Michael Mulloy, Senior Vice President of Investments with Raymond James, joins to talk about how they can assist entrepreneurs in planning for their post exit life.
Please excuse any typos in this hasty transcript.
Matt Register: Welcome back to the show, Texas business radio. TexasBusinessRadio.com is the website. Jay Curry, my cohost had to step out for a few minutes. He’s going to join us here shortly. I’m your host Matt Register. We’re talking about how to exit your business, and what does that deal team look like?
One of the very, very important members of that deal team with the wealth management side. You are going to take the golden goose that’s fed your family for a long time, and your business, and now you’re going to sell it. You’re going to replace that with a big pile of cash, right. The wealth manager is the guy that’s going to make sure that that cash, one doesn’t go away, and two makes sure that you know how big, based on what your goals are moving forward, how big does that cash need to be.
Now one of our favorite wealth management teams here is, Raymond James. Mike Molloy is a Senior Vice President on Investments with Raymond James. Mike welcome to the show sir.
Mike Mulloy: Thanks Matt, thanks for having me.
Matt Register: So talk to me a little bit about your business, because you’re in the relationship business. You’re not in the money make business as much as you are the money protecting business. Is that accurate?
Mike Mulloy: That’s right. Most of our clients are good at making money, whether through their business or wherever it is they’ve done a good job of making money over the years and they look to us to earn a reasonable rate of return but mainly to get their money back, not to …
Matt Register: Make sure that stuff doesn’t go away, right? They now don’t own the vehicle anymore that has earned them the money, so they need to make sure that that doesn’t go away.
Now generally there’s a couple of key questions that need to be asked. So walk me through some of them. When you get a brand new client that is looking to sell their business and becoming liquid, what are some of the questions you want to know the answer to as you are helping to determine how much money do you need to get out of this company?
Mike Mulloy: It’s a process that we go through working with clients and everybody’s situation’s unique but we go through a process to get to know the client. First of all, you have to … If you’re going to retire you have to define what is retirement?
Matt Register: Sure.
Mike Mulloy: For a lot of us in our mind retirement means sitting on the back porch in a rocking chair, and that’s generally not what we see anymore. A lot of our friends and clients have retired and gone on to do some consulting work. So we call it a ‘work optional’ lifestyle where they may still work some, but it’s not necessarily the full time job.
Some people want to travel. Some people want to have multiple homes, one in Colorado, one on the beach and maybe on here. Identifying and defining what is retirement is the first step of the process once we’ve gotten in the relationship. At that point you’d say, “What is the number? How big of a next egg do you need to generate the income you need to live the lifestyle you want?”
Matt Register: Well, and it’s not an easy number to come with. Hence, why as an investment banker we assure that the wealth managers are there. But quite often, what I have found as an investment banker … I mean all of these entrepreneurs have a number in the back of their mind and very generally that number is usually higher than what is really required.
Mike Mulloy: That’s right. That’s right, it’s … Most of us spend a full lifetime building up a full nest egg. Most people retire one time. So you get there and for whatever reason the number that a lot of people have built up in their mind is bigger than they actually need. Historically we used a more linear approach to analyzing what that number needs to be, now with the power of computers we use some more in depth, real life historical rates of return to do the calculations. Fortunately the power of computing has allowed us to do that.
Matt Register: Well, and it’s an important number for those guys. You know, its funny we were talking about retirement looks different now than it does before. We have a group of men we lovingly refer to as our family retirement club. These guys are business owners, they’re alpha individuals anyway and they all of a sudden they’re completely unemployed and retired and they’re not very good at that at all.
Mike Mulloy: Absolutely. So there … Personally I like the idea of playing golf five days a week, at some point in life. In reality that would last for about a week.
Matt Register: Yeah?
Mike Mulloy: I don’t … Most people that are go, go, go … You get bored at some point so you’re always looking for
what is the next challenge.
