Ep 406: Exiting To A Perpetual Purpose Trust To Facilitate Internal Leadership Succession Without Indebting G2 Advisors with Michael Kramer
Financial Advisor Success
Michael Kitces
4.8 • 696 Ratings
🗓️ 8 October 2024
⏱️ 90 minutes
🧾️ Download transcript
Summary
Michael Kramer is the Manager of Natural Investments, an RIA based out of San Francisco that has offices across the country and oversees $1.9 billion in assets under management for 1,300 households. Michael's firm uniquely employed a perpetual purpose trust structure for its internal succession plan, which allowed the founding partners to monetize their ownership without burdening new advisors with debt. This approach also fostered a more equitable leadership structure, not solely based on share ownership.
Listen in as Michael talks about the firm's governance by "trust stewards" and the unique role of a "trust enforcer" to ensure accountability as well as why the firm chose this model over traditional ESOP or cooperative structures. Michael also reflects on building his practice from the ground up, leveraging public speaking to attract like-minded clients, and embracing his role as a "seed planter" to foster a business that embodies his values and sustains beyond his tenure.
For show notes and more visit: https://www.kitces.com/406
Transcript
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| 0:00.0 | Welcome to the Financial Advisor Success Podcast, where you go behind the scenes with |
| 0:07.1 | financial planner, speaker, and consultant Michael Kitsis to hear stories of how leading |
| 0:12.4 | financial advisors navigated the inevitable challenges that arise on the path to success |
| 0:17.4 | and get insight from leading industry consultants about how to break through to the next |
| 0:22.2 | level in your advisory business. And now here's your host, Michael Kitsis. Welcome, everyone. |
| 0:29.0 | Welcome to the 406th episode of the Financial Advisor's Success Podcast. My guest on today's |
| 0:34.1 | podcast is Michael Kramer. Michael is the manager of natural investments, |
| 0:38.1 | an RIA based in San Francisco, California, with offices across the country, overseeing |
| 0:42.6 | $1.9 billion in asset center management for 1,300 client households. What's unique about Michael, |
| 0:48.2 | though, is how his firm used the unique perpetual purpose trust structure to facilitate |
| 0:53.6 | an internal succession plan, allowing |
| 0:55.5 | the founders to monetize their ownership in the company without indebting the firm's newer |
| 1:00.6 | next generation advisors and in the process also creating a more equitable leadership structure |
| 1:05.4 | based on more than just relative ownership of shares. In this episode, we talk in depth about |
| 1:10.7 | how Michael and his |
| 1:11.6 | fellow partners use the perpetual purpose trust, which now owns the underlying RAA, to |
| 1:16.4 | implement a succession that provided them with an upfront payment financed by a loan, taken out |
| 1:21.0 | by the business, as well as ongoing earnouts, and allowing them to monetize their original stakes |
| 1:25.4 | in the firm without putting the next generation |
| 1:27.5 | advisors into debt. How Michael's firm then decided to allow new advisors joining the firm to become |
| 1:33.3 | eligible for its profit-sharing payouts and voting rights immediately without a vesting period |
| 1:37.3 | to further distribute power across the organization. And why Michael's firm decided to make |
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