At 74, Jack Hillis can retire or work
till he 'croaks,' knowing his clients will be taken care of
May 11, 2018 @
4:37 pm
Jack Hillis isn't
quite ready to stop working with clients or give up his lifestyle advisory
practice, but at 74 years old, he knew he needed a succession plan in
place.
His solution was to
complete all the paperwork for a sale that will take place when Mr. Hillis
decides he's ready to "retire or croak," he said.
"I read a few
years ago about an adviser still working at age 99, and my goal is to break her
record, but I wanted a contingency plan to protect family and clients, just in
case," he said. "I wanted a succession plan where I continued to stay
in the business."
Mr. Hillis, who is
celebrating his 50th year in the business, opened Hillis Financial Services in
2001 and currently manages $320 million for about 500 clients.
While he doesn't
have any immediate plans to retire, he doesn't want his clients or his wife
worrying about the future of the business, so
he struck a deal with Mike Allard, owner of CalBay Investments, that has
everyone sleeping easier.
Mr. Allard, 52, has
known Mr. Hillis for 40 years. The two first met when Mr. Allard's father was
teaching Mr. Hillis the financial services ropes early in his career.
For Mr. Allard, who
has already completed five acquisitions and
manages $565 million, the acquisition and succession plan follow a blueprint
created when he acquired his father's advisory firm in 2010.
The structure of
the deal will include a payment equal to 85% of the sale price, with the
remaining 15% paid out over five years based on revenues over that period.
That covers the
sale, but what makes the deal work is the succession plan, which involves
gradually melding the practices together through personal interactions and
meetings with clients.
Mr. Hillis said
that while his San Jose, Calif., firm is still technically separate from Mr.
Allard's business, which has offices in nearby Danville and Santa Clara, any
new clients Mr. Hillis brings on are considered co-client of both firms.
And Mr. Allard is
ready to move Mr. Hillis into one of his offices at some point to help reduce
expenses as he transitions toward retirement, as Mr. Allard did when he was
acquiring his father's firm between 2007 and 2010.
"I'm trying to
take away those long-term obligations, so if Jack wants to maintain an office
with me after his lease expires, I just won't charge him rent," Mr. Allard
said. "We call it a sunset program. We're just taking more things off his
plate as far as office rent and personnel costs."
For Mr. Allard, the
financials add up, and both parties appear happy with the deal.
The unknown in the
sale agreement is the forward revenue for five years after the sale. If enough
of his clients leave in the wake of the sale, Mr. Hillis might not get his full
15% portion of the sale price.
But Mr. Allard said
that in his five other acquisitions, the payout always ended up above that 15%
level.
"We uncover
assets because we are motived," he said. "Plus, we're a fresh set of
eyes looking at the business."
Mr. Hillis said
that initially his clients wondered why they were being introduced to Mr.
Allard and his firm.
"I explained
to them that I have no plans to go anywhere, but there is a contingency plan in
place," Mr. Hillis said. "We've already done all the legal documents,
so if I decide to step away or get carried off, this means my wife doesn't have
to worry about what she has to do with the practice and my clients are being
taken care of."
https://www.investmentnews.com/article/20180511/FREE/180519976/advisers-consultant-building-a-flexible-succession-plan
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