I am so pleased to moderate the panel you see before you. How interesting is it that we will hear not one, not two, but three different paths pursued in the plan for succession in each of their firms. A brief word about each of us since I respect the fact that you have the ability to read our biographies later and they of course will be sharing their stories with you. As for me, I sold my firm in 2006 and I stayed in the financial planning profession that I love by becoming a certified coach and I also hold the CFP mark. I believe there are less than 10 individuals in the country holding both designations. I say this only to convey that working with financial advisors has been immensely fulfilling from the practice management perspective as well as from the confidence building coaching perspective. Today, we delve into the planning area that most of us must respect no matter your age. I'm going to ask each of these individuals to share with you when they founded their firm, their trajectory since then, and any other pertinent information that they deem worthwhile. We are holding ample time well before the close of the session for questions and answers and I do please, I want you to please hold your questions as we may cover some interesting facts that may very well answer your curiosity as they each share. For those of you who know me well, I do enjoy the element of fun. So where is the element of fun? Here is what each of my three panelists may not share and to make it more fun, they have no idea what my tidbit is. Steve, who is to my far right, is an avid cyclist. On one of his vacations, he and his spouse had bicycled through parts of Europe vigorously for one week and then chose to match their energy spending the entire second week vigorously drinking fine wine. Karen, yes, so let's give her a yes. Karen is someone you do not want to make a tea time with knowing her handicap. I am guessing she may empty a few wallets in this room if you are crazy enough to bet against her on the golf course. And Bob is a newly christened parent to a five-month-old golden retriever named Maggie. She has already escaped her crate on their only first date night out only to come home and find her having the full run of their house in their very brief absence. So that's a little bit of a fun fact about each of them. What I'm going to do is I'm going to ask them first to spend a minute or two on where are they located, when did they found their firm, and how many years in the industry. And then we're going to follow a format where I'm going to be asking questions and they'll be able to share their stories through the questions. So beginning with Steve. Steve Tallheimer, I have my own solo firm in Silver Spring, Maryland, which is right outside of Washington, D.C. I've been in the industry for 25 years and have had my own firm for 20. It's just me with two virtual assistants, part-time. Karen? Hi, Karen Keatley. I'm with Modera Wealth Management currently. Modera was founded in 1983 and is a firm with offices from Boston to Florida and a few places in between. But I joined Modera at the beginning, January 1st of 2020. I had my own firm prior to that, which I founded in 2007. Bob? My name's Bob Rall. I'm the founder and president of Rall Capital Management. We're in Rockledge, Florida, which is right just south of the Space Center on the east coast of Florida, 45 minutes from Orlando. Been in the industry for 30 years and founded my firm in 2004. Okay, great, thanks. So our first question for the panelists, beginning with Steve, we're gonna do Steve, Karen, Bob. What prompted you to consider a succession plan at the time that you became much more serious about it? Okay, well, that's been actually pretty recently and right now I'm casting about and researching what the options available to me are. And I would contrast that with continuity planning because for the first 10 years I had my business, I was an hourly only planner. And my continuity plan was to have my husband give clients a letter saying, unfortunately, I'm no longer here. Here's a list of three hourly planners that you can go talk to. I also developed a continuity plan with another advisor in DC. We worked with FP Transitions and that was in place for a number of years. Great fit, except that he was 10 years older than me and retired. So when that fell through, I am a coaching client of Diane and I actually worked with her to develop a sort of a hit by the bus continuity plan. But now I'm thinking more in terms of succession planning because I would like to have some plan in place within five to eight years so that if I want to continue working, I can, but I don't necessarily, may not want to be the sole person running my business. So I also would like to realize some value from my firm, which now that I have ongoing clients and I manage investments, would be passed along to my husband and my heirs. All right, thank you. Karen. So I got serious about succession planning for my firm, which was Keighley Wealth Management, a number of years ago. And the reason I got serious about it is we were growing very quickly. And I would say the nuts and bolts of running the firm were getting more and more complicated and I was enjoying that part of my workday less and less. I really wanted to refocus on the parts of the job that I loved and not be as bogged down in things like what's my next technology platform gonna look like. So we were getting to an inflection point and it was gonna take a lot of work, I think, to kind of retool our platform to get us over that. The other part of my succession plan was that I had sold a minority stake to an employee who was an excellent partner, still is, but she wasn't enough younger than me to become a succession plan. I also think it's important to realize is that not every employee that you have, even a fantastic employee, is not necessarily cut out to be an owner and not necessarily every owner really wants to be actually running a firm like mine. So those were sort of the hard realities that I had to accept. Great, that's a great point. Bob. I'm trying to remember when the moment was and there really wasn't a moment. Like probably a lot of us for a good number of years after I started my firm, it was a job. I was making a living, my clients were paying my fees, but it was basically a job and there wasn't really much value. In fact, my contingency plan was, I told my wife, there are a couple other NAPFA advisors in our area. If something happens to me, help make the transition and go forward from there. But then as the years went by, and I should mention I have two employees and they both share my last name. I get to see both my kids every day when I go to work, it's pretty cool. But it complicates the succession planning issue a little bit. But once a few years ago, I've been in the industry a long time and I see all the talk about the mergers and the acquisitions and everything that's going on. So I've been kind of keeping an eye on it for a long time. And a few years ago, I hired FP Transitions, kind of similar to Steve. And while I was quite pleasantly surprised that a business that I had started from nothing had grown into something that had some real value, wasn't quite enough value for me to retire yet. So thus the succession planning stuff that I'm working on. And similar to Steve, kind of the same kind of a timeframe and working my way into it. So it was kind of a gradual, all of a sudden I've got some value and I'd like to capture this for my wife and my kids and to be able to pass something along. Just to add to that, I'm gonna say as