Deal or No Deal?

John Robinson |

By J.R. Robinson, Financial Planner (March 2024)

Throughout 2023 and earlier this year, in the course of our regular conversations I shared with some clients that I was considering selling a majority interest in Financial Planning Hawaii.  Over the past several years, there has been a flurry of deals involving firms similar in size to FPH run by owners around my age. The introduction of private equity money into the independent registered investment adviser (RIA) space has raised valuation levels considerably and offered advisers a tantalizing opportunity to obtain financial security without being forced into retirement.  (Staying on to continue to work with clients for a term of 5-10 years or more is often a requirement of RIA acquisition deals).

In 2022, I was approached by a recruiting firm that specializes in RIA acquisitions.  The owner of the firm informed me that he represented multiple RIAs that are interested in growing through acquisition.  He told me FPH popped up on his radar because we have a national footprint and because I am in my mid-50s.  He advised that if I allowed his firm to do a formal analysis and valuation of FPH, I would have the ability to interview multiple potential suitors and choose one that I believe represents the best culture fit for our clients. 

I agreed, and over the next several months, I was introduced to several firms of varying size structures.  Most would have required us to drop the Financial Planning Hawaii brand, shut down our websites, change our clients’ investment portfolios, raise fees, and/or part ways with my existing team.  Each of these demands is an absolute non-starter. 

One firm, however, seemed to be a near-perfect fit.  The company is based in San Francisco and has a de-centralized business model that would allow us to continue to operate exactly as we always have. I liked many of the people I met from the firm and the offer was exactly in line with what I was seeking.  After months of discussions, I was genuinely excited. Aside from the financial security, a big attraction was the prospect of being able to focus entirely on working with our clients and writing our newsletter. It is all I long to do.  No more time wasted on the hassles of running the company and keeping the tax man at bay.  The deal seemed like a fait accompli… until it wasn’t. 

The final call with the new company was a Zoom meeting to go over the transition process.  All of us at FPH were on the call along with eight or ten folks from the acquiring firm.  The call was led by the company’s Chief Operating Officer.  I had spoken with him briefly on two other occasions and did not get a great vibe.  I should have listened to my instincts because it quickly became apparent on the transition call that there was no way that I would ever be able to work with this person.

Immediately after I abruptly ended the call, Alicia asked me if I needed to take the afternoon off to go to the gym to relieve my stress.  I responded that I already felt relieved.  I felt like I had dodged a bullet.  If that fellow had not revealed his character on the call, I believe we would have been miserable if the deal had gone through. 

The entire process of exploring a sale was a valuable learning experience.  As much the Siren’s song of private equity money captured my imagination, I have concluded that I do not wish to sell FPH any time soon.  The Schwab integration has already provided more than enough (unwelcome) excitement for now.  Plan B is to keep plugging along until one or more of my children decide to join the company to help me ride off into the sunset.  My oldest son, Noah (23), is already working as a Financial Analyst in Boston and would certainly be qualified to join me and eventually succeed me if he ever decides to move back to Hawaii. My youngest son, Brody (19), has already expressed his interest in joining me, because “the job looks easy and you obviously don’t have to be too smart to be successful.”  If either of them ends up in the family business, there is also a very real possibility that we will all end up working for their sister.  For her part, our Marketing Director is already bucking for a promotion.