For Joe Reeves and Ron Butt, co-founders of Louisville, Kent.-based ARGI, the pursuit of a viable succession plan for their $2.6 billion financial planning firm was the original objective, but the ESOP provided the added bonus of giving all employees a potential stake in the RIA’s ongoing success. “Stock ownership ties everyone to the same common goal,” Mr. Reeves said. “We were running into the situation that as we were growing, it was good for shareholders, but it was just more work for everyone else,” he added. “Once we added the ESOP, people started to get excited and thinking like owners.”
The ARGI ESOP, which is structured like a profit-sharing plan, was set up in 2015 to enable the company and its employees to eventually buyout Mr. Reeves and Mr. Butt, who co-founded the firm in 1997. Mr. Butt, 60, retired last year, but Mr. Reeves, 48, plans to work for another dozen years and gradually sell down his ownership stake to the employees.
Prior to the ESOP, the ownership was split evenly between the two co-founders. In creating an employee stock ownership structure, Mr. Reeves and Mr. Butt each sold 10% of their ownership to the ESOP, which was financed through a bank loan and paid to the co-founders.
Over the past four years, Mr. Butt’s shares were gradually distributed to employees, with his remaining 8% stake acquired by the ESOP upon his retirement. Currently 15 of ARGI’s 155 employees own stock in the company directly outside of the ESOP, but every employee owns shares inside the ESOP through annual share distributions equal to about 6% of individuals’ salaries.