long ago as five to 10 years ago, the topic of succession planning started showing up in the financial press as how could two thirds of the financial planners out there not have a succession plan? And that statistic stayed pretty strong for several years. As a coach, I found it curious. And what occurred to me is that many of you were challenged by the fact that you have to find the right person, the right fit, the right situation. Internal succession plans can be a challenge. External plans can be a challenge. There is no easy path. So I think a lot of interest has been stirred up more so in the last few years. I laugh because there's two people in Pennsylvania and they said to me, Diane, during my audit, one asked for a written continuity plan and I don't have someone suitable. And then another person in Pennsylvania, the auditor never even mentioned a continuity plan which is distinct and different from a succession plan. This afternoon, we're gonna talk about succession plan, but again, tomorrow morning, I'll talk about it a little bit later. We have an additional session where it's a much more open forum regarding continuity versus succession. So I just wanted to pop that in there. Second question, what aspect of your experience related to your succession planning did you or do you find most challenging? Finding the right person or persons or firm. That's the hardest thing. Having worked with FP transitions, I know that there's a lot of mechanical things that can be done in terms of actually managing the transition. But unless you find the person or persons where there's a fit, it has to be a personal fit. You have to like them. You don't have to be best friends with them, but you need to like them. You have to have shared vision and goals, service model, culture, client bases, and that's the most difficult. And I distinguish between, many people have heard of the transition that takes place, you find, you list your firm on FP transitions. You find somebody. There's a transition period where the planner stays with the firm for a year to manage the transition and then they're out. And the importance of finding the right person or firm works in that situation too. However, I'm at the point now where I'm actually considering maybe finding a person or firm to work with together for a few years, to build something jointly and have a longer transition time. Ultimately having the option to exit at some point or go to part-time myself. But in that situation, finding the right people is even more important because you'll be working with them longer. Yeah, great point. I'm trying not to chuckle. During one of my coaching sessions last year, I said to the person, I'm sensing some hesitation with the person that you're moving forward with. And he said, can I be frank? And I said, sure. And he said, the man does not stop talking. So I said, you know, you can laugh but you have to listen to a gut check. As Steve mentioned, this is somebody you spend an awful lot of time with in the next several months and years. Karen. Well, I think what you are talking about is the canoe test, which is you have to be willing to spend half a day in the canoe with them and get along well enough to do that as a litmus test to whether you can be business partners. But as to what was most challenging for me, I think it was very similar to what Steve articulated, which is when I looked at succession planning for me, the clients had to come first. I also had four employees, one of whom was a partner, and I cared and still do care very deeply about how their careers progress because they had hitched their wagon to my little train a long time ago and I didn't want to leave them hanging. So those were two important constituents. I was the third. I was the third priority. But that meant that I really had to not only find a partnership that was gonna work on a business level in terms of client fit and culture, but also that was gonna work for the people that I'm potentially leaving behind. So when Modera and I were connected by our Fidelity reps and we spent a lot of time talking, getting to know one another, we actually spent 15 months talking and visiting one another before we decided to move forward with letter of intent. And I will say that for me in that process, the fact that Modera was completely transparent about who they are, how they run their business, they even invited me to a board meeting. Those were all really important things to getting me comfortable with who I was joining forces with. Okay, great. It's interesting, I hear 15 months and I was like, wow, my initial reaction was, that's an awful long time, and yet people will say, well, how long does this process usually take? And depending on whether you're a solo firm or more than one owner or more than two to six people, et cetera, there's so many considerations. There's staff, there's conversations that have to be held with a potential buyer, and you go back to your office and you're speaking to your staff. There's decisions on when do you tell the clients, et cetera. There's so much to the process that I think the best thing that everybody can do at a conference such as this one is to leave a session like this and say to people, what are you doing with succession planning? I'm not doing anything. Have you done anything at all towards it? And get the conversation going with as many colleagues over drinks and dinner and breakfast, et cetera, because there's just so much to go through in terms of getting to know the people. Bob. The question was, what's the biggest challenge? Steve listed, Steve mentioned finding the right people. You trust them, you like them, the culture. I mentioned both of my employees are my children, so I check all those boxes. I trust them, I like them. In fact, I'm probably one of the only bosses in the country that can tell my employees that I love them at the end of every day. So I've got all those boxes checked, so I think finding the right people, I've kind of taken care of. But the biggest challenge is they're my kids. And as I said before, I read what's going on in the industry and all the way back to Mark Hurley years ago that said the independent RIA is gonna disappear. And we still read it, we're all gonna disappear and we're gonna be rolled up into larger firms and there's only gonna be a few survive. And I don't wanna sell my kids a blockbuster franchise and sell them something now that gives me the value that I wanna get out of the business. And then five or 10 years from now, the business has changed. I don't think that's gonna happen, but that is a challenge that I'm addressing. And to give Diane a plug, I'm also a coaching client at Diane's. And one of the reasons we hired her was to help us make that transition. My son's a CFP now, he's been a CFP for two years. One of the, he's my kid, so I'm gonna be proud of him, but he's a smart, bright, great kid. I'm gonna do a great job for our clients and we've started mixing him in where he's coming into the meetings and preparing the clients for that next generation. But he's a millennial and he does not wanna make a decision about anything. He likes it the way it is. And if I rock the boat or make a suggestion, then why mess with it if it's not broken? But we do have to, I'm not gonna be there forever. So we're working our way through that transition. And while it's great, I've got the people, I know I've got the people in place. It's a challenge to, all right, I wanna, like she said, we gotta be fair to everybody. Wanna be fair to me, I wanna be fair to them, and most importantly, my clients. But I