It wasn't until 1987, when he found two other planners with like-minded goals, that Young hit on a formula for success. "The difference is we took two to three months to plan it out," he says. "We spent time defining the business, defining values and wrote a business plan."
One advisor who wishes he had taken a more thorough approach in selecting a partner is Jack D. White of St. Charles, Mo. With the help of his broker-dealer, White set out looking for an Arkansas firm to buy in 1996. The search led him to a firm that was run by a local church pastor. "I talked to him, and we seemed to be of the same theological and religious convictions, and he seemed honest," White says.
The two of them decided on a plan in which White would buy the firm, but the pastor and the pastor's name would remain associated with the business. White was confident he'd found a match. So confident, in fact, that he ignored a few "oddities," as he puts it, that were evident from the beginning.
The pastor, for example, made White promise that he would not talk to any of the firm's clients before finalizing the deal. He also wasn't allowed to talk to any other professionals in town that the firm dealt with, such as CPAs and attorneys.
"He said he didn't want them to get jittery about" the deal, White says. "I honored that, thinking he was being honest with me."
It didn't take long, however, to discover that the pastor's explanation may not have been the real reason he didn't want White snooping around. As White recalls, it wasn't long after they completed the deal that people started "coming out of the woodwork" telling him horror stories about their dealings with the pastor. Many of the stories dealt with the pastor placing client assets in unsuitable investments, including retirees' money in bad annuities and limited partnerships. It soon became evident to White that the pastor would do anything to make a sale-even if it was at the expense of his clients' welfare.
"I ended up going back to him saying, 'What I purchased here was your good name and your name stinks,'" White says.
White and the pastor eventually came to an amicable agreement to dissolve their deal, but that wasn't the end of White's mistakes. As part of the breakup, White agreed to retain his former clients. White felt he could reconcile the damage the pastor had done and build up the business. It was, in hindsight, an overly optimistic outlook. The clients, it turned out, stayed away, and White had to eventually declare personal bankruptcy. He recovered a year later, with the creation of his current business outside of St. Louis. White looks back upon the ordeal with great irony: He was a financial planner who did absolutely no planning in setting up a business.
"I think it was a combination of pride and egotism on my part," he says.
Even if a partner is a good match, it doesn't mean you can get away with a lack of good planning. Just ask Linda Leitz, co-owner of Pinnacle Financial Concepts Inc. in Colorado Springs, Colo. In 1997, Leitz and a friend merged practices on a solid foundation. The two were close friends, they both specialized in serving clients involved in divorces, and they were quite thorough in setting up the merger. They built in contingencies for just about everything, including the mechanics of what would happen if one partner decided to quit the business.