Podcast episode (Million Dollar Mastermind, host Larry Weidel) interviewing Ivan Illan about the risks and lessons of business partnerships. Main points: entering partnerships with unequal duties but equal ownership can create long-term pain; importance of drafting clear exit provisions and using industry-specialized attorneys; separation can be financially and emotionally costly; Illan restructured his advisory business as an independent RIA after a multi-year separation process.
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Welcome to this edition of the Million Dollar Mastermind podcast. This is where we pick the brains of high achievers from all walks of life and get their hard earned real world insights on winning. I'm your host, Larry wyd. Now, how can you have evolved now to that phase of your life to where things could still all go wrong to the point you're having the sleepless nights? Where would that shock come from? Because you think you'd be prepared, you know, because that's what we do, Ivan. We feel like, okay, I've got it now. You know, I've gone through. You know, they used to say that as I was coming up, they would say every successful person, never trust anybody in business unless they've been bankrupt twice, not once. Because the first time you think you've got it and then you do it the second time. Now you can be trusted, you know, and that's overstating the case, but you get the idea. And so, you know, we go through these big traumas and we feel like, I've got it together now. You know, life is complicated, I understand all that. But you start running flat out again. Things start working out. Success, success, and. And then boom, a new trauma of unknown origin. It just bumps right in and screws everything up in your life. So did that happen to you or in any form?
Yeah, I mean, I had that happen several years ago, which I made some choices in how I structured the business that obviously if I had to go back and do it over again, I would not have made those choices.
What was your thinking and how you structured it and why was it backfired?
It's funny, because in our industry, I think there's a lot of this actually, and I speak to a lot of advisors on a day to day basis that kind of commiserate or are in a similar situation that find themselves in a similar situation that I did years ago, which is partnerships are entered into within financial advisory practices where there is unequal or uneven duties and responsibilities, yet equal allocation of ownership. And that is painful when you realize that, when one partner realizes they're pulling all the weight for other partners or there's an inequity somewhere with one of the partners that has to be addressed, that has to be dealt with, that is painful and it definitely causes some sleepless night.
So you got into a partnership that you thought, this will help us grow, this is the next step. And, you know, we're a good blend.
And they're actually. It wasn't all bad. It just wasn't going to be. And also the other thing is, you never know, because also, you know, in any business, you're under attack by the marketplace. And so there's all these other elements that are coming at you individually, but also other partners. And, you know, a little birdie can get in somebody's ear on something, and then now, all of a sudden, they're not really on your page anymore, and you. And you lost them. So now it's like, unredeemable. And you. Now you got to figure out a way to separate and somehow do it amicably. And that often doesn't happen because, you know, when you're running your own business, there's a lot of emotion. It's so personal. So everything's personal, and it's impossible to do it in an emotional way.
So much of the time is kind of like the breakup of a rock band in the sense that everything's great until the first one gets married. And then she starts saying, you know, the agent. You're going to get enough respect. You know, you didn't have a big enough picture on the COVID This, that, the other. It's like Spinal Tap all over again.
Exactly right. So that's growing pain. And so you have to go. And that's. I would say that's a normal thing to. To have to go through, which is you made decisions in the past based on what you knew up through that point in time, and then you move through time, and then things changed, and then you have to adapt.
How painful was it for you to get out of that?
Very. It was very financially painful.
How long did it take and all of that?
It took a few years. Yeah. And then it was. And then really after that was fully resolved, I was able. Probably another two years after that, I was able to fully restructure this business into its own independent entity, registered directly with the SEC and really getting away entirely from the other corporate RIA structure. It was a good run. Like I said, 17 years operating within an ecosystem that was, by and large extremely beneficial for me and partners that have stuck with us and are part of us. But ultimately, now we don't have sort of other agendas informed by other corporate entities that would impugn or really limit what we could do. And I think that's another thing that you have to be very cognizant of in operating a business, is be very careful about alignments that you may make, because there's usually a hidden agenda. And so you really want to cut to that core hidden agenda, especially if it isn't Initially obvious. That's, I think, when you should be really more provocative to suss it out.
Well, also, it can be much worse. It could be the other one goes sour and drains all the funds and leaves you holding the bag. You know, they just disappear.
No doubt about it. And there's stories like that out there as well. And so, no, you have to be eternally vigilant in your business.
What's the best way? You know, because the thing is, you know, it did work well for a long time. What? How could you. Did you learn, like, ways you could, you know, is it. Is the answer in line with saying, we're going to build an exit plan into this partnership right from the beginning, everybody's happy with each other and everything you talk about and work, like how you would disengage if any point anybody decides that this is not working?
Yeah, it's so prudent to do that. And most of the partnerships that I see amongst certainly folks in our industry, they absolutely do not have that consideration or provision.
And I think. Don't you think, Ivan, it's because you're making decisions so fast. Working here, it's working there. You know, boom, boom, boom. You know, you're assuming success and you just go ahead and do it.
It's kind of similar to a prenup agreement in marriage. It's just probably a prudent thing, but it just feels a little weird.
Where would somebody go? Let's just say, where would you have gone? Let's just dial the thing back to where you're starting that partnership. Where could you have gone to get good advice and input on how to properly structure something like that? Because we could have people listening on here and saying, I'm getting ready to do something like that. Who should I talk to?
I had an attorney, and I went to the attorney, and that's how the partnership was drafted. What I think I would have done was get an attorney that was specialized in our industry. Something. There's more intimate knowledge and nuance for these things when there's counsel that's practicing in our area. And I think that would have helped considerably. So, definitely. I think attorneys are amazing. I mean, they can be amazing in helping to properly structure things. You just really want specialists in certain things.
Do you get along with your old partners?
No.
And that's something you just have to deal with, right?
Yeah. And of course, you know, and there's. There was a personal relationship. There was a lot of good years together, but when it goes sour, it really is like a divorce. And the marriage is over.
Yeah. And it's not going to be pretty. I re one time I had to let someone go and they this story came from out of one of Donald Trump's books. He said, you know, I fired people gently. I've given them massive long severance. You know, I've sent him away with letters of recommendation. I've given this and he said, and then I've, you know, he went through the whole gamut of ways that he's fired people all the way to I just fired them on the spot in a moment. He said the end result of all those different ways of dealing with a termination is when it's over, they all hate my guts.
He probably said it best. I mean there really isn't any elegant way through it, unfortunately.
And so that's a very good way of saying it. So congratulations on your success. You know, we're all going to be better off for, for what you're doing and the books that you, you've written. I like to encourage people to who don't have a plan and don't have feel like they've got their finance, personal finances organized, follow through and get these things, it turns into a crisis. Thanks so much for your time, Ivan. Wish you the best with your firm and looking forward to catching up down the road and seeing how your your new phase of your business is expanding. Thanks for listening to the Million Dooll Mastermind. If you felt there were any valuable takeaways from this episode, please take a minute, leave us a five star review. You your feedback is important and really helps us get the word out to a wider audience. Remember, we have a valuable webinar that is absolutely free. Register for it right now@whiteallonwinning.com thanks for listening.
