It’s hard to go for a month in the registered investment advisor sector without a new report detailing the challenge of succession planning in this founder-led, client-driven industry.

Just take this week. According to Charles Schwab’s annual RIA benchmarking survey, just 45% of firms with under $250 million in assets under management have a written succession plan. The figures are slightly better for firms over $250 million at 65%, and are highest for Schwab’s top-performing firms, identified by a series of 15 factors, at 77%.

At HB Wealth, an Atlanta-based RIA founded in 1989, the firm’s succession strategy didn’t seem so clear after its first decade. In 2001, firm co-founder and CEO David Homrich departed to run AMB Group, an investment and wealth manager for client Arthur Blank, the co-founder of Home Depot.

How did the firm manage through such disruption? According to current CEO Thomas Carroll, it was through forward-planning by the remaining co-founder, Andy Berg.

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Having seen disruption at the top firsthand, Berg eventually put together a 12-year succession plan that not only included his pathway out of running the firm but also a focus on equity-sharing with partner advisors.

That plan led to Carroll’s appointment as CEO in January 2024. In the course of that year, he oversaw the firm’s sale of its second minority stake to TPG Growth, as well as its largest acquisition, a $6.4 billion multi-family office based in Tyson, Md.

Last year, the firm rebranded from Homrich Berg Wealth Management to HB Wealth. It has also continued to expand its service offerings—just this week announcing a new division focused on institutional advisory and an OCIO offering.

Wealth Management recently spoke with Carroll about the firm’s growth and continued focus on sharing equity among employees.

The following has been edited for length and clarity.

Wealth Management: Tell me about HB Wealth’s roots.

TC: We were founded in 1989 by two ex-CPAs who wanted to leave the practice of accountancy and start an independent wealth management firm. The RIA was not really a thing in 1989, so they were a little bit ahead of their time—trailblazers in some respects. They started it with a loan from one of the founders’ fathers. Fast forward 37 years, and we’re at about $32 billion in assets, 350 employees and thousands of clients. We started in Atlanta, and that’s still our headquarters. The vast majority of our teammates reside here, and in recent years we’ve started to expand geographically.

WM: When did you join the firm, and how did that come about?

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TC: I joined around 2020. I was actually part of the solution for both succession planning and leadership transition. Our founder, Andy Berg, basically ran the firm for 20-plus years as CEO after our other founder, David Heinrich, left in the early 2000s to work for a client. Andy was starting to think about a leadership transition in which he could move to more of a chair role and bring someone in to run the day-to-day operations.

Andy and I had known each other through our church, our kids’ schools and socially in the community. He brought me in as his presumptive successor. We worked closely together for four years—I was president at the time while he was CEO. During that period, I took on increasing responsibility across the organization, helped lead some growth initiatives, and built my personal equity stake in the firm. Then, in January 2024, we transitioned the CEO title to me, and he became chair of our board.

Here’s an interesting story: Andy developed a 12-year succession plan. The first four years were to find the successor, the next four to work closely with the successor, and the last four to serve as chair of the board before he retires. We’re in the very last stages of that plan now. It’s nice when a plan works out as designed.

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WM: When you came on, what was the discussion around ownership structure? You’ve stayed majority employee-owned at a time when private equity firms are offering large sums to take majority stakes.

TC: When I started, we did have a belief in broad equity distribution—that’s been a tenet of the firm going back well before I started. We’ve always believed we should equitize leaders and advisors broadly across the firm. Even with that approach, we still had a concentration of equity with our G1 shareholder, so we needed to de-risk that a bit.

I came in and built my position during that time, largely through transactions with Andy. Ultimately, we decided it would be hard to sustain that internal transition given our growth rate and the amount of equity that needed to be recycled. We thought an external minority, non-control transaction was appropriate for us at our size and scale. Looking back, it was certainly the right path for us.

New Mountain Capital made that initial investment in September 2021, so we’re now about five years into that. It’s been a really good thing for our firm and has helped us in many respects. It was also getting harder to facilitate internal transitions in a traditional buying and purchasing way—they got harder and harder to finance. We were faced with the challenge of needing to distribute earnings to help younger shareholders satisfy shareholder loans versus reinvesting cash flow in the business to support growth.

WM: And that’s why you had TPG Growth come in as well?

TC: Yes, three years later—in the fall of 2024, so we’re now a year and a half into that. We went back into the equity markets and had TPG come in, again in a minority, non-control way. The three largest shareholder groups are now HB employees—there are 86 of us who own the largest amount of equity—and then TPG would be second in the capital stack, and New Mountain would be third.

