Season 2 of The ESOP Podcast concludes with a special episode. Capital Trustees has announced that Rich Heeter will acquire Bret Keisling's interest in the firm.
Listen as Bret and Rich look back at their time as partners, and Bret looks to his new venture in employee ownership including continuing to host and expand The ESOP Podcast. We'll be kicking off Season 3 on Tuesday, September 3rd, 2019. Until then, be sure to stay tuned right here on www.theesoppodcast.com for our summer series highlighting past episodes.
Listen to this episode on Soundcloud. Or subscribe on Google Play or iTunes/Apple Podcasts.
Episode 80 Transcript
Announcer: 00:03 Welcome to The ESOP Podcast brought to you by Capital Trustees, keeping you up to date on all things ESOP.
Bret Keisling: 00:22 Hey, everybody, it's Bret Keisling of The ESOP Podcast. Thanks for tuning in. It is my great pleasure to begin the final episode of Season Two with my business partner and colleague Rich Heeter of Capital Trustees. Rich, how are you?
Rich Heeter: 00:36 I'm great, thanks. How's everybody?
Bret Keisling: 00:38 Everybody is wonderful. Rich, you and I have been partners for seven years. Cap Trustees was formed in 2012 and this is the last time that I'll be able to introduce you on a podcast as my partner, because in fact, you're buying out my interest in Cap Trustees, aren't you?
Rich Heeter: 00:54 I am. Yeah.
Bret Keisling: 00:55 What the heck happened over the summer?
Rich Heeter: 01:00 I think we -- and as you'll explain in some of the future ESOP Podcasts and some of the things that you're going to be doing going forward -- I think the timing was right. We've certainly have different interests as to professional directions and things that we want to accomplish, and so I'll let you explain what you're looking to do, but it's been a good run. And this is a very amicable, very good situation for both of us. So...
Bret Keisling: 01:37 It absolutely is. And the funny thing, Rich, is -- you said it exactly right -- our professional interests have kind of diverged, but it is very worth noting and very important to me that the clients of Capital Trustees understand that your interest have been and remain and will be providing quality trustee services exclusively to employee ownerships.
Rich Heeter: 02:01 Correct.
Bret Keisling: 02:01 That's not changing at all.
Rich Heeter: 02:02 Not at all.
Bret Keisling: 02:03 Through the last couple of years with the podcasts. And, and anybody who has listened to podcast, you see it. And Lord knows, if you've seen me in person at a conference...
Rich Heeter: 02:11 What's a podcast, Bret? [Laughter.]
Bret Keisling: 02:12 That's part of it, Rich, as well. It's, you know, we started the podcast two years ago, but I've gone very broad in my thinking of employee ownership. I'm passionate about employee ownership. I want to help grow and expand employee ownership. And there's a lot of things we've done with the podcast and you have been very indulgent with the "what's a podcast" and just letting me do my thing. But there's a lot of stories we've told, a lot of scenarios we presented that really have nothing to do with fiduciary work, specifically. Sometimes it's in co-ops or other areas of employee ownership that aren't ESOP's. And as I've gotten more and more passionate about those stories, it's been difficult for me to find a way to have a connection with Cap Trustees. So, even though we could keep doing the status quo for quite awhile, quality trustee work and the podcast on the side, I actually want to pursue growing employee ownership broadly and it just doesn't make sense for either one of us for me to do that under the auspices of Cajp Trustees.
Rich Heeter: 03:16 Right.
Bret Keisling: 03:16 So you want to focus on, on truly what we went into business for and what we've developed a national reputation and what we have done great. It's actually me that says, hey, there's a bigger sandbox out there. I want to play in the bigger sandbox. And you've been wonderful about accommodating that.
Rich Heeter: 03:31 Yeah, and I think we both discussed and, and our clients and other professional advisors agree. I mean it's certainly an area that's your strength. And, and as you said in your email, your passion and I think we're both well-served to follow those paths.
