The secret of successful succession

3 min read

Kennas Financial Services boasts a 123-year history and owes its success, in part, to its partnership structure based on succession and equality.

Kennas Financial Services is proud of its long history. Dating back to 1896, the company has nurtured a culture of partner custodianship where each generation takes care of the business until it’s time to pass it on to the next.

“It’s a great long-term business model. Everyone’s astounded when I say we’ve been in business for 123 years. It’s a pretty good story. I really do see myself as a custodian to look after the business and then pass it on. I’m now at the helm of the ship, and it’s not going down on my watch,” Kennas Financial Services Partner and Director Brent Giles says.

Brent began at the firm as a graduate in June 2007 and was identified as potential partner material by 2010. In July 2015 he was admitted as the 25th partner of the business, on a salaried basis. For two years he received 80 percent of the other partners’ salary until he bought his first tranche of equity, five per cent, in 2017 and his second tranche of the same in 2018. In July 2019 he will receive equal equity partnership. During this preparation period, Brent had the opportunity to focus on his softer skills through management training courses and by developing his client acquisition skills.

“It’s whatever is right for the business when bringing on new partners,” he says. “We have a flat structure, we don’t have middle management, so it’s a bit much to jump straight to a full equity partner. Initially, you’re not quite bringing to the business what a full equity partner does, so for us, 80 per cent of salary is appropriate at that point.”

Brent attributes the company’s success to having clear 10-year plans in place. Every aspect of the business is agreed upon and documented including partnership agreements, shareholder agreements, processes, policies and partner rights and behaviours, and buy and sell agreements. The 10-year plan includes a clear succession plan as to which employees will be brought on board as a partner and who will be retiring. This is reviewed annually at their succession strategy meeting.

“We are ‘successioning’ as we speak – one senior partner who has been there for over 40 years will be exiting the business. That will create a new wave of challenges for us, particularly for us younger partners who haven’t experienced exiting partners before.”

Brent points out that it’s important to have a good spread of ages among the partners to ensure smooth transitions and continuity. Kennas currently has two partners in their 30s, two in their 40s, two in their 50s and the exiting partner will be 60.

Brent says that the company success can also be partly attributed to the partners having equal ownership of both the accounting and financial planning sides of the business. This means that all are driving in the same direction and that it’s a mutually supportive environment, Brent says. Clients are cross-referred in a corporatised model with the emphasis is on the customers being a client of the firm rather than the partner.

Regular valuations are also essential in a succession-based business. Kennas conducts annual valuations and procures an external valuation before an equity change over.

Brent warns that it’s essential to take your time choosing an equity partner because it can be a complicated process to unwind if it doesn’t work out. Kennas ensures it finds people with the right skills, personalities, ethics and vision that are an appropriate fit.

Improvements

Brent feels that every business should continue to grow and evolve and that even they could make adjustments in certain areas. For example, partners should be more accountable to each other and that there could perhaps be processes around that. In addition, he says improvements could be made in mentoring future partners. “We all know that managing staff is a big part of any business,, so a partner also needs to be a great manager and a great leader – not just a good technician,” he says.

Fortunately for Brent, he had an outstanding mentor who was one of the key reasons why he stayed. His mentor was voted in the top 50 planners in the country for nine years in a row.

Brent would like to see a broadening of the skills matrix among partners, by bringing others on board with skill sets that complement the existing partners, to push the business forward. 

For Brent, the future’s bright and he’s very content with his own strategy.

“We’ve had our own licence since 1992 so that was part of the culture and the attraction for me. I love the firm, the history and what it stands for. We try to lift everyone up together and operate as a sum of all parts. We’re a strong unit and all our interests are aligned – we’re all going in the same direction. And I think there’s a massive future in financial advice,” he says.

Brett’s key recommendations

Determine your exit strategy – have a clear succession or buyout plan

Document everything and review annually – clarity, accountability and transparency matter.

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