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The 10-year goodbye for 2 advisers

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Last month, Robert and Peggy Eddy turned in their keys and walked out the door of Creative Capital Management, the San Diego-based advisory firm that they co-founded more than 40 years ago.

When did the two start planning for their exit?

“Exactly 10 years ago,” Peggy Eddy says.

As an adviser who had helped many company-owning clients with their own succession plans, she gave herself plenty of time to prepare her own, she says.

“It would be really embarrassing if I had not done that,” Eddy says.

When Robert Eddy turned 60, the couple began figuring out how they could leave the firm when he celebrated his 70th birthday, which he did a few days before the couple retired.

In terms of succession planning, the Eddys identified their end goal: to keep the firm intact and in good hands. They have achieved that objective, if one sets as the most significant measure what has happened with their client roster.

After the Eddys sent out notices detailing their departure and giving clients an opportunity to switch firms, which is required by regulators, just two clients replied that they would move on, and one of them was moving to an advisory firm where his child works.

How did the Eddys succeed at their firm’s succession?

They started early, hired successor candidates based on their values, then trained them so that they would have the right skills.

They mentored, coached and integrated into the practice those two hires, and, when it came time to negotiate the terms of a sale agreement, they spent money on the right lawyers, each side of the transaction having their representation, and did it correctly, Peggy Eddy says.

Starting early helped because, “we didn’t have a gun to our head. We didn’t have to get this done,” she says.

That gave the Creative Capital Management founders an opportunity to “hand select the two young men, who we’ve known since they were young,” she says.

They made sure those two potential successors were “compensated fairly,” Peggy Eddy says.

“This was not a nickel-and-dime, mom-and-pop schlock operation,” she says, noting that Creative Capital Management offered medical plans, disability and life insurance, and defined-benefit retirement plans for employees.

They also set up a program, known participation in earnings, to allow their chosen successors to benefit from good years before they took the helm.

But the Eddys also saved payoffs timed for their departure. When they negotiated the sale of the firm, they used a valuation that gave the two successors consideration for the value that they had added to Creative Capital Management.

The Eddys’ approach doesn’t fit everyone.

Lynn Ballou is a CFP and the regional director for EP Wealth Advisors in Lafayette, California. She sold her own advisory firm to EP Wealth Advisors after years of trying to groom successors in-house without succeeding.

“We had a fantastic team of people here. They just didn’t see themselves as working for each other,” Ballou says.

The Eddys -- to make sure that their successors would be ready for a leadership role and accepted as such by clients -- spent the past two years having them lead client meetings. The two successors also started a few years ago writing blog posts and appearing in online video presentations so that outsiders would identify them as firm leaders.

However, a few weeks before she turned in her keys, it was Peggy Eddy who penned a blog post, a goodbye of sorts.

“It has been a thoroughly rewarding experience being allowed into the lives of so many special clients and their families. For this, I DO count my blessings!” she wrote.

This story is part of a 30-30 series on smarter succession planning.

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