Bret Keisling: 03:50 That's exactly correct. So we do want to go back and have a -- someone in the ESOP industry famously says there's no such thing as a scorecard in ESOPs, and so I thought we'd close out our final episode as business partners with a little bit of a Cap Trustees scorecard, if you will. Talk about where we are now, and the path that you're going to continue. And again, the key message that I want people to hear is Bret's departing -- We'll talk a little bit more what I'm doing. The podcast will go with me. -- But Cap Trustees is continuing full force as quality ESOP trustees.
Rich Heeter: 04:29 Correct.
Bret Keisling: 04:29 So yes, we will. We are very happy. We are excited about this future. [Laughter.] So Rich, and the other thing with the timing, just very briefly, once we realized, and I had come to you and said, "Hey, I got this broader thing that I want to do." I didn't think that I have the ability to call many people nationwide in employee ownership and say, "Hey, I'm looking at something down the road that might be outside of Cap Trustees." So, I'm building new and exciting and that sort of thing. For you, your focus, this summer particularly, is just maintaining the client base. Most of our -- just to explain to people because they ask about capacity -- most of our annual work, many of that's already completed for the year.
Rich Heeter: 05:10 Sure. And so, transactional work, we have the capacity, we'll look at different options and engagements and what the staffing is going to look like. But going forward, I would say that for, at least for now, it's going to be the status quo, as to everything that we've worked on to this point, I don't see any, at least at the very foreseeable future, no major changes in, in how we operate. So.
Bret Keisling: 05:47 Except if you hear a little voice in your head, it won't be me this time [laughter], it'll be your own. So let's talk a little bit Rich, and we used to track our growth and numbers quite regularly and then it got a little bit hard as we grew. So we started, and I'm going to call it seven years. We actually started in August of 2012, so that's close enough that we hit seven years, about 26 states that we're in.
Rich Heeter: 06:15 Yeah. Yeah, as far as where we've done, either done transactions or serve as ongoing trustee. Most of that is obviously been in the mid-Atlantic, the Northeast, New England, the Midwest, and so on. But we have done some work in California and in...
Bret Keisling: 06:43 Texas...
Rich Heeter: 06:45 Arizona...
Bret Keisling: 06:46 Washington state....
Rich Heeter: 06:46 Just to name a few, Colorado...
Bret Keisling: 06:50 Colorado, yeah...
Rich Heeter: 06:51 So I'm not going to sit here and name all 26 or 27 states, but...
Bret Keisling: 06:55 ...nor will we try to spell them. [Laughter.] But we've been out and when we grew -- and by the way, episode one of the ESOP Podcast, and all of The ESOP Podcast archives, the two seasons, what I'll be calling the Cap Trustees episodes are going stay online and be available. They do talk about our -- yours and my -- origin story going back. But just hit upon it: 2007, you and I were kind of having a network meeting. You were in financial services. I was a new business lawyer. We had, for me clients, you, they were primarily friends, but a little bit of client advising you had done and you had suggested an ESOP for them.
Rich Heeter: 07:30 Well, actually, the one partner in that firm actually asked me one day if I knew anything about ESOPs. And it started with what do you want to know? And...
Bret Keisling: 07:44 ...then you went from there with [information]...
Rich Heeter: 07:46 ...went from there, and yeah.
Bret Keisling: 07:47 And, when you first told me about this, and in that context, the three brothers who were the partners had decided an ESOP wasn't right, your first go, when you told me about this, first of all, I was like, let's try again. And second of all, my response, which you gave some years later for podcast was, "What's an ESOP?" I had no clue, hadn't heard of it, et cetera, et cetera. And a year later, we concluded our first transaction, from a start. And there were advisors that, we've talked, our friends Rob Schatz and Rich Glassman were involved in the first transaction. The lawyers that SFE&G were involved in the first transaction, and we've worked with those guys through today, even though the firms have changed. So the people who have started us off, continue to work with Cap Trustees and, and whatnot. So that's very cool.
