July 20, 2012

Merging or Partnering with a Fellow Planner is all about Commitment!

Sadique Neelgund

In the fourth quarter of 2002, I merged my sole proprietorship with an existing firm with a simple stroke of a pen, the journey I chronicled in “Urge to Merge: Insights from a Sole Practitioners Search for Partners” was complete.

My journey, while arduous at times, yielded many benefits.  One day I was sharing, through the above mentioned article, that it was very difficult to find people that wanted to be in business with me and the next thing I knew I am told I won one of the awards in the Journal of Financial Planning’s inaugural Call for Papers competition for the article. I heard from hundreds of planners all over the country from firms of all sizes that could relate to some aspect of my quest. I learned much about people and priorities.

Since then, I have been asked to speak or write about small practice mergers and management to planner groups around the world.  My colleagues want to learn, not only about the search but also how we got the deal done, how we operate, how we get paid, what may lie ahead, and a host of other topics.  I am thrilled to be asked to contribute to a few thoughts to my friends in India.  I cannot tell you what you should do but I hope that by sharing my thinking, you can come to some conclusions of your own and better run your businesses.

When to Consider Merging

There were several things that made a merger with my partners look good, at least on paper.  For instance, they had a stable practice that, like me, is committed to serving clients in a fiduciary role.  All the partners are CFP Certificants and active leaders within the financial planning profession.  We share similar planning philosophies and employ similar techniques.  We use many of the same types of software and use the same custodians.  However, there were three deeper qualities that became clear only after a fourteen month “courtship” of discussions, planning, and negotiations. There were three qualities that made me want to trade the benefits and frustrations of a sole proprietorship for the benefits and frustrations of an ensemble: obsession with quality, dedication to clients, and an intense commitment to do the work.

That final quality is perhaps the most important.  Drafting an agreement that spells out dissolution is a critical step but, in my opinion, it is foolish to enter into a merger to “see if it might work out.”  Like a marriage, there must be an unwavering commitment to making it work.  In this day and age, the internal and external environments of any enterprise change rapidly.  My partners and I are under no delusion that we will have a problem-free existence.  The partnership works for me because the three of us work purposefully to support each other, resolve our differences, compromising as needed, and put in the work required to serve our clients well.  This is indeed a great deal of work.  If it were easy, everyone would be doing this.

Distributing Responsibilities

For example, before the merger, we had determined that I would be primarily responsible for overseeing our marketing and communications. One of my duties was to write the initial drafts of our client newsletter and commentaries.  The purpose of dividing responsibilities is to get leverage of time and talents.  By not having to spend much time on these communiqués, my partners could focus on their firm-wide responsibilities like HR, technology, and compliance.

This all sounded great in theory but in practice it took a while to get any leverage.  Initially, I would write something up and each partner would edit the draft.  Unfortunately, there were times when they would edit the others’ editing and we would find ourselves in a debate about exactly how to word something.  Instead of getting leverage, we would slink into the depths of word-smith hell.

Commitment is Work

As the writer, I sometimes hate being edited at all let alone by three people with differing styles.  At the same time, I appreciated the nervousness they had about what we were creating.  There are few things financial planners are more sensitive about than what someone else sends to the planner’s clients. Eventually, we devised a system whereby another person on our staff edits the details, tone, and style, while the others are restricted to giving me feedback only about the broader themes.

Getting to this system took time, trust-building, and compromise. Other activities and decisions have gone through similar processes.  Despite the success of our work together, we continue to struggle with a number of areas in which we are not clear about who will make what decisions and when.  The pace of change today is such that this will likely always be the case.  Without a firm commitment to each other and the success of the firm, it would be impossible to make progress.  Commitment is work.

Life will Change for the Better

The results of the merger have been excellent in many ways.  Our lives have gone and continue to go through a pleasant transformation.  In short, coming to work is a joy.  World markets may have been in turmoil through the ’08-’09 crisis but the word I use often to describe conditions at the firm was “peaceful”.  Don’t get me wrong that period was not fun but we had no internal dramas to deal with. We were able to assemble each day concerned only with how to help each client through the hysteria.

Creating an ensemble firm as we have done won’t work for a lot of people but we are truly blessed with how well it works for us. This is no Utopia but on most days, we each have every opportunity to spend that day engrossed in the aspects of the business that excite us.  We spend most of our time individually on things we are very good at and enjoy. We also have the comfort of knowing that the items we are not directly attending to are being handled well by people that are highly skilled at the respective tasks, enjoying their work.

In the decade since writing that article, I have conferred with hundreds of financial planners that are considering merging, have merged, or have broken up a merger. By far the factor best correlated to successful unions is a unanimous commitment to a common culture within the firm.  In the US, we often compare partnerships to marriages. There are many similarities; chief among them is the importance of commitment and accountability. This is more critical than complementary technical or managerial skill sets.

As co-owners, we are accountable as only those with some “skin in the game” can be.  Our clients are getting little pieces of each of us and our skills.  We get home at a decent hour and our work does not interfere with our responsibilities at home.    That, my friends, is a job worth having.

Dan Moisand, CFP® is a Past-President of the FPA (Financial Planning Association) in the United States.  He writes frequently on a variety of financial planning issues, has been named one of the America’s top financial advisors by several publications, and has spoken to planner groups on five continents.


Authored by,

Dan Moisand

Moisand Fitzgerald Tamayo, LLC
Florida, USA

2 Thoughts to “Merging or Partnering with a Fellow Planner is all about Commitment!”

  1. Thanks Dan for sharing such an important aspect of Financial Planning Practice.

    I always believe that partnership is the best way to build, run & grow our practice. As an enterpeneur we have to understand that most of us don't posesses all the qualities that are required. When we were in the job, we were part of the system but as a sole practistioner we are the system.

    If 10 things are required to build the business you will only have 4-5 but your partner can bring another 4 & 1-2 can be hired. Plus the committment we can expect from a partner will be much higher than an employee.

    @Sadique – thanks for asking international planners to share their experience.

  2. Dan Moisand says:

    Honored to be asked and happy to oblige.


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