Transition planning can be like sailing through a challenging stretch of ocean. You'll need a combination of good navigation and seamanship to negotiate the passage. It's hard to float away from something you've built and grown. You often want to see it thrive after you've gone, yet finding the right passage can be difficult. Here are two case studies that show how some veteran financial planners negotiated these changes.

A SEVEN-YEAR PLAN

After building Austin Asset Management, the largest fee-only financial planning firm in Austin, Texas, John Henry McDonald wanted to spend more time on other pursuits outside the office. But he didn't want to sell his practice. He was growing into a role akin to an emeritus professor and rainmaker, and he didn't want to detach himself completely from the firm; instead