From the January 2005 issue of Investment Advisor • Subscribe!

January 1, 2005

Buying's Not for Everyone

As creator of the on- line buy/sell concept and founder and past CEO of FPtransitions, I feel compelled to chime in on Mark Tibergien's October column ("A Voice in the Wilderness") regarding over- valued practice sales.

Mark contends he might be the lone wolf in his view that buyers should approach practice acquisition cautiously. It may give him comfort to know other industry associates, including myself, share many of his views.

Mark's assessment that buying a practice is not a passive investment and requires a real time and money commitment is perhaps his best point. It is an investment that does require an above-average rate of return after owner compensation. Current values will make that an extreme challenge for most. In addition, acquiring 200-500 clients overnight almost always requires that buyers have greater capacity and greater expense than the seller experienced in their business.

Another caution Mark mentions should be examined further. Yes, buying a book of business will in most cases leave you with a large percentage of less-than-optimal clients. Of equal concern is how long the optimal clients stay with you--losing even one or two of the largest clients during the transition or before the total value is paid could be disastrous.

For these and other reasons, most solo advisor operations aren't suitable to consider taking the risk of paying such high practice values. Indeed, as a principal of a succession planning consulting firm, I can report that numerous solos are looking to the historic emergence of thousands of financial planning graduates as a new path for their growth plans.

Buying a practice was never intended to be for everyone, nor should it be.

David K. Goad, ChFC

Succession Planning Consultants

Newport Beach, California

Getting Credit When It's Due

As someone who develops tax strategies for successful clients, your October 2004 article, "2004 Year-End Tax Tips," caught my attention. Since most of our clients in the New York area earn incomes in excess of eligible amounts to receive tax benefits, you may want to discuss in future articles how higher-income individuals can take advantage of these rules. One strategy that is very popular right now is helping certain clients with kids in college qualify for the Hope and Lifetime learning credits, notwithstanding income limits. For those with younger kids, creating a tax-deductible college education fund is also attractive.

Michael A. Kirsh, CFP, CLU, AEP

Kirsh Financial Services, Inc.

New York City, New York

Let's Play Two

James Green's September 2004 Editor's Note, "Leo Was Wrong," was a pleasure to read. During the 44 years I have worked on Wall Street, I have found that nice guys become successful, well-liked, and personally fulfilled. Their co-workers, employees, and clients also come out ahead.

Your suggestion about having respect for one's skills and for our industry was powerfully stated with your Ernie Banks example. Anyone who thinks nice guys finish last simply does not know where the finish line is.

Gary Wollin

Gary Wollin Company

San Francisco, California

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