ABRC-ESOP

I have evidence to support the statement, “Many professional advisors without ESOP expertise will lean towards business transition alternatives that allow them to share their expertise and receive compensation for it.”

I recently met with a prospective client who shared a memo from their attorney discouraging ESOPs. After describing several “viable” exit alternatives, here is what the memo had to say about the ESOP:

“…although the ESOP is an option, it is likely not a very good option for the corporation at this time. The administrative expense and ongoing responsibility significantly outweighs the benefit to you in accomplishing your desired return. You will not only fail to achieve your desired goal…but you will likely look back and wish you had never set up the ESOP.”

I think this is a classic illustration of how business advisors approach the ESOP concept and might explain why there are still so few of them.

Even if professional advisors are aware of the benefits of ESOPs, they may feel that they will be unable to assist their clients with the implementation of an ESOP. Since a major goal of a professional advisor is to share their expertise and receive compensation for it, they are likely to look for other business transition alternatives where they can utilize their expertise. As a result, there are situations where an ESOP might be a great fit but is not seriously considered. I am not questioning the integrity of these very competent professionals; rather, I am identifying a legitimate barrier to increasing the ESOP growth rate.
(Aaron Juckett)