three common and painful scenarios.
by marc rosenberg
retirements & buyouts
the book of business method of allocating goodwill benefits is most often used by “eat what you kill” firms. essentially, retiring partners “sell” their client bases back to the firm.
more on retirement: the multiple of compensation method, fully explained | the ins and outs of aav for goodwill | 5 points to consider when paying out goodwill | clients leaving? time to reduce retirement benefits | how to set terms and limits for goodwill payouts | 4 ways to decide how to pay out capital | partners may balk at guaranteeing retirement obligations
in almost all cases, the retired partner gets paid only to the extent that the firm retains her clients throughout her payout term.
the major flaw with this method is that a partner will never, ever delegate or transfer clients, for the good of the firm, to other firm members because this would lead directly to reduced retirement benefits.
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