Well over 90% of Shiroff's assets under management have transferred to his buyer at this point, and he's confident he'll maximize his total proceeds over his 2.5-year earn-out period. In order to duplicate his experience, heed Shiroff's advice: "Look for someone who's even better than you, can offer better service, has more knowledge, and who will do the right thing for your clients."
Jean and Bob Cummings, of Sequim, Wash., had a similar experience, except their process started and ended with SunAmerica Securities. They used FPTransitions solely for its assistance in providing necessary legal documents and closing the deal.
At ages 61 and 68, Jean and Bob found many of their friends dying or becoming disabled. With children in the Netherlands and Ireland and grandkids to see, they just wanted to travel. The Cummings' commission-only planning practice consisted of 900 accounts with SunAmerica, so what they sold was their book of business. They wanted to remain licensed and work under their buyer for four years, the length of their payoff.
So who's the buyer and how did they find him? He's 42-year-old Bret Keehn, a veteran of the brokerage business who, for the last ten years, worked two doors down from the Cummings in the office building they own. "We approached him," says Bob Cummings. "He wasn't a stranger to us. We knew he was a good person. We had observed him and discussed business with him from time to time. We knew he was up to speed on investing. He was an employee of his previous firm, so he'd had no ownership experience, but he has acquired that [working with us]."
Jean Cummings had read an article about FPTransitions but didn't figure they'd need any help. Their son was an attorney capable of drafting a purchase agreement. When they realized their son's retail orientation didn't lend itself to drafting a contract for an advisory business, they called David Grau at FPTransitions at the last minute for help. "He stayed with us for 36 hours, putting everything together, faxing papers back and forth, until everyone agreed and signed them. Everything in those documents is so clear that each party knows exactly what requirements it must fulfill," she says. All the paperwork was signed in early December 2002.
Then came the fun part: finding out if they'd made the right choice. "We had joint appointments with Bret, clients coming in every 45 minutes," says Bob. "We all looked over the clients' accounts, dealt with the new account forms the clients needed to sign, and got the working relationship with Bret moving forward. After several days, some clients wanted to bring in new money and they asked for Bret! Occasionally a client would call and ask for Jean or me, but not that many. No one's refused to speak to Bret if we weren't here and, because Bret's a nice man and very comfortable to talk with, he's establishing rapport with the clients quickly."
What did this experience teach the Cummings about selecting a buyer? Says Bob, "Look first for ambition. Bret has four children and a reason to get out of bed in the morning. He has a strong work ethic."
Kris Behn, owner of Fieldstone Financial Management Group LLC, has had the opportunity to experience this process from the other side-as the buyer. The first time around, he closed on a practice in May 2001 with a mature seller eager to get out but, at the same time, he was cognizant of what he had to do to maximize his value. Behn and his first seller worked together diligently for about 12 months, transferring systems, meeting with clients and successfully shifting the client relationships over to Behn. After that, the seller remained available for another year, but was rarely needed. He and Behn worked together easily, making a friendship as well as a mutually profitable business transaction.
Heady with the victory of his first merger, Behn tried to do it again in late 2002. "Since my first deal went so well, I assumed the second would also take a similar amount of time and go smoothly. My focus was more on getting the deal done than assessing whether there was any personal connection between me and the buyer. This turned out to be a colossal error in judgment on my part," says Behn.
Among many other differences, Behn is finding he and his second buyer (for whom we'll use the pseudonym "Jones") have very different ideas about planning. What's more, Jones' mentality and investment philosophy have been largely adopted by his clients. While that could have worked against Behn, he says, "I'm finding that coming in as a fresh person with new ideas is actually appealing to Jones' clients. I'm not telling them to go out and buy bags of gold and silver but to make investments that are a bit more traditional and comfortable for them." While good for his new client relationships, this switch in advice doesn't always sit well with Jones, who wants to remain active in the business and, Behn believes, has on occasion felt undermined by his different style.