and not let the junior person prospect from it.”

Such a system requires senior partners to have confidence in the work of their junior colleagues. But the Moneta Group also provides a safeguard in the firm of a non-compete agreement to ensure that a younger adviser doesn’t leave the firm with the new contacts.

But Mr. Diederich says that formalizing the succession plan helps everyone involved in the process understand how their actions today are creating a sustainable business.

“Senior people need to be willing to allow the junior people to make money and get paid for their efforts as they ramp up,” he says. “Meanwhile, the juniors have to be patient and know that, though it’s a long runway, ultimately they’ll be able to buy a business that is several times larger than they could develop on their own.”


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