Rich Heeter: 08:40 Yeah. If it weren't for the other professional advisors, I mean, that's where we've, they've been a very big source of, of referrals and you know, just across the industry, from ESOP attorneys and valuation advisors, third party firms. So, we're very thankful to, to all of the people who have had a hand in the growth and success of Capital Trustees and thank them.
Bret Keisling: 09:14 And going back, and one of the cool things, Rich and we are very appreciative and there's also continuity; for example, the feasibility for our very first transaction was done by Joe Marx of Principal. And he just did a podcast just a couple of weeks ago. So really we have been able to work with a lot of really cool advisors, really talented people. And meanwhile, we're kind of proud that we brought something to the table ourselves. And, Rich in addition to the third party administrators, and lawyers, and valuation advisors, although it's a little bit different, we have some friendly competitors who are trustees and we're very proud, and have always been proud, that skill set talent, that sort of thing. We for a boutique firm, we have sat right up there with the large institutionals and more than held our own. So I'm very proud of that, but wanted to give a shout out to the friendly competitors who I won't name because you're still going to compete with them. But, uh, we've been very fortunate in the ESOP industry.
Rich Heeter: 10:19 Yes, we have.
Bret Keisling: 10:20 And we work with, you know, the chapter advisors and whatnot. And so without getting too nostalgic...
Rich Heeter: 10:27 ...Sentimental [laughter]...
Bret Keisling: 10:28 Rich, let's go back to, the scorecard a little bit. With every new client, whether it's a transaction or whether it's an annual client, a site visit is required. And you and I have always agreed and talked, on many podcasts, those are our favorites. Any of them stand out to you in particular?
Rich Heeter: 10:48 We've had a lot of very interesting ones. I certainly like the manufacturing companies. Where I am not a manufacturing person. I don't understand a lot of the technology that goes into it. So, you know, getting to do a site visit where they make cool things and, you know, I'm really interested in how did they make the machine that makes the product.
Bret Keisling: 11:19 And you're exactly right. And the cool thing is what a lot of people don't understand is that the trustees knowledge is kind of generic as to, or general as to, ERISA. That if we as the trustee are making the decisions, we don't have to be industry specific as long as the valuation advisor is industry specific. So when we've gone in to these facilities or businesses, whatever, we're seeing a lot of really cool stuff and it's okay that we're seeing it for the first time. If the valuation advisor would be like, "Oh, I've never seen this before!" You'd be like, "Whoa, what's up with that?" Couple of things, Rich, that I'd like... and there are a couple of folks, Cap Trustees clients that I'd like to mention particularly because they embodied to me what is the best about an employee ownership. We did a site visit, Rich, a couple of years ago to Godshall's Quality Meats [https://godshalls.com/] and Mark Godshall is the CEO and he has a very talented team. And we can tell when we go into a company, when we go to the factory floor or the sales cubicles or that kind of thing, what I call the "CEO Culture Test." And if the boss walks in, we'll say a factory floor does everybody kind of run and avoid eye contact? And with Mark Godshall, he knew everybody by name. He knows, you know, they knew him by name, he'd stop and chat. And purely besides the technology in terms of a culture, that was really cool for me to see. And that's the best of employee ownership.
Rich Heeter: 12:52 Right. Yeah.
Bret Keisling: 12:53 And then the other folks, another client for a few years, and I keep coming down to them, but Hoffman and Hoffman [www.hoffman-hoffman.com/] down in South Carolina, and Rusty Hoffman was the second or third generation of the Hoffman family owned that. And Jim Bingham that we've worked with quite closely. These folks just have such a great environment and they don't just promote employee ownership, but the entire vibe of their organization speaks to that team approach. And I think that those things are both really cool.
Rich Heeter: 13:25 Right. Yeah.
