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VOL. 126 | NO. 37 | Wednesday, February 23, 2011

Waddell & Associates Begins Employee Stock Ownership Plan

By Andy Meek

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David Waddell, the chief executive officer of Memphis-based financial planning firm Waddell & Associates, will be on a plane later this month bound for Florida.

He’s heading there to meet with his firm’s very first client, one who’s been with the company since 1986.

Nurturing long-term relationships like that is at the core of Waddell & Associates’ mission. It’s also a reason Waddell recently took a major step in the history of a firm he’s infused with a business model that focuses on high returns, top-notch financial planning and personal, targeted client communication.

Waddell & Associates is now 100 percent employee-owned, thanks to the introduction of an employee stock ownership plan.

Waddell, who also is an investment columnist for The Daily News, said the move means his current team now has a vested interest in sticking around for a long time.

It also means a lot to clients whose idea of asset management and financial planning might be fraught with uncertainty, given the frenzy in the stock market investors have had to stomach over the past few years.

“I think if you look at the financial services space in general, one of the perceived weaknesses is turnover,” said Waddell, whose multi-pronged business strategy has worked so well the firm added new clients between 2007 and 2009 and doubled its assets under management since 2003.

The firm grew from about $300 million in 2003 to $600 million today.

“At Waddell & Associates, it is a strategic corporate objective to establish and nurture long-term relationships,” Waddell said. “If you look at the average tenure of my core client adviser, they’ve been with the firm for 14 years on average. These people have held client relationships together and held the firm together during the most tumultuous market period we’ve seen since the Great Depression.”

In thinking through all that as the firm came to the final stages of wrapping up a succession plan, the last component was the establishment of an ESOP.

“It’s a differentiator,” said Waddell, who joined the firm under his father several years ago. “We really established the business to be of highest value to the clients. And to execute on that, we thought that keeping the team together met the mission. That should give the clients a great deal of comfort. That’s important to me.”

There’s an expectation the firm’s planners will reach out to clients regularly and have face-to-face meetings with them at least twice a year. Meeting those expectations influences employee bonuses.

Waddell thinks the new ownership structure will give the firm a strong recruiting tool in the marketplace, and clients will be able to see for themselves that financial planners who spend their careers with the firm will have “skin in the game here.”

Waddell seized an opportunity to begin pushing the firm in a new direction after the tech bubble burst years ago.

“I wanted to do three things,” Waddell said. “I wanted to do financial planning, asset management and develop a very deliberate communication strategy with clients. So we went from being an asset management business to being a wealth strategies business, where we’re now really the personal chief financial officers for our clients.

“I think having the opportunity for the employees to be owners in the firm solidifies the company more so than it’s ever been.”

One prong of his business model will be on display at the University of Memphis Thursday at 6:30 p.m., when Waddell hosts his annual “State of the Union” address in the FedEx Institute of Technology, 365 Innovation Drive.

The theme of his presentation, which falls in line with his firm’s communication efforts, is “America Rising.” It stems from Waddell’s analysis of the current economic “space race” in which the U.S. finds itself.

He said there’s a groupthink in the general public that the U.S. is on the wane economically. But he doesn’t think that’s true.

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