WM: What were some of the important things you wanted to maintain control over to ensure the right relationship with your minority investors?

TC: There were a couple of things we said very clearly from the get-go. First, we believe very passionately about our fee-only approach to wealth management. That is the North Star for our business. It was one of the key principles we were founded on in 1989, and it’s as relevant today as it was then. A condition for consideration of investment was that firms had to align around being invested in a fee-only business. That means don’t show up the day after we close and start saying, “Hey, you guys need to sell insurance,” or “You need to stand up a broker/dealer.” We were very clear about that, and frankly, the market was very supportive of that approach. I think more and more businesses—and more and more clients and consumers—are gravitating toward that business model because it inherently takes out some conflicts that exist across the industry.

No. 2 was maintaining control. We were largely asking for control valuation with non-control governance, and that was a tough ask. But we were happy to find a partner that was willing to support that.

And then, obviously, we wanted partners who would support us in making the business better. We have found tremendous application there across our capital markets functions, marketing, finance, HR and even some executives of our sponsors becoming clients. There are lots of ways these sponsors have supported our success.

WM: How do you now share equity with employees?

TC: We still have a core philosophy that broad equity distribution is key to our long-term success. We promoted eight new teammates to shareholders in January. The way we facilitate equity distribution is different than it was before. Previously, equity was bought and sold in private transactions. Now we have the ability to grant equity, and that was another key component to TPG’s investment—we stood up an equity program that allows us to grant a certain amount of equity each year to continue to promote the equity recycling that has been so important to our long-term success.

We have an amount in our operating agreement that we could issue up to every year. I go and request that funding from the board, and once that funding is approved, I work with the executive team to figure out how to issue that equity.

I would just add one point: This is a key driver of people wanting to come to HB and people staying at HB. Our equity is very valuable. I’ve worked in financial services a long time and have seen the value in other equity instruments in my career, and the value of HB equity is real. We have the track record to show it. It’s a very important part of why advisors want to come to HB, and frankly, why advisors stay at HB.

WM: You’ve grown into six states with multiple offices, and you have a 100% W-2 employee model. How has that model served you as you’ve grown through recruiting and acquisition? Do you ever run up against advisors who push back against that structure?

TC: Philosophically, there are a couple of key planks to our organization. I mentioned our fee-only approach to wealth management and broad equity distribution. A third is that we believe very strongly in integrating businesses and not aggregating assets. There are other business models out there that will take a more aggregated approach and allow acquired firms’ advisors to be more like independent contractors. We just don’t feel that’s the right approach for us.

We’re very transparent whenever we talk to an advisory team or a firm that might consider merging with HB that integration means a couple of things: one compensation model, one tech stack, one investment department. Obviously, delivery of investments gets curated and customized to client needs and preferences, but it’s very much a “one HB” approach across these key pieces of the business. And of course, fee-only is another component of that.

If a potential candidate or firm doesn’t want to align around that, then that’s okay—we’re just not the right fit. It’s better to figure that out before we get into the deal rather than later. It’s served us well. It definitely narrows the population of advisory teams and firms that might want to merge with HB because not everyone is aligned around that, and that’s okay.

WM: What are your goals for the firm going into the next few years? Any particular targets for size, footprint, or geographic expansion?

TC: The first goal is always to serve our existing clients expertly—it starts with that. So many business models are built on the premise that the next client is the best client. We want to maintain the existing clients that we’re privileged to serve. We target 98.5% client retention this year, and we’re running probably north of 99%.

Take care of your existing clients, and generally, they will take care of you. That leads to organic growth. Historically, 60% of our new business comes from satisfied clients making referrals to their friends, and that’s great. We want to sustain that, but we’re also looking to add more lead generation at the firm level. We’ve invested more in our digital marketing efforts and really stood up a more robust marketing team. We’re trying to do more digitally and sustain what I think has been best-in-class organic growth over the last five years from a Salesforce sales perspective.

We’re also leaning in a bit more to M&A. We’re never going to be a serial acquirer—that’s just not our business, that’s not our culture. But when we see a firm in a market that we think makes sense, we’re going to lean in. Continued expansion across the Southeast, the Mid-Atlantic, and the Sun Belt—I think we have a real opportunity to continue to expand our presence across those markets.

WM: In terms of capital, will you go back to the market at all in the near term?

TC: We’re very well capitalized, but things are moving fast in this industry. Even though we’re probably in a good spot today, that doesn’t necessarily mean we’ll have the capital we need a year from now.