Breaking off a partnership- stay w/ firm or leave?

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Apr 23, 2008 9:55 pm
Hello everyone.
 
I currently work as a 25% partner in a 2 broker financial advisory team.  I am 29 years old, 1st job out of college and LOS 5 annualizing approximately 300,000 pcs.   When I started on the team 5 years ago, we were annualizing just over $750,000 and now we are at $1,800,000 -  We are doing a great job of managing and growing our client base as a team, however, there are some significant personality conflicts, power struggles and trust issues going on ESPECIALLY in regards to compensation.   Because of these frustrations I am really having second thoughts as to if I can continue working like this.  As such, I have determined that , I need to either:
1) Request from my complex director for our partnership to end -- as I am entitled to 50 million of the book.
2) Look at other firms/banks and go on my own with the idea that I could potentially be risking a guaranteed 50 million in assets.
 
If you could please provide me with some of your experiences and what direction you would consider, I would appreciate it very much.
 
Thanks!
Apr 23, 2008 10:31 pm

My first take is that you'd probably be better off trying to stay with the firm as a solo producer if they'll allow it.  If you leave your current firm, management will just slide another junior in your spot and give all the credit to your senior, who will happily use his/her credibility to retain all or nearly all of the relationships and you'll be essentially starting from scratch.  If management will not honor your request to split the team, you are screwed.  You may think you are entitled to $50 million AUM, but your firm is likely to have a very different opinion.  At that point, you might as well bail and plan on starting over.  Consider any assets that follow you, besides mom and dad's accounts, a bonus.

 
This is exhibit A why building a book as a part of a team is a bad idea.  If you want to get experience on a team, fine.  Just understand that firms love teams as they are very effective mechanisms to retain assets when only part of a team leaves.
Apr 24, 2008 7:48 am

What, specifically, would entitle you to $50MM?  Is there anything written on that, or is it a verbal understanding?

Apr 24, 2008 8:19 am
This is exhibit A why building a book as a part of a team is a bad idea. If you want to get experience on a team, fine. Just understand that firms love teams as they are very effective mechanisms to retain assets when only part of a team leaves.

[/quote]



Very true--it is like exhibit A-Q...unless there is very high level of trust that is not shaken by years of working together, the minority partner takes on lots of career/income risk. I agree that pulling off whatever you can and remaining at the firm is your first, best option. If your "partner" and mgmt hose you, perhaps be willing to accept a 10% or some smaller split for a time (as long as possible, ideally forever) without having to be involved at all, then rebuild your own book to build to add to this smaller income ($180k gross if you can somehow get 10% for nothing...a stretch, I know).

Apr 24, 2008 8:46 am

Thanks for your thoughts.

 
My understanding is once I have been with a team for at least 3 years, I am entitled to whatever my percentage split of the partnership has been.  I certainly need to be sure I want to do this before even briging it up though.  My thought has always been that even though I have a good relationship with at least half the book, how many of them will follow me is a big question mark.
Apr 24, 2008 9:18 am
Tissot:

Thanks for your thoughts.

 
My understanding is once I have been with a team for at least 3 years, I am entitled to whatever my percentage split of the partnership has been.  I certainly need to be sure I want to do this before even briging it up though.  My thought has always been that even though I have a good relationship with at least half the book, how many of them will follow me is a big question mark.


I'm sorry to tell you that your "understanding" may be worth zero should you wish to split from your partner, UNLESS you have something clearly documenting that understanding between you and your partner and/or firm.  Were there not ANY documents signed at the outset of the partnership?

This really is a critical point in your consideration of options.  Until you are very clear on this point I wouldn't exert a lot of energy on other scenarios.  Deal with facts, not understandings and assumptions.

Apr 24, 2008 9:26 am

Why don't you just have a sit down and try to resolve the conflicts?  Reference any written agreements if neccesary and if anyone still gives a shit about the partnership, tell them to stop acting like babies.  Without trust the partnership will inevitably crash and burn.

Apr 24, 2008 10:17 am

Hire a hitman, problem solved.

Apr 24, 2008 11:44 am

Yah..where's the Jones guy in Ohio when you need him...

Apr 24, 2008 12:15 pm

Sounds like you have a pretty good thing going especially at your age.  (Other that the conflicts.)  I would stick with your current firm whether you have to stay in the partnership or if you can take 50 mill.  Starting over is a HUGE risk from where you are at.  I don't think the risks are worth it.  Stick it out.

Apr 24, 2008 1:33 pm

Tissot, I agree.  I would try to stick it out.  Try and figure something out at your current firm.  Somtimes things happen.  One of them could leave, retire, get fired, etc.  The risks of leaving right now are too high.  As you age a bit more, the issue will likely start to work itself out somehow.  You will start to garner more power on the team, and you will develop better relationships with your clients.  The partners will not be in a position to call you the "kid" or "junior partner" to your clients when you leave (and putting doubt in your clients' minds about moving with you). 

 
Question: Are the issues unbearable, or just a nuisance right now?  Are you able to have a heart-to-heart with them?  You may be able to resolve this thing amicably (the team may allow you to break off at the firm, or you may work things out with the team).