think that's gonna be the easy part because our culture is our culture and our clients know us and like us and they're already calling him for more things than they're calling me, so that's good. Yeah, Bob is not the first parent adult child situation that I've had to coach. I've had mother daughter, father daughter, father son daughter, and it's interesting. I think there's two elements to when family members are coming in to the practice. One is that, let me get away from the podium a little bit. One is that it's not even, I don't wanna stereotype either, but the millennial or younger, they have a lot of enthusiasm and there's a lot of, well, why, let's do it this way or whatever. And you've got this culture of owners who from the seat of their pants started practices with nothing, built the practices up, and you have a generation of people who come in as paid employees. So that right there is a different perspective. There is also the challenge of being the parent and not being the parent in the office, but being the employer in the office. That's a very tough one as well. It really is. But what I do see in terms of the younger generation comfort level is there's no ma, da, ma. There's none of that. You don't hear that too much in the office. But the internal succession plan in and of itself is a challenging one as well as if it's your own adult children. So yeah, just to underline what Bob was saying. So here's another question and then we're gonna open it up. What do you see as most life changing for you on this journey? Just elaborate on everything. What do you see as most life changing in this whole process that you're going through? Well, for me, of course, giving up control because I have been a solo for 20 years. And so recognizing that at some point I'm going to have to give up control, share control has been something I think about and am working through. But I think I'm okay with that given where I am in my career. The other thing is realizing that I'm approaching the end of my professional career or the beginning of something new. 10 years ago, 15 years ago, I had a whole huge block of time where I could develop the business the way I wanted to. And now I'm looking at a much shorter timeframe to be able to do that. And related to that is thinking about succession planning has made me think of what are the most important aspects of the business I want to transfer or hold on to during the succession planning exercise. So it's things like, of course, clients first, fee only, comprehensive planning and investment management. All those are investment philosophy. All those are very important. I'm realizing as I go through this that geographic location for a successor might not be as important as it might've been. In part, the pandemic has shown us that you can effectively work remotely with people. So whereas before I might've been thinking of really just looking at the greater Washington DC area, I'm a little more open to working with people a bit farther away. Okay, thank you. Karen. Well, I think, like Steve, it's always life-changing when you're not in charge anymore. But I think the pleasant surprise for me was how Modera as a firm embraced my team and was really open to new ideas and sort of bringing us in as full participants in the firm. Modera, in fact, treats mergers and acquisitions not only as part of its growth strategy, but also, frankly, as part of its talent acquisition strategy. They were looking for good people and have been able to get some really great people through some firm mergers. But I think the biggest change for me is that my personal career and personal responsibilities evolved in an unexpected way. I did go from being a founder, owner, leader of a 200 million, give or take, AUM firm, and now I've been asked to step up and be the Chief Wealth Management Officer at Modera, which puts me in the leadership team of a $5 billion AUM firm. This is a big change in my world. But, you know, and a pleasant surprise, but I think the change that was needed for me, because I think what I realize now and didn't realize before was that I was ready for a new and different kind of challenge than I had before. So I'm happy about that. Yeah, that's pretty exciting. Modera, Tom Arecchio is an original founder. Tom Arecchio is from New Jersey. He is a former NAPFA National Chair. Really, really good guy. So just wanted to do a shout out to Tom if he listens to the recording. All right, Bob. Life-changing on the journey, and I think the key there is it is a journey. For me, it's this whole business, and maybe I was just in the right place at the right time, but I come from very modest means, and modest would be a stretch. And what this business has allowed me to do is live a life that I would have never imagined. This whole succession plan has given me one more, the next step in that is to be able to take what I've been able to build over the last 15, 17 years, and it's gonna affect the next generation. And there's that, and this morning's session, the gentleman talked about legacy, creating a legacy. And that's, I mean, it's a small legacy, but it's my legacy, and it's something that I'll be able to pass along to my kids, and we joke about it with our clients now when they start, you know, I get a client that's retiring, and we're talking about required minimum distributions when they turn 72, I said, well, that's gonna be these guys taking care of you, because it's not gonna be me. And I'm already starting, we talked about giving up some of the responsibility. I'm trying, I'm trying to push more and more. I recently, and I'm glad I learned this about Karen in the introductions, I've recently taken up golf to try to spend some of that time, so I don't wanna, I wanna make sure I don't challenge her. She can give you a few lessons, I think you'll be starting high school. So it has been a journey, but for me, the whole thing is, it's not over, but it's being able to see what happens next, and be able to enjoy the fruits of what we've done over the years. Yeah, and your son is so wicked smart. In the early coaching sessions, he said, well, I wanna make sure that this firm is worthwhile to buy. Like, I gotta make sure the firm, I'm like, oh my gosh. So we are obstacle one on session one. So, yeah, a few things came up for me listening to you, all three of you. I'm gonna say two, three years ago, the expression started popping up, sell and stay. And we never heard that before, that it was, you know, someone sold their firm, if they were a solo, they would stay five months, nine months, and then they would leave, and the firm was sold. Then it was, you know, maybe not a solo firm, the firm, the owners may need to stay 12 months to make sure everything is all settled in nicely, but they would leave. And then others are like, you know, I'm not so sure I wanna leave. I think I might wanna just get rid of the compliance, get rid of the burdensome operations, et cetera. Let other people do that so that I could just be with my clients. And that works fine, too. Sometimes there's a conflict with, I can remember, oh, I don't know, four years ago, it was three owners purchased the firm from the original founder. And I said, when would you like that founder to be gone? And they said, mm, in about a year. I mean, she's owned it 30 years, et cetera. So I then said, do you think she would speak to me privately? So I held a personal phone call with her, and I said, when do you think you'd like to leave? She said, mm, nine years. And I said to myself, oh my, oh my. So again, communication. The succession plan on the early