PE to PWM

first, thank you for taking the decision seriously, it's not as simple as some people would make it out to be. on the surface, what you're talking about is great. someone wants to retire, hand you their business, instantly making you over 6-700k/year without the long hours. goldilocks scenario to be sure. here are a few points to consider and questions to ask.

1. who are his clientele? are they retirees in their 70s and 80s, or are they corporate execs in their 40s and 50s? if the former, I'd hesitate. because as soon as those people die, hundreds of millions turns into dozens of millions, and high six figures turns into looking for a new job.

2. how is he paid? I'd look for over 80% of his business to be fee based, or at least 90% recurring revenue. if he is a stock jockey, that business is dead. you want to take over a book that has a solid managed account business, so that the revenue is recurring and you can focus on investment management and relationship building, not pushing product.

3. when will he exit? is he looking to retire within 3 years? is he willing to put that in writing? I'm betting the answers there are "not sure." "probably not," and "hellfucking no" this is probably the most important thing for you to realize about PWMers. it's a cushy job at this stage. he has no incentive to grow his business unless he's a perennial overachiever, he's got a good living, likely a good net worth, and happy clients. if you could work 30-40 hours a week and make 600k with low stress, you'd do it in a heartbeat. you'd have zero incentive to retire, so don't bank on all of his income coming your way right away.

4. what would your role be? get specifics on this. if he doesn't know, that's fine, but you need to talk it out beforehand.

I ask all of this because I'm currently a junior partner in a large practice at one of the big firms, I've seen partnerships go south and I've seen them go well. what often happens is some mid 20-something comes along, thinks they're going to get six figures for showing up on time, the senior will retire, and all will be well. what happens more often than not is they get brought in a good salary (below PE but maybe 1-150k/yr), senior guy doesn't retire, and they don't really get a pay raise unless they bring in business. I go over this in my 4 part PWM blog (the economics of the business), but just know that if you're not a rainmaker, your growth in comp is capped to whatever your family member is willing to give you.

if I were in your shoes, assuming you're younger than 27-28, here's what I'd do: if your family member is in his 50s or early 60s, go to B school, go back to PE, see if you make VP, and see how you like it. make it known you're interested in the idea but you want to further your education because you realize PWM is a career decision, not a stop along the way in your life. you decide to be PWM, you stay PWM (I'd guess that if you didn't like PWM, it'd be very hard to go back to PE). within a couple years you'll know if you like the PE lifestyle at that level.

if you have a shot at making MD/principal and your fund is doing well, you can probably make reasonable comp just from carry in perpetuity, so that makes taking another job kinda pointless. something to consider.

if you don't like the PE lifestyle at that age (probably closer to early 30s now), then PWM might make sense. your family member is probably still a few years away from retirement, you've matured and made the decision you don't want to do PE anymore.

feel free to PM me with more questions, I spent a lot of time thinking about my agreement.