Bret Keisling: 13:27 So on the site visit, you mentioned the factories. One thing that I've noticed has been cool is like if we can go into a factory and see something in the factory as a component made by another ESOP company. For example, about a year ago I walked in and they had these huge reels that were Carris Reels [https://carris.com/] and Carris Reels had nothing to do with what they were manufacturing. It was just cool to see on ESOP company servicing in another provider. And then, Rich, as I just go on with couple, here's a transaction that we didn't end up concluding, through no thing of our own. There was a PVC manufacturing facility down south. And what I thought was fascinating is we go into this plant and they just make PVC tubing. And at one end of this long plant, they're putting resins into the hopper. And then we walked down to the far end of the plant and here's this PVC tubing that's just coming out, perfectly formed. And it was really cool. And after about a minute, we looked over at the CEO and said, "Is this all it does?" And he said, "Seven days a week, 365 days a year, it's just the tube coming out." And then you found out if, but for needing to cut it to size, two people could run that whole factory.
Rich Heeter: 14:52 Right.
Bret Keisling: 14:52 But they've got to cut it to size and ship it. So they need a few other people. And then the other reason why I think it's fascinating is what it turned out is it's not really the PVC that they sell per se. It's the resins that go into the manufacturing. So all of it is kind of a commodities based, somewhat boring process to watch that does very, very well.
Rich Heeter: 15:16 Complicated.
Bret Keisling: 15:17 But that is much more complicated. But it's probably an example of all the things that the ways there are to make money that you and I didn't necessarily think of until we saw them ourselves. And then the one site visit, that I can't admit if I'm sheepish or proud to say that I omitted, and you omitted we were, we had a transaction, we were selling a insurance brokerage firm and we had an offsite meeting at a law office to preserve confidentiality. And then we were going to go do the site visit. And, you and I actually were a little bit caught on time cause we were out of town, but we realized the site visit consisted of 40 cubicles. And for people listening, one of the reasons why the trustees or the professionals always do site visits is as silly as that will sound if you're buying or selling a company based on 40 cubicles. And it turns out you didn't look and there were only three cubicles? So we got to go and make sure that facilities are there, what they're there. But as I recall, we verified that all we were looking at were 40 cubicles and we send our valuations advisors, lawyers, counsel, let me just say we're going to catch a plane. So we didn't go to the insurance company one. But other than that, we've seen a lot of cool stuff.
Rich Heeter: 16:38 Yeah.
Bret Keisling: 16:39 And then Rich -- and here's where we, our interests diverge a little bit, or will going further -- we are both at home in all aspects of what we do. Uh, whether it's meeting with the board, whether it's meeting with management, CEOs and that sort of thing, including the participant meetings and working closer with the employee owners. And both of us are interchangeable. But the fact of the matter is I get a little more passionate if I'm out with participants statements, meeting with the employee owners and, not that you're not comfortable with that, but you're very comfortable in the boardroom and management and that sort of thing. So you'll be focusing on that. And I'll be off rallying the employee owner troops.
Rich Heeter: 17:20 Right. And hopefully we'll, if all goes, well, we'll actually have the opportunity to work together on some of those things, but really just as a separate companies.
Bret Keisling: 17:31 So, Rich, this is a good segue. When I talk about, I may even do a participant meeting and what our mutual interests are. I'm going to be doing actually a lot of what I've been doing. With the podcast, you know, they've been a broader conversation of employee ownership and it's been a luxury for Cap Trustees to do that. But you and I both believe in promoting broader employee ownership. So, there are going to be products and services that I will offer. They, very broadly, will fit kind of in a communications mold. If we're looking at the normal employee ownership areas, I'm not going to do legal. I'm not going to do valuation. I'm not gonna do trustee. I'm not going to do third party administration. What's left? Everything else that we generally say, culture, communications. There are a couple of things though that are work, specifically out of development from the podcasts and whatnot. There are a couple of pay-per-listen projects we're working on, devoted directly to employee owners and their significant others at home. A kind of an "ESOP at Home" program. And the other thing that I'm not ready to talk about publicly yet, but very broadly, I'm interested in following Jim Bonhams' lead and Doctor Blasi's lead and Frank Luntz's lead, and the NCEO, when they spoke at the ESOP Association's National Conference in May about our goal being 40 million employee owners in 10 years. We're at about 7 million right now. And as I look at, you and I, Rich, last Friday were at a planning meeting for the New England fall conference and there are certain logistical infrastructure challenges that I see trying to get to 40 million new employee owners. The professional advisers of which we are included are tired, just in the sense that the conference schedule is grueling and goes throughout the year, there is great hunger from employee owners for more content but not a great way to get the content out there, whether it's through conferences or other methods. So partly what I'm going to be looking at doing is how I can affect the infrastructure through using the podcasts. And probably what is now The ESOP Podcast will be two or three podcasts by year end. And we're going to use them to broadly promote employee ownership, not just ESOP's. And that's a major variation from the Cap Trustees dictates, and have a lot of fun doing it. So very broadly. They'll find us on The ESOP Podcast is not going anywhere. We have a brand new website [www.theesoppodcast.com] for it. We have various products and services that I'll be putting together an offering by the time the fall conference schedule starts up in September. And, meanwhile I'm going to spend the summer in a dialogue of how do we seriously get to 40 million people because, I don't, I don't know right now that there is a path to it. So I think you need a bunch of people who can spend time focused on getting that path.