stages is about knowing what you want. And I mean every day, Monday to Friday, what do you want? Do you wanna be in the office? Do you not wanna be in the office? Do you want to be doing work in addition to being present in client meetings? Or would you like to just be a face in the room and let the firm that's taken over? The other thing, Steve, you made me think of something. Your original person for continuity planning, when we were discussing a number of different things, the issue of fee disparity came up amongst a number of firms across the country. If there is a distinct difference between lower fees and higher fees, whether it's on the seller's end or the buyer's end, that's going to be an issue at transition for clients. It makes it very difficult for the buying firm, if they're the ones who have to increase the fee. And then I've had situations where the buyers have increased the fees very successfully, and the selling owner is actually miffed and resentful that they could not have been earning that same revenue for all of those years, and yet they did not make that effort. So there's so many moving pieces to this, but early on, it is what we had just talked about, the canoe test, liking the person, getting to know them better, and seeing if there is a culture fit. So what I'd like to do now, not only do I want to open it up to questions, but if any of you have anything that you would like to share about any experiences that you're going through, or did you have a positive experience or a negative experience, please feel free to share that as well. I'm gonna try to remember to repeat each of the questions, and I'm gonna ask you if you would, when you're asking the question, would you take the mask off, because it's hard to hear from up here. So does anybody, let's kick this off. Questions, anything you want to share? Yes, sir. I'm curious, I'm on the other side, I'm still building, and I have three partners, and we're looking for potentially acquiring practices. I'd love to hear your thoughts on the other side of it, and finding nice people like you. You'd love to hear thoughts on, if you're interested in acquiring firms? I mean, for people who are having fun, and you can make a great success. Great question, great question. 16 years of coaching, when I've had buyers approach me, I've said to them, I need to tell you that you must exercise etiquette and grace, because to go up to someone that you don't know, and you are a little strong, and you say, so, are you thinking of retiring? A lot of people are very insulted. Why would you say that? Is it my gray hair, am I bald? So I always tell people, you cannot go like a bull in a china shop, so the buyers have this very challenging position of how do I come about finding this out? So I think the softest entree into any of this, whether you're a seller or a buyer, is to say, I'm working on succession planning, which you are, acquiring firms. I'm working on succession planning for our firm. I've talked to a few folks. Have you done anything formally for your own succession plan? That's a more graceful question than, and I'm not suggesting that you did this, that some people saying, are you thinking of retiring soon? So I had somebody once tell me for their continuity plan, they said, can I send you the letter that I'm thinking of sending to clients if something were to happen to me? And I kid you not, I kid you not. It said, dear client, if you receive this, I am dead. God's honest truth. I said, oh no, no, no, no, this letter needs some work. Softer, softer entree than that. Do either one of you wanna respond to that? What should buyers, you're in this mix. What would you say? Come to conferences like this. Become active in your local study groups. Do what you can to meet people in a very informal fashion. I've had people reach out to me about, one guy at our local study group actually came up to me, and I think he was going around to anyone with gray hair saying, hi, I'm so-and-so, and I wanna be your succession planner. Not the right approach. No, I'm sorry, what's your name? Karen? Modera is also selectively merging with other firms, acquiring firms. They like to call their transaction with my firm a merger, although it really was an acquisition. They called it a merger, I think, out of politeness, because I think it sort of showed that their respect for our firm, and that they really still viewed it as a joining of firms rather than one firm swallowing the other. But I do think you just have to talk to a lot of people. You kiss a lot of frogs before you find the prince. Yeah, yeah. That's a great point, too, about the distinction of merger versus acquisition. I remember David Grouse, Sr., he and I were in Washington, D.C. We did a study group presentation together, and he said, you know, Diane, every merger is technically an acquisition, yet it is far better to just use the vocabulary of merger. It's similar to when I give sessions on ownership. I'll say partners, even though I know S Corp. is shareholder, I'll use the language of partners, meaning are you all having partner meetings? Do you talk to each other? Are you aware of the staff's issues, et cetera? Well, I will say, though, that- No, go, no, no. That, yeah, there are some firms out there that are truly interested in being roll-ups, and we all know who some of those are. They really are in the acquisition business, and so I think it's an important differentiator. It's more than just the words you use. It really is. It does reveal how things are going forward, whether it's truly a merger or truly an acquisition. Some firms really aren't interested in merging with a smaller firm. They just wanna roll up the assets and- Yeah, that is a great point in terms of once you do something like that, I've had some clients say, Diane, it's all about growth. It's all about growth. We keep getting growth quotas. And it helps to, if you're checking out a larger firm, I actually call those firms consolidators, which is an option if you choose to go with a consolidator, that you talk to people who have been with those firms for at least a year to hear, because even if somebody was giving me a 100% perfectly rosy picture, I would still push and say, well, there had to have been some difficult periods in the beginning, and I would just keep pushing to hear. Yes, Donna. Hi, Donna took me out to dinner when I went to Washington, D.C. Thank you. My story, or my plan, follows the themes almost to a T. I love what I do. I don't wanna stop what I'm doing, per se, but I just wanna have somebody that has my back and run the ship while I'm doing the other ventures that I wanna do in my life. And the fear that I have is joining a firm and becoming an employee, because I feel like as a solo for all these years, I'm unemployable. Can everyone hear her? Can everyone hear her? I just don't wanna create or follow a whole new set of rules How do you deal with that when you get into a new culture, when you're merging? Because I think the selling stakes model is getting much more popular among solo practitioners, and it's something that I would certainly like to see happen. Yeah, and for those in the back, some didn't hear, Donna mentioned that it's great to be with a firm where the responsibilities you don't enjoy are now being picked up by somebody else and you have a little bit more freedom and flexibility, and yet you are now an employee. And she jokingly said, I'm not very employable. I don't do well being told what to do, et cetera. So it is hard to own your own firm, work for several years, and now you're an employee. I'm