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Leslie Lauer has carved out a wealth management niche from a unique corporate entity, the employee stock ownership plan. ESOPs allow business owners to sell stakes to employees, reinforcing a sense of ownership throughout the company while providing a range of tax benefits.
Lauer is the managing director of The ESOP Group at UBS, complementing the bank’s dominance in advising and building ESOPs with her group’s expertise in managing the proceeds. The ESOP Group has about $3.3 billion under management, with 97% to 98% of its business the result of ESOP sales. The group’s clients are primarily ultrahigh-net-worth families.
Lauer heads a 10-person team based in Atlanta, although she continues to live in Columbus, Ohio.
Barron’s: How did you first get hooked on employee stock ownership plans?
Leslie Lauer: In 1994, I transferred with [accounting firm] Crowe into their benefit practice in Columbus, Ohio. As luck would have it, I started on a Monday, and that Friday was one of the annual ESOP association conferences. The keynote speaker was the CEO of Davey Tree, a very large commercial and residential tree-trimming company with thousands of employees across the country. It’s a very successful employee-owned company. I was 30 years old and loved the idea of trimming trees and getting ownership in this company. From then on, I got very involved in ESOPs at the state and then the national level.
What is unique about your practice?
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Almost all of our business-owner clients are driven to us by this [Section] 1042 deferral. They invest in a diversified pool of special bonds called ESOP floating-rate notes, and then they borrow back against them. Then they further diversify into all the other asset classes they may want to invest in.
Even clients who at the time of the transaction don’t even use credit cards may find themselves with a $1 million, $10 million, or $50 million margin loan that they carry essentially in perpetuity. So it’s being able to work with business owners, educate them on the appropriateness of using leverage, and how we build leverage into their overall wealth management strategy.
How do you prepare your clients for a liquidity event (like the sale of a family business) that results in a radical change in their wealth?
Part of our client on-boarding process is to always do a complete trust- and estate-document review—review insurance policies, powers of attorney, and any buy-sell agreements that might still be in place. In the process of evaluating all of that and where their assets are going, [it brings up] the whole topic of where they want their money to go. How much money is too much to leave to your family? What kinds of multigenerational planning are you interested in doing?
Has your investment strategy changed in response to market movements?
Because spreads on fixed income have blown out so wide, we can make a positive enough spread on corporate bonds to warrant going into more fixed income. What’s changed is we’re now able to justify drawing down on [clients’] margin loans to further diversify into fixed income.
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