Why I Sold – Part 5 Overcoming the Psychological Resistance to Merging

By Jim Whiddon

April 1, 2014

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This article is the fifth installment in a multi-part series exploring the issues Jim Whiddon faced as he decided to sell his practice. To access all the articles in this series, please click on “more by the same author” in the left margin.

Before I made the difficult decision to merge my registered investment advisory (RIA) with a larger partner in 2013, I took one last look at the pros and cons. Despite all the positive aspects my research turned up, I hesitated over some lingering issues that were important to resolve. And while the bottom line was compelling, many of my concerns had to do with the psychological effects of the move, both for me and for my clients.

Emotionally, after more than a quarter of a century leading my firm, I had to come to terms with the fact that I’d no longer be completely in charge. I’d be foregoing some of the positive benefits of being the boss – including possible financial upside.

Another consideration that warranted some reflection was the possibility that our clients might prefer a smaller firm in the same way one might prefer a small, local bank instead of a large, national institutional bank. I concluded that while some clients were definitely with us because they felt that our small size created a unique “boutique feel,” they comprised a small minority of our book. For most of our clients (especially the older ones), we determined the financial stability of the firm they are dealing with was more important. For the clients who worried that economic difficulty was ahead of us, larger meant more stable. This was especially true of Baby Boomers who were raised by Depression-era parents. Even better, my fears turned out to be unwarranted. The same small and flexible feel is still present in our business post-merger when it comes to day-to-day client interaction, because the only thing that changed in that respect was the name on the door.

Another concern was that some clients might see the merger as a sign that I was personally on the way out the door. I was able to ease that concern because many of them understood that at my age, 52, I had more working years until retirement. An owner in his or her mid- to late 60s might have a more difficult time alleviating those client worries. The older a principal is, the more difficult it will be for him or her to stick around after the transaction and retain clients – which affects the value of the transaction payout and provides the stability and peace of mind that clients deserve to have.

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