Matt Register: No doubt about that. Things change though, in people’s lives. You were talking earlier about the relationship that you have with folks because in retirement, as people retire and they continue to live out the latest chapter of their life, that’s not necessarily liner, right? I mean at some point …
Talk to me a little bit about that, because when life changes then the plan needs to change with it.
Mike Mulloy: Right, absolutely. So there’s … Everybody’s situation’s unique. A lot of … We plan like you’re going to live forever but we’ve seen some situations were couples get to the point to where they’re in those prime years where they’re going to retire and live life, and suddenly one of the spouses ends up with dementia or Alzheimer’s. You have to take that into account when you’re planning. You’ve got to plan, be willing to enjoy it along the way too.
Other situations where we’ve had clients live well into their late 90s or 100s and at that point, a lot of times the younger generation, children come in to help, have to take over some parts of it. Whether it’s, like we talked about earlier, taking car keys away from mom and dad, I mean that stuff. Children start getting involved so …
In addition to the retirement planning, a lot of what we do say multi generational planning. So we have some families where we work with four generations, from grandparents down to great-grandkids.
Matt Register: Sure, and there’s all kinds of things you can do if you have time. Is generational skipping and things that can be a lot more tax efficient.
Mike Mulloy: Right.
Matt Register: Correct as you’re going through this proc… Interesting you brought up some spouses living longer than was planning. I would loved to, I would need the to sit down with you one of these days and talk to you but my grandparents … My grandfather died in the 80s. My grandmother’s still alive and going. I promise you their plan did not account for that.
Mike Mulloy: Right.
Matt Register: But that’s where y’all’s continued involvement now is able to tweak and adjust the plan as you go, and to maximize the availability for her, however long she ends up living.
Mike Mulloy: Yeah. All the negative scenarios. One if your money runs out before you do, that’s no fun so you definitely want to plan for that but on the flip side, if you live a long time you want to make sure the money’s there.
Then after you cover those two things, what are the hurdles? Long time care becomes a big thing for a lot of families.
Matt Register: Sure, and what else may you want you do? What else charity-wise, or legacy leaving to your kids.
Mike Mulloy: Right.
Matt Register: Talk to me a little bit about Raymond James, we have a couple of minutes here to wrap up but tell me a little bit about the company?
Mike Mulloy: Okay, it is a unique company. It’s not one of the major Wall Street firms. A lot of those been acquired by banks over the past few years. Raymond James is headquartered in Tampa. Actually there earlier this week. Interestingly it was founded, as a financial planning firm and that’s what they do.
Mr James partnered with a CPA firm, I think Ed Raymond was his name so there wasn’t actually named Raymond James.
Matt Register: Sure, Mr Raymond, Mr James.
Mike Mulloy: It was Mr Raymond, Mr James got together and started the firm, I believe in the early 60s.
Matt Register: Okay.
Mike Mulloy: And mainly focused on doing financial planning. So that is at the core of what the firm does, and what they believe in. It’s different from other organizations I see in the market place. A lot of them are more geared to selling products it seems like now. But Raymond James is more geared towards providing service, providing financial planning.
Matt Register: Well I agree, and Mike Malloy is certainly one of our favorite wealth managers. We end up, as an investment bank, placing a lot of these clients and he’s certainly one of our favorite. Interesting stuff. Mike Malloy, thank you very much for joining us.
Mike Mulloy: Thank you.
Matt Register: And we were talking MichaelMalloy.com is the website, we’re going to have that linked right there from TexasBusinessRadio.com. If you’re driving and can’t take notes. But go, learn a little bit more about these guys because I think you’re going to like it.
We’re going to continue to talk about your transition out of your business. There are … Your team associated with selling that business is just that. It’s a team of multi disciplines that’s going to end up maximizing that value for you, and all of them play an integral role.
We do however have to pay a couple of bills, so we’re going to be back right after that with a whole lot more Texas Business radio. Don’t go anywhere.
Sponsored in part by:
In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.