Rich Heeter: 20:52 It's a lofty goal and it's a, but it is a goal and it's a mission to try to... it's a very valuable or important goal for the associations to have.
Bret Keisling: 21:06 And part of it, Rich, with a broader product offerings, for me, there's a lot more I can do to pursue the goal, whereas the Cap Trustees podcasts -- and again, you and I've been very proud of them and grateful of them -- Cap Trustees podcasts, Cap Trustees is a fiduciary for employee owned companies. So there hasn't been great reason to, let's talk about co-ops, you know, it's just got nothing to do with our business model. So on the one hand, taking me out of Cap Trustees is going to allow me to pursue that lofty goal. And you know what, Rich, here's the cool thing about a 40 million employee owner goal in 10 years. If we only double and get 20 million -- or double is 15 triple to 22 and a half -- we're still going to be in a much better place with employee ownership than we are today.
Rich Heeter: 21:54 Oh, no question.
Bret Keisling: 21:55 So we hit the goal. All right folks, with that, we're going to conclude the final episode of Season Two of The ESOP podcast. I'll be back with the podcast Season Three, Tuesday, September 3rd. I hope you'll tune in and find out exactly what I'm up to. I hope *I* tune in and find out exactly what I'm up to! Rich, I want to thank you for appearing on this episode, but I also want to thank you for seven years of partnership at Cap Trustees. 12 years of ESOP, being ESOP colleagues and friends. I know that Cap Trustees is going to do what they've been doing, which is just solid, steady service and you're going to do well for years to come. And I'm looking forward to creating some attention and some new stuff.
Rich Heeter: 22:35 Back at ya. It's been a good run and I'm sure that your future endeavors will be very fruitful and be good for all of the ESOP, and broader employee ownership. So I wish you all the best.
Bret Keisling: 22:52 Let's... Thank you very much. That means a lot to me, Rich and my goal just moving forward is let's do some good things. Let's have some fun. Let's make some money and be proud of it, but I am very excited for this next phase of employee ownership. With that, thank you everybody for tuning in. Thank you for two wonderful seasons. Thanks to all of our guests the last two seasons and especially all of our listens as we're recording this now, we've got 21,750 listens in our two years remember to tune in the summer for a repeat episodes of the archives of The ESOP Podcast and we'll be back in September with a brand new episode. Have a great summer!
Brian Keisling: 23:31 Do you have feedback about this or any other episode of The ESOP podcast? Do you have a topic you'd like for us to discuss on the show? Would you like to appear on the podcast as a featured guest or a panelist in a group presentation? Then we want to hear from you! Send us an email to email@example.com. Thanks for listening.
Announcer: 23:54 Thank you for listening to The ESOP Podcast, brought to you by Capital Trustees and their managing directors, Bret Keisling and Rich Heeter. Production assistance provided by Brian Keisling and Third Circle, Inc. Logo designed by BitsyPlus design and music created by Max Keisling. Join us again next time for The ESOP Podcast.