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Written by: Scott D. Calhoun
Recently, I represented an advisor who was taking over another advisor’s book of business. The transaction turned out to be more complicated than either the advisor or the firm originally anticipated. Although they had talked through a number of issues, when it came to putting the deal into words and focusing on the details, we soon discovered that there was still a good bit of work to do to reach an agreeable deal.This is not unusual. As businesspeople, individual advisors and firm managers are well aware of their own concerns. But the other side usually has a different perspective on the same important issues. As a lawyer, my job is to recognize both sides of each issue and help my client work out a deal that is fair but protects my client’s interests.Notice that I said my job is to help my client reach a deal. In these circumstances, both sides want to make a deal. Pushing relentlessly for every last advantage for my client will often act to get in the way of a deal, and ultimately works against the result my client is seeking. Reaching a deal while still protecting my client’s key interests requires finding the sweet spot – and usually it takes a good bit of work.For instance, in the transaction I described above, one important issue dealt with ownership of the accounts. In this case, the firm owned and controlled all the clients – the specific advisors serviced the clients and maintained the personal relationships. Consequently, issues related to client contact and ongoing responsibility needed to be finessed. The advisor had to understand that if he left the firm, the accounts still belonged to the firm, but the firm needed to understand that the advisor’s servicing of the account is what brought value to the firm. As a result, both sides needed to understand each other so that they could reach a mutually agreeable arrangement on contacting clients and servicing the accounts.A second issue dealt with compensation. The advisor was expected to pay for the potential future income to be received from servicing the accounts. But what happens if the advisor leaves the firm? The range of circumstances involved in any potential departure require different treatment in different cases. The advisor did not want to have the obligation of continuing to pay for the accounts if the firm decided to terminate him without cause. The firm wanted to protect against the possibility of the advisor leaving the firm and taking the accounts without having paid the full compensation. A middle ground was reached, but not until both sides explored the alternatives so that we could land in the proverbial sweet spot.What’s my point here? Even though both sides wanted to reach a deal, they had to work through the issues in a way that did not create animosity or mistrust. They had to find the deal, and it took some work. As a lawyer, I needed to protect my client’s interests but also help the parties get to a deal, because that was my client’s ultimate goal. And that’s how I was able to add value. As advisors, you need to look for ways to add similar value to help your clients achieve their goals as well.Related: How Advisors Can Make the Ideal Hire