thinking especially for children. Now that's gonna be fun. Yeah. So being an employee, I think that it's all in the very beginning that it gets spelled out very clearly, very vivid. What are my deal breakers? What can I live with? What can I not live with? So that when a seller describes sell and stay, they say to the buyer, my perspective is that I'll come in, I'll do this, I'm going to tell you that I will be hard pressed to take orders. I mean, I would have all of that thrown out on the table in the very early stages. Usually, well, there's two schools of thought. Usually, firms enjoy someone to sell and stay because you are experienced, the clients know you, and yet if you will not comfortably roll into their systems and everything else, it does cause a challenge for them. So sometimes it gets a little too long in the tooth and like we need to get this person out of here. So I think it's a good idea to spell out when do we revisit exit plan, when do we revisit possibly exiting sooner, or when do we revisit I'd like to stay longer or you want me to stay longer. Yes, sir. A solo practitioner, could you compare or contrast the pros and cons of rolling up your sleeves and doing it solo versus hiring from like a few transitions? Contrast the pros and cons of solo versus? I think of self-running your succession plan versus hiring at FP transitions to help you run your succession plan. Doing your own succession plan versus hiring FP transitions. What are the pros and cons? I'm repeating for the recording. Thank you, go ahead. For me, I might be able to do it myself but there are experts at it and I would rather delegate to that level of experience. And FP transitions aren't the only people that do this. They're among the best known. But having a firm with a track record and the resources to help manage the process from valuation to documents to helping you iron out roles and responsibilities, it's just a matter of experience. I could do my own taxes but I hire an accountant. Same thing. I would add on saying this is not a plug for FP transitions but I worked with them too as far as doing valuations of my firm for a couple of years before I pursued a merger. So you don't have to hire them to do the whole thing. I think they do bring a lot of expertise to the table and we did use them for valuations. And I probably have a little bit of a blend. We, and I want to go back and clarify earlier, I said that I had worked with FP transitions. Actually, I worked with the successor or I guess non-successor. Non-successor, yeah, his son. Of Succession Resource Group and they helped draft some documents. And I think they're really good for situations where you may not have the next gen in place. What I found from the documents that they put together for me to move forward were a little restrictive for me and my kids. So it was a little different. But I would think that if I were going out in the marketplace and trying to find someone to buy me or something like that or searching for that, that's the same reason clients hire us to do their financial plans. They can do it but if they want professional help and make sure you don't make the big mistake. So there's also a number of individuals that feel comfortable with a business contract attorney in their local area to draw up the agreement. I think, first of all, it's an excellent question because depending on the tenor of the conversation that you're having with the potential buyer, things can go very nicely and very easily or it may get contentious very early on. And in either scenario, you want to feel that the contract that you ultimately sign has covered all bases. Yes, sir. So like most of the others, like the potential buyer, you know, of course, so what are some of the things that you have to think about in terms of how do you work with clients to make sure that the case is successful? Did you hear that? I didn't hear the second part. I'm so sorry. How do you work with your clients to make sure the merger is successful? Yes, yes, fantastic. Sure, sure. Post-sale, I, as a coach, I say that's the most crucial, crucial, crucial focus for both seller and buyer. If I had a dollar for every time I said, shame on either one of you to lose one client in the first 12 months. When you think about it, though clients will be unhappy if they're completely surprised, it stands to reason that the person they trust has selected after a lot of time this buyer and they're endorsing them and giving their blessings, but that's always not enough for a client because I say to my buyers, don't be so cocky. You know, well, where else are they gonna go? I said, they could de-link and stay in retail. They could not pay a fee. They could keep their investment portfolio as is, but not choose your firm. So that gave that person pause because there is an effort by the buyer and the seller and to be honest with you, it's a great question, it's really more the seller's effort because they're the ones who have a relationship with the client. So the buyer has to be very delicate and not be too familiar in the early stages with a brand new clientele. And yet, as the year unfolds, the seller is to ease out endorsing and giving confidence to the buyer in front of the client. And I'm gonna allow each of you to share whatever thoughts you'd like on this as well. Because when clients are in a room, their loyalty is with you. So you don't want a seller to say, oh, Bob is a much better planner than me because the client knows you and they're gonna defend you. So now you've backed yourself into a corner. You don't ever compare what you say to them is, I've chosen this firm. I think you're gonna be very happy. I'm not going anywhere anytime soon. We are going to make sure that everyone is settled in nicely. That tends to soothe people. But during a 12 month period, you should know what clients do you think are at risk. Because as you say, at the end of the year, the sale price will get readjusted if clients walk out the door. And it's, you know, I tell my advisors, I don't mean to bruise your egos, but clients won't leave just because they don't wanna do the paperwork. Like, oh, I don't wanna go to somebody else. I mean, that's a really low bar to stay with you. But it should be about the fact that they felt, okay, you know, this firm was selected by my person that I've been with for 20 years. At the very least, I should stay here and see if everything works out. And then in that 12 month period, it better be a very impressive 12 month period for the client. Anyone of you wanna? I'll jump on that first. Because I think it kind of ties to all three or three, several of the questions. And a lot of the conversation, it's really about culture. I guess you need to really make sure that the people that you select, if you're the buyer or the seller, have the same value or similar values and similar approaches and working with people for the two guys that are looking to acquire, you're fishing in the right pond. We're all fee-only advisors. The culture is pretty much similar amongst us. And to the lady who didn't wanna be an employee and is unemployable, my wife was a CPA, a partner in a small CPA firm. And the older partners were looking for succession planning and they did a roll up into a large firm. And it was culturally a disaster. And my wife's not a partner there any longer. And the whole firm is completely blown up from what it used to be. So just, I think that kind of, make sure you're marrying the right person. Yeah, yeah, I don't think, I think people take a few things pretty casually. And I think that is the worst thing