Given the terms she chooses, Marjorie Fox could be speaking about the movies, but her language also applies to a type of transition that looms in every advisory firm owner’s future: transferring control and equity to new principles.
“It’s a weird thing. I’m kind of fading away,” says Fox, a CFP and a partner of and senior adviser at FJY Financial in Reston, Va., who has been an adviser for 25 years and expects to retire in 2021.
Fox, as is the case with many other veteran advisers, has adopted a go-slow strategy for her retirement transition.
Her game plan calls for making sure that before she fades entirely, however, she checks off what she calls her four “T”s: time, talent, terms and treasure.
To address the “time” category, Fox scheduled a retirement runway for herself, by planning far in advance -- almost 10 years -- so that she has time to think about their future after she leaves the firm.
To address the “talent,” category, she hired advisers who she expects will be capable of replacing her as owners.
“We have the right people on the bus, potential successors. Three are already part owners,” Fox says.
What made those advisers suited to the assignment?
“They are willing to be risk takers and they have management skills. You have got to have the skills set in addition to having the appetite for risk and you have to be good at business development,” Fox says.
To address the concept of “terms,” she drafted a detailed agreement with those advisers that sets when and how an outside evaluator will determine the value of the firm, so her replacements know what is fair to pay her. In turn, Fox has pledged not to poach clients from the firm when she leaves
What about the concept of “treasure?”
That is Fox’s way of saying that the firm’s profits must allow the new partial owners enough funds to pay her for her equity when she leaves or at least start paying off a note that she may hold for their obligations.
That remains the one “t” she still hasn’t yet checked off. But she is hopeful.
For Susan Bradley, a CFP, her retirement from her advisory business appears in her rearview mirror, and she also took some time leaving. She still owned the advisory practice in 2013, when she founde a consulting business, Sudden Money Institute, based in Palm Beach Gardens, Fla., which, ironically, trains and certifies advisers to help clients with transitions.
Bradley had hoped and attempted initially to continue steering both her advisory business and her consulting concern, a strategy that on paper offered the best financial outcome for her, she says.
“When I’m good I’m all in. It didn’t work well with my attention split,” Bradley says.
So she transferred her clients to a talented back-up adviser, who she previously had tapped for the assignment.
Forging a buy-out agreement with her replacement was no easy task, for “all the classic reasons,” Bradley says, referring to the knotty task of determining the advisory firm’s valuation.
But now, with a few years’ hindsight, she deems her retirement planning and execution a success.
“The clients all stayed with my replacement,” Bradley says.
This story is part of a 30-30 series on transitions.