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Financial Advisor Creates Flexible Path For FA Retirement

Every day as an investment advisor you help clients secure their retirements. But what about your own? While there are probably 50 ways to leave your wealth management business (apologies to Paul Simon), not all of them work out for your long-term benefit.

Joe Heider, ChFC, CLU, discovered that five years ago when he merged his practice, Dawson Wealth Management in Cleveland, Ohio, with Rehmann, a large financial services and accounting team based in Michigan.

He had hoped to retire on his own terms: he sold/merged his business and became a principal in his new firm, hoping he could continue to grow his business aggressively with an eye toward future retirement.

It didn’t work out.

Finding a match

“The biggest issue with the merger was the cultural mismatch,” Heider recalls. “It was more of a bank model than a rainmaking, entrepreneurial firm. They derived 75% of revenue from the CPA side of business and just 20% came from the financial services side. It wasn’t a good fit.”

So, in an unconventional move, Heider bought his practice back, and starting January 1st, founded Cirrus Wealth Management, with approximately $300 million in AUM and 150 mostly high net worth client households.

And part of his growth plan includes attracting advisors who would like to merge with him and eventually retire, without surrendering total control of their business right away. As Heider learned from his experience: an entrepreneurial spirit is hard to give up cold turkey.

“I’m looking for advisors not necessarily wanting to retire in the next year or two but who want to pursue a glide path over the next five to ten years.”

Heider is also looking at younger advisors, and while his preference would be advisory firms within a 400-mile radius of NE Ohio, location is not a deterrent. “With technology, it’s not difficult to set up operations anywhere.”

The Cirrus team approach calls for advisors to pair with licensed administrative support personnel, as well as senior client relationship managers, many of which hold MBAs, or CFAs, and are technically skilled. The team can step in when the advisor is on vacation. “When I leave, no one notices,” Heider says, comparing it to a medical team.

Heider believes that this team approach will attract advisors who want to slow down, but still serve their clients effectively, invest in new technology, take care of their teams, and grow their business value.

How it works

Heider’s model works like this:

  • Cirrus put down a relatively small down payment (about 10%) on an advisor’s practice.
  • The contract includes a two to three year trial marriage, of sorts, followed by an “earn out” over a 10-year period when the advisor decides to slow down.
  • This maximizes the seller’s practice value and sales price, roughly two times the annual revenue. “If they grow their practice, the revenue grows,” Heider says. “Secondly, it reduces everyone’s risk, because if it is not a good fit it’s relatively painless for them to move back out on their own in the first few years.”

The bottom line: Cirrus hopes to help advisors approach retirement on their own terms: slowing down, but still delivering service, and not paranoid that the business will fall apart without them. Because nobody wants to feel forced to quit before they’re ready.

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