you could possibly do in the first 12 months of a transition, is take anything casually. Staff should be paying to the tone of voice of a client. Staff should be noticing if somebody's not calling when they used to. Anything like that. Karen or Steve? Well, I think as a seller, there are a lot of things we can do to help a merger be successful. And one is how we describe what we're doing to our clients. Always be able, you need to be able to truly look them in the eye and tell them they're gonna be better off as a result of the merger. So in order to do that, you better be sure they're better off, which means you better pick the right partner. But then you can tell them why they're better off. In the case of us, it was being with a bigger firm with bigger resources, people with different backgrounds and different skill sets. A firm that had been around since 1983 and would be around for perpetuity, unlike my firm, which was very small. So I think if you can truly look at your clients and tell them, look, this is what we've got and this is how we're doing this to actually make your lives better. Then it works. If they just get the sense that you're just doing this because I just want to get out of here and get a fat paycheck and cut and run, that isn't gonna work. Yeah, yeah. And there is a fine distinction. That is perfect. You're better off and one plus one is three and that whole thinking versus they're still feeling loyal to you. So you make sure that you're in that equation of we are so happy about this, as you mentioned, that you're happy to be merging with Modera and good for you to say, you better feel in your heart that it is better for the client, yeah. Steve. No, I would just echo what everyone has said. The seller has to believe that this is in the best interests of the client. Did we answer every part of that? Okay, great. So I was gonna come down if I didn't hear it. Any other questions, experiences? Yes. Mm-hmm. Why would a buyer, I'm in a small area, it's a very rural area, why would a buyer come and buy my practice just waiting for the client to expand and go looking around? Good question. So the question was, she is in a rural area, why would a buyer buy her practice instead of just waiting till she just closes up shop and the clients are scattered? Two reasons. Number one, I had someone who had a very small practice in San Francisco, and she was literally going to basically give away 12 clients. And I said to her, that's perfectly your choice, but I think you could get some value for it. The buyer today, there's one advantage of COVID. I'm sorry, the seller today has an easier time of Zoom video being an option for clients. I've spoken to a number of buyers where I've said, my best advice to you would be, you're going to take a trip out there and meet people in the very beginning for sure and spend the time, and yet you don't have to do that twice a year or once a year or every year. Maybe it's every other year you might make an in-person trip, but in the beginning, I would suggest you go out there and meet the office, meet the staff, et cetera. If it's a manageable number of people, it's not hard to do something like that. In literally three or four days, you could meet all the clients, et cetera. Scattered, the only problem with scattered is, and this is a challenge that some people want to only buy the top portion of a practice, and the sellers are like, no, no, no, no, no. I don't give you my top three and my, let's say it's only 10 or 12 people, and my bottom six or seven lower fee, you don't buy, so I'm basically in the same position anyway. I would say it should be sold as one if you want it to be sold as one. Where a buyer, again, to answer your question, would find that attractive is if your clients were willing to do video so they wouldn't have to make a trip out there, and scattered could mean, sadly, some people still working with a fee-only advisor do not understand, and they go to HR Block or Wells Fargo or Raymond James, not even understanding that they're not going to a fee-only planner. So scattered means they may go back into a commission situation. Anybody want to add on to that? Nope. Yes, sir. Well, we work very hard to acquire a business, so even though they know that you're getting out of business how are they going to get all those people they don't get, you know, a client list and all that? So, you know, I work with a few people, so that's probably the reason why. So you're saying it would be easier for them to acquire if they had a full client list and they knew each of the profiles of the client. Yep, yep. And you get, as everyone said, you're selling the clients on the UO. Yes, yes, definitely doing that. It's also, when you're considering this, no matter what age, which tomorrow morning, by the way, in our session, I'm going to touch more upon continuity planning, because you can be 32, 42, 62, or 72, anything can happen to anyone, so continuity planning is very crucial, and the clients are starting to ask about that, what if something happened to you? You know, I'm hearing it more and more from advisors, the first time anybody ever asked me that. I have a client out in the southwest area of the country, he, not only does he have a boyish face, but I don't think he's older than 45 years old, and he said to me, Diane, do you think I look old? And I said, no, why would you say that? He's being solicited by, not the larger consolidators, not, you know, Buckingham or Pinnacle, but the medium-sized consolidators that we don't know as well, you know, a number of them are out of Chicago, or, you know, different areas where they are trolling websites, and they are reaching out to advisors, and I suppose he thought he got contacted because they thought he was retiring, but I said to him, wow, that's really interesting, because this sounds a little too good to be true, but he was told that after he leaves, I said, this can't even be possible, he would receive 40% of revenue, and then when he passes away, his spouse would receive 25% of revenue until she passes away, and he's 45, and I was like, wow, that's some deal. My skepticism tells me that, but you intimated, Karen, if there's a roll-up, they don't have to stay true to anything that they said in the contract if there's a whole new contract five years from now. So, again, I just want everybody to be very, very careful about who you are speaking with if it seems too easy, and also, talk to your colleagues. Talk to your colleagues, you know, what do you know about this firm, et cetera, et cetera. Other questions? Yes, I have a question. When you talk about the continuity plan, what is the best way, once you have something in place that you can communicate to your clients, just send out a letter to everybody and say, hey, you know, just want you to know that I put this in place, I know it goes in your ATP, but, you know, when they feel, have felt comfortable with you for years, and then, you know, you wanna add that little extra level of confidence that's something that they'll take care of, what's the best way? Yeah, that's a great question. The question is, what's the best way to communicate a prepared, formal continuity plan to your clients? And I have seen a number of ways. I like a combination of a few things. Sending an e-blast is fine, an email blast. Sending a formal letter as a follow-up to the email blast. I think it's a nice idea to pick up the phone and call a few people. I've had firms hold events where they had a cocktail hour where the two planners were in the room, and they invited as many people as that would