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Hilliard Lyons Takes Succession Planning Seriously

Office neighbors for six months, James Allen and Tom Kessinger are in the early stages of longer-term succession process

By Mark Green

James R. Allen, left, CEO and chairman of Hilliard Lyons, and Thomas Kessinger III, president, have already spent six months working in neighboring offices as part of the succession process at the 163-year-old full-service wealth management firm.
James R. Allen, left, CEO and chairman of Hilliard Lyons, and Thomas Kessinger III, president, have already spent six months working in neighboring offices as part of the succession process at the 163-year-old full-service wealth management firm.

Business-succession planning advice is a product for Louisville-based financial services firm Hilliard Lyons, so one expects best practices when the guard changes in its top offices. The reins are handed over with deliberation at the 163-year-old company.

Tom Kessinger III was a longtime financial consultant in Hilliard Lyons’ Lexington office before he was named president and appointed to the firm’s board in May. Since then, he has been an office neighbor most days in Louisville with Chairman and CEO James Allen. 

During a joint interview in the headquarters offices overlooking downtown Louisville and the Ohio River, Allen and Kessinger discussed their roles and the central goal of maintaining the
Hilliard Lyons operating culture of integrity, high ethics and professionalism that the company believes is what sets it apart from other wealth management and financial advising operations.

Allen cites especially Henning Hilliard, who led the company from the late 1950s until 1982 then continued to serve as a senior executive until his death in 2001, for setting the tone. Hilliard was chairman and CEO when Allen started at the company in 1981.

“We want to do what Henning would want us to do,” Allen said, which he defines essentially as: “Do the right thing.”

Henning Hilliard set in place the practice of company ownership by its managers, a version of which is the case today – Houchens Industries Inc. of Bowling Green, itself the nation’s largest employee-owned company, owns 60 percent of Hilliard Lyons and HL managers own the rest. The terms of the 2007 deal when Houchens bought Hilliard Lyons from PNC Financial Services called for Hilliard Lyons management to raise at least $100 million in equity capital to share in ownership; in six weeks they raised $102 million.

Hilliard also initiated the growth of the company into first the largest Ohio Valley securities firm and today a significant brand in wealth management from Michigan to South Carolina. Hilliard Lyons operates 71 branches in 12 states. It has about 1,000 employees, half of which are in Louisville, with around 400 financial advisors.

Hilliard Lyons offers comprehensive financial services and advice, including professionally managed accounts, as well as a broad menu of investment vehicles, such as stocks, bonds, options, mutual funds, annuities and insurance to facilitate the financial strategies recommended. Hilliard Lyons specializes in planning issues that include retirement, business succession, trust and estate planning, and education funding.

For years, the firm has been the biggest advisor to school boards and fire departments all over Kentucky, Allen said, providing the expertise behind many of the significant financial moves they make. It also advises Louisville Metro government.

The core business, though, is advising the high-net-worth individual. Hilliard Lyons has $48 billion in client assets under management. It provides estate planning, has what it believes to be the state’s largest trust services department and advises individuals and businesses on succession planning.

Kessinger, 48, had some 30 years association with the business when Allen and the board came to him to discuss assuming responsibility to advise and plan all of the company’s services and above all else convey Hilliard Lyons’ standards of practice to all of those 400 advisors.

His grandfather, Thomas Kessinger Sr., was an original principal in the Lexington firm Babbage and Kessinger Securities when it began in 1948. At age 16, Tom III was hired by his grandfather to be the office janitor while in high school. When Kessinger III completed a University of Kentucky accounting degree in 1993 and was set to take a job with the national Coopers and Lybrand accounting firm (now part of PriceWaterhouseCoopers), his grandfather convinced him instead to join Babbage and Kessinger, which had become affiliated with Hilliard Lyons in 1958.

Grandfather and grandson worked with each other daily until 2008. Kessinger’s impressive eulogy at his much-respected grandfather’s 2012 funeral, Allen said, made him first take note and consider him a person capable of overseeing the entire firm.

Allen and Kessinger, who make a point of mentioning that there is “a lot of mutual respect” between them, each note the successive waves of change – whether public policy and regulation or technology and business processes – that impact the structure and operation of the business. Smart phones today can access anything, almost instantly.

“Social networks popped up before our eyes,” Kessinger said, “and we adjusted.”

It is a technology-sensitive world, but other things remain the same.

“The investment business is a people business,” Allen said.

“People like relationships,” Kessinger said. “Technology gets us to the that face-to-face meeting. Technology enhances the quality of relationships, but it does not replace it.”

Allen credits the efficiencies that advances in communication technology created with enabling much of the growth that Hilliard Lyons undertook. Much of that growth occurred by acquiring local firms in Kentucky, Tennessee, Ohio and Indiana that became available, made sense geographically and meshed with Hilliard Lyons’ philosophy.

The strategy resulted in employee longevity, Allen said. Employees and advisors like it, he said, because they were not asked to push new products “or the IPO of the day” to clients.

Hilliard Lyons has sought to ensure it uses technology to build its advisory capacity, according to Allen, who cites the addition of Wells Fargo Clearing Services to its platform for operations, technical support for its advisory work stations, integration with its customer relationship management program and investor reporting and analytics.

It has adjusted as regulatory intensity has increased sharply since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. When interest rates change, the Hilliard Lyons IT department runs computer models so that it can determine the net costs and potential savings for potential refinancing of bond issues public clients have.

In August 2017, the firm named Mark Nickel, a chartered financial analyst, its first chief investment officer, creating a new position so that there would be someone empowered to speak on behalf of what Hilliard Lyons thinks and expects about interest rates, market outlooks and related issues.

Mark Green is executive editor for The Lane Report. He can be reached at [email protected].