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Why I Sold – Part 3

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Why I Sold – Part 3

By Jim Whiddon
March 11, 2014
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Jim Whiddon

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

When I decided to sell my small wealth-advisory practice, my due diligence focused on the internal threats and weaknesses I faced. But I took an equally hard look at external threats – industry-wide issues that all firms, regardless of size or stature, will face in the coming years. I quickly realized those overarching issues were beyond my control and more difficult to overcome.

The global financial crisis, take 2

The global financial crisis of 2008-09 could have ended my firm. If I had not been in a strong financial position personally at the time – which gave me the needed resources to support my company – it would have been catastrophic. But it was painful to dip into my personal savings to keep my most valuable asset viable. And while none of us want to ever experience 2008 and its aftermath again, we all understand that an occasional market retraction is inevitable to have the creative destruction we need for bull-market runs.

Nevertheless, pullbacks can devastate smaller firms. After revisiting the personal price I paid financially and emotionally, I considered whether I had the stomach to weather another major market storm as the sole owner of my firm.

It took about four years after the crisis for the value of my firm to return to a level where it made sense to consider a transaction. In 2012, with the markets still hovering around all-time highs, I felt there was a window of opportunity that could close at any time. If you are in your 60s now and a significant market correction occurs, you could be in your 70s before a market rebound returns your firm to its former valuation.

A merger would give my clients, my staff and my family the financial stability we needed to withstand the next market retraction — and the one after that.

Regulatory oversight

By the end of 2013, fewer than half of the 398 new regulations authorized by the Dodd-Frank legislation had been finalized. The task of understanding and complying with regulations – even before Dodd-Frank – was a real chore for our small firm. The additional advent of the Consumer Financial Protection Bureau was just being unwrapped.

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