come so that they could actually meet each other in a social setting. I will tell you that clients will get nervous. They'll think, is something wrong with you? Is there a health condition you're not sharing? Especially, you know, a pandemic. These are the things, and so you have to just gently reassure everyone, I'm a planner, you know, this is something that I should be doing. The continuity plan can get very, very involved. We'll talk about that a little bit tomorrow. But you wanna make sure that you're covering all the steps. And yet, the most important piece is the communication to the clients. I like combinations of email, phone, written. Events are perfectly fine. All four are fine. And yet, in many instances, the person you choose may not be your succession plan. So a lot of times people will ask that, oh, is this the person that's gonna ultimately take over your firm? And that's not always a yes. Sometimes it is, but sometimes it's not. Sometimes you'll ask somebody to be your continuity plan, and they have zero interest in being your continuity plan unless they're the first name on the list to buy your firm. If they can't buy your firm, they don't really wanna sign up for stepping in and helping in a time of crisis if there's, quote-unquote, nothing in it for them. So there's that piece of it as well. Sadly, a long time ago in New Jersey, I knew of him, I didn't know him personally. A gentleman passed away at the age of 48, had nothing in place, so there were a few New Jersey planners scrambling to try to help the spouse. But to your point that the clients scattered, it was terrible, it was a big mess. So that really woke people up to, wow, I should get going and doing this. Myself as a coach, what I see is there's always something for all of you to be doing, and I understand that, I was an advisor. There's always something else that's pressing between Monday and Friday. And yet, you need to put time on your calendar, and it's two distinct things, continuity and succession. And I will tell you continuity is more important because it's crisis limited. And a long time ago for NAF, I did a session on disaster planning. It's not always death or disability. In New Jersey, we suffered Superstorm Sandy. There were people out of business for weeks sharing offices with other financial advisors. So disaster planning is part of continuity planning. And these are issues that, as planners, we should be preparing for because it's an unanticipated event. Succession planning, on the other hand, is like when I think of Bob, I think of his two adult children. They're several years ahead of them. They know what they know now, and they're comfortable with what they're doing now, but there's so many levels that we still have to introduce them to. So it is a definitely longer process. But for all of you in the room, you wanna start thinking about it, and I wanna steal your thunder on your best advice. So any questions? Any more? I think we have, yes, we have a few more minutes before we, Mark. I'd like to ask the panelists, it sounds like, Karen, you settled on, or you got to do your plan, I guess I'm just wondering if that is true in all the panels that you've thought about what happens if a plan A falls through. How much time do you devote when you know you're coming on? When you start working on the plan B, how does that all fit? Because that's kind of my, that's a big concern. Going down what ultimately is the wrong path and not having enough time to recover. Mm-hmm, mm-hmm. Okay, so the question is, and actually, Steve can address this as well, because when you're looking for people as a partner, the question is, do you have a formal plan in place for succession, and what does that look like, and what were the steps to put it together? Bob, I would say we're in the early stages. Is it not fully formed, and is it a work in progress, and what does that look like, and what do you need to know to follow that path? To, and basically, Mark, what you're talking about is not only how do I begin this process, but what are the steps? And I will tell you before they each respond that it's pertinent to the people that are involved in the process. So for instance, with Bob, we have a readiness factor that we have to respect first and do things in a step-by-step fashion, whereas Karen had it much different. She was checking them out. They were very well orchestrated at Modera, very much in place, and she still wanted to make sure that was a match. But Steve, talk a little bit about you trying to find someone, et cetera, and what steps are you taking that you've progressed a little further on? Well, talking to other people that are in the same process as well. I mean, there's lots of resources. Diane has been a coach for me in doing that research. I've also worked with another coach that specializes in communicating, having Gen Y, Gen X, millennial people work with boomers or transition businesses to boomers. And there's lots of literature out there. I subscribed to FP Transitions Equity Management. EMS, Equity Management Systems. It was $100 a month. They gave you the business valuation, and then a whole bunch of resources to evaluate your own business and what to look for in a partner. And part of that is to understand that any deal you put together needs to have that clause put in there. What if it doesn't work out? Under what conditions is that determined, and what comes next? Any good plan would have that in place. I also think, and this, you have to start early. It takes a while to do this. And you have to sort of think through, there's sort of the internal succession, there's the look for a merger partner, sell and stay, which is what I did, and then there's sort of the sell to a roll up. That's always out there, and that can be done really quickly. I mean, it's less than ideal in so many ways, but it's there. But I would just say, get going early and spend the time. This was my plan A, but it wasn't my first plan A. I've spent time talking with other merger partners over the years that, for a variety of reasons, realized it wasn't gonna be a good fit. But it takes a while. So start early. And mine is definitely a work in progress, early work in progress. While I seem to have the right people, who knows, lots of things could happen between now and then, we are taking the baby steps. First thing was we got my son a certification over the last several years. Now he's in client meetings. He does all of our trading and rebalancing. So little by little. And my daughter's just not a planning type. She's more the soft and cuddly, I call her my chief happiness officer. Her job is to take care of our clients. But she won't be the one that will run the business. So we're having him step by step. He's learning the different things. I know he's not gonna be really interested because while we're very similar, he's a little different in when we get to the marketing and how you market your firm. Right now he's learning operations and client, what we need to do. And he's gonna be a much better planner than I ever was because I've only been at this for planning 10, 15 years. He's gonna be a much better technician. Where I had the edge is I grew up in the brokerage world. We were taught to sell. So I didn't have a problem selling the service. I came to the planning part late. He's gonna have the opposite issue. And I get to have fun because I'm not their parent. And by the way, Bob has an office where Sam the golden doodle delivers the mail. The mailman actually hands the mail to Sam and he runs down a hallway and gives it to Jenna. It's great. All