TRANSITION TALK

Stuart Smith, JD

Stuart Smith, JD
Stuart contributes over three decades of leadership and experience as both a lawyer and a licensed securities professional. Stuart is part of the Enterprise Consulting team, where his experience makes him uniquely qualified to understand the challenges of financial business owners and the solutions to help them accomplish their goals.

Recent Posts

Benefits of Synthetic Equity for Next-Generation Professionals

Posted by Stuart Smith, JD on Sep 30, 2020 4:56:11 PM

Benefits of Synthetic Equity for Next-Generation Advisors

The term “synthetic equity” refers to a set of compensation tools that is commonly used to provide key employees some of the economic benefits of ownership without actual stock changing hands. While existing owners may benefit from synthetic equity by capitalizing on employee performance without relinquishing ownership, there are key benefits to next-generation advisors, too.

Reduced Financial Risk

One of the most beneficial aspects of synthetic equity for a next-generation advisor is that it does not require a financial investment in the firm. As a younger professional, you may already be juggling the financial obligations of a new family, a recent home purchase, or student loans, and you may not be interested in taking on the added burden of ownership buy-in–yet.

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Topics: Compensation, Succession Planning, Next Generation, Sustainability, Building Your Team

Structuring Ownership Compensation

Posted by Stuart Smith, JD on Mar 11, 2020 8:52:42 AM

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Professionals working in the independent financial services industry tend to organize their business the same way as other professional service providers. Whether a dentist, lawyer, or wealth advisor, chances are that the firm owner is both a full-time employee and an active manager of the business as well as a shareholder. We are often asked in our consulting work about this dual role; shareholder and employee, and the interplay between them, particularly as it relates to compensation strategies. For example, should employees be rewarded with stock, or the opportunity to buy stock for achieving certain targets? Or, now that I am an owner, shouldn’t I get a raise?  

There are no simple answers to these questions, but context should help to understand the thought process required to make informed decisions when these issues inevitably arise.

Salary vs. Profit Share

At a first level, ownership and pay are distinct concepts with unique rules, purposes, benefits and risks. These concepts represent the division between the return an investor receives on the capital put at risk and the reward received by an employee for the work that is performed. This division should be simple, self-evident and unbending, but the reality in a small business is often far different. The smaller the company, the harder it is to maintain a distinction between ownership returns and compensation. In the most basic model, a one owner company, the black and white lines dividing a return on investment and wages for work often disappear completely.

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Topics: Compensation, Business Growth, Enterprise

A Green Paper for Financial Advisors

Posted by Stuart Smith, JD on Sep 13, 2019 12:42:27 PM

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We write a fair number of white papers every year. As thought leaders, it is part of our job to share our thinking with independent financial professionals in order to advance the profession. In our consulting work, our clients often challenge us with thought provoking questions which open us to new ideas, help us to improve, and occasionally challenge basic assumptions behind the work that we perform. Sometimes questions are really out of left field and our curiosity leads us to an answer worth sharing.

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Topics: Succession Planning, Business Growth, FP Transitions, Sustainability, Enterprise

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