Ric Edelman is looking to hire a successor.
The founder of one the largest RIAs in the country is actively headhunting for a new president and chief operating officer for Edelman Financial Group -- and hopes the new hire will ultimately replace Edelman himself as CEO.
"We need outstanding talent," says Edelman, 56, who says he's not planning to leave his namesake company. "It would be my hope that this person would eventually be able to become CEO so that I can be relieved of the corporate function and stay focused, and actually increase my focus, on the core element of our firm, which is consumer education."
Edelman -- a No. 1 New York Times best-selling author who speaks regularly about personal finance on NPR, public television and in seminars -- has often repeated the goal of building the top independent financial services firm for middle-class Americans; much of the firm's marketing is tied to his own appearances.
The move comes as the company prepares for an eventual IPO, buyout or other exit for its private equity owners.
PROFESSIONAL MANAGEMENT NEEDED
Edelman's firm, which had $11.6 billion in assets under management according to an SEC filing in March, may in fact be overdue to
Nearly half, or 47%, of all RIAs with $1 billion or more in AUM have COOs, says Nick Georgis, vice president of Schwab Advisor Services.
And hiring a professional can turbocharge growth: Firms with more than $500,000 in gross annual revenue that have dedicated professional management show 161% more total revenue than firms without dedicated management, a TD Ameritrade Institutional study found last year.
Although it can be hard for many firms to find the right talent, those that are growing rapidly have more luck, Georgis says.
Edelman Financial has expanded from about 15,000 clients two years ago to more than 25,000 today, with 108 planners, its founder says, adding that the number of clients is now growing at about 25% to 35% a years.
PRIVATE EQUITY PRESSURE
One impetus for growth: The firm's private equity ownership will likely be looking for an exit -- whether an IPO, sale or management buyout -- in the next three to five years, Edelman says.
In 2012, New York private equity firm Lee Equity Partners bought a majority stake in the firm and took it private, delisting it from the Nasdaq, in a deal that Edelman says was worth $320 million.
Lee owns about 56% of the firm; Edelman says he is the next-largest individual shareholder with a 21% stake. The rest of the owners are individuals, he says.
Edelman and his private equity partners began preparing for a president and COO search about a year ago, he says. After tapping national search firm Heidrick & Struggles, they began making calls two months ago, using a list of 12 prospects -- whittled down from an initial 50, Edelman says.
SEARCH TARGETS
Over the next several weeks, Edelman says he will be interviewing the final six candidates, while Heidrick & Struggles makes another pass to look for viable candidates it might have overlooked previously.
"Some are looking around, but most are not," Edelman says of the top contenders. "Most are very content where they are. Others are retired or have left and we are persuading them to come back to the field."
Edelman says he is only looking at C-level executives in large companies. "How many companies are there [in the financial services industry] that have this caliber person?" he asks. ""You name it and we've considered them."
He would not confirm specifically whether he'd spoken with two high-profile but currently jobless former executives: Valerie Brown, former CEO of Cetera Financial Group, or Esther Stearns, former head of LPL Financial's now-defunct online offering for middle-class investors, NestWise.
He did say, however, that he is looking both inside and out of the financial services industry; LPL, the largest independent broker-dealer in the country, plucked its chief information officer, Victor Fetter, from a leadership role at Dell last year.
"Why would somebody want to leave Ameriprise or Fidelity or Schwab or Colgate-Palmolive or Dell Computer to come to my company?" Edelman asks. "The reason is that the opportunity that we have is unique to be able to turn a company into the next Dell, to create the next Merrill Lynch."
Edelman founded his namesake firm with his wife Jean in 1987; that firm is now part of a holding company that includes eight smaller wealth management firms, all catering mainly to higher-net-worth individuals. (He also holds the CEO job at the holding company, whose AUM is roughly $20 billion.)
Edelman's core focus, however, is on mass affluent investors: His minimum is $5,000, and the average account size of Edelman clients is $500,000, he says.
At some point, Edelman says he may choose to sell off the smaller practices, if it makes sense to do so. "This will be one of the challenges for this CEO, to execute on this strategy," he says.
REDUCING 'KEY MAN RISK'
But the first priority, he says, is to reduce the firm's "key man risk."
"Our view is that the firm cannot forever be reliant on me," he says. "We need to look beyond me even though I am only in my 50s and have no intention of going anywhere."
Edelman has already made one high-profile hire this year, bringing in
Now he says, he wants someone with more experience running a large company.
"I'm a really good CEO," he says. "I built the company from scratch. But it doesn't mean I'm the best CEO. Why wouldn't it make sense to relinquish the duties to others who can do much better?"
"I'm prepared to have the firm do whatever is necessary to serve our clients," he adds. "If that means that I need to relinquish the chief executive title, then I'm not going to stand on pride or let ego get in the way."
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