right, so save the best for last. Do we have any other questions? Okay, great. One by one, I've asked each of them ahead of time to think about what would be their best advice. Now they might've shared a little bit of it because we touched on a few things, but would you each just share your best advice to everybody in the audience? I would say don't be afraid of the seeming enormity of the task in front of you. Like any difficult task, you would rather procrastinate, break it down into small parts and start. The important thing is to start. And for me, that has meant research. I'm good at researching things. It's harder for me to actually make a decision, but I'm great at researching things. So I have an eight year timeframe, but by the time I wanna have a plan in place and I've started this process maybe a year or two, and I've read lots of books and I've worked with two coaches and I've talked to a lot of people. And as Karen said, it takes time to have a plan in place. So start now rather than later. And if you don't start now, the risk you take is that events will back you into a corner and force you to pull the ripcord, which is, again, leads you to probably less than ideal solution for you financially and for your clients in terms of cultural fit. So that was my first bit of advice, is get started early because it takes a while. Don't rush it. Another thing I would think about is understand what drives the value of your business. And going through a valuation is a great way to do that. Understand what are the variables, what are the levers you can pull that make your business more valuable or less valuable? And of course, fee disparity is one of those things that can make a business less valuable. I know NATFA advisors are very client-focused and I also know that we tend to be disruptors. So there's always at conferences a lot of talk about this creative fee model and that creative fee model and maybe I wanna do it this way. I wanna get away from the traditional AUM and do it this way or that way. Understand that when you make the decision to do that, the consequence down the road might be that your firm is less valuable to a potential merger partner down the road when you've made those kinds of decisions. So think about your pricing model and think, grow your business and do your business with the end in mind, even if you're a long way from succession planning. Think about how this is gonna go. And my last little bit of advice, and this is like really micro advice, is have an assignability clause in your advisory agreement with negative consent. You'll thank me later, just trust me. That's a great point too, negative. Yeah. So you want your, when you have those conversations with your clients, which I did two years ago, explain to them that I was merging with another firm. There were a handful of them back in my early days because I didn't have these things in my client contract where I actually had to get written consent from my client, affirmative written consent, allowing them to assign their existing advisory agreement to the new firm. It's a lot easier to have a contract that's assignable with negative consent where you can just say, this is what we're doing. If you don't like it, let me know. That way, even, all the clients went with us in the merger and they all stayed with us, but it's awkward enough to have to explain to them that you're going through a transition like this, then asking them to sign paper. It just makes it feel a little icky. So we had it in place for 80% of our clients. There was that other 20%, I guess, that we had to go out and do it. And it was kind of a pain. And you have to do all this in a very compressed period of time, potentially. It was, I think, 60 days. Yeah, and to that point, Karen, they may forget, I call it convenient amnesia. Clients may forget negative consent, and yet that's fine, that's fine. At least you're covered until you can explain and talk to them. I always say to all my advisors, the most important thing is to have the conversation with a client where they understand what's going on and they won't care, negative consent, positive consent, any of that. They just wanna know, well, I'm not understanding what you're saying, so just explain it to me again. And when it comes from a place of trust, they'll be fine with it. The other point, I'm so glad you mentioned about the fees. I often say to so many of you wonderful people out there that if you are undercharging, you need to consider raising your fees to the level they should be. Number one, because down the road if you sell, you want that piece covered. You do not wanna be raising fees and then nine months later say, oh, by the way, I'm transitioning my firm. So you need to clean that up and take a good look at that. So if you have a gut sense that you're not charging enough, I know it's a very difficult thing to do. Of course I know that. I will strongly encourage that all of you likely deserve more than other individuals out in the brokerage world. They'd be lucky if they could name their children of their clients, you know? So just please think about if your fees need to be raised to raise them. Bob, best advice. Short and sweet. Do something, but take your time. And at least for me and maybe for a lot of us and even in this session, we kind of blended it. There's contingency and there's succession planning. They always kind of blend together. Do, definitely do something for the contingency because that could happen tomorrow and there could be an issue. But take your time on the succession and make sure everything we've talked about, the culture and making sure you're getting the right piece. You know, before my kids were really involved in the business, I thought I had kind of a succession plan in place with another partner, wasn't a partner. We decided to not merge our business. He was in the broker dealer side. I was on the fee only side. He wanted me to come to the broker dealer side. I wanted him to come to this side. We couldn't make an agreement. We said, well, let's just move in and share some expenses. We shared offices, telephones, things like that for a while. When you, it's kind of like dating. When you spend some time living together, you know that maybe you shouldn't be married. I learned a year or two into that relationship that it was a good thing that we didn't move forward with a succession plan. While we all want to get it done and we're planners, make sure that you're doing it the right way. Yeah, and don't send a letter if you get this. I'm dead. We hope to see you and any colleagues that you want to spread the word, not in this room, but tomorrow morning at 9.50 a.m. in the Otis room. We titled the session Keep the Conversation Going. Not only will we expand on continuity planning, we'll continue any conversation that you want about succession planning. And I told Napa, I want it to be like an open mic forum. We'll walk around, there's no presentation. I want to encourage the audience to share their experiences. Just as much as any one of us up here, you have value in what you could share with us. So it's gonna be a very expanded scope. If people want to talk about raising their fees, that's perfectly fine. So finally, I want to thank my three great panelists for being so open and sharing. I believe they deserve a great round of applause. Thank you.

succession planning

financial advisory firms

panel discussion

career paths

experiences and challenges

finding the right fit

acquiring a firm

culture and communication

successful transition

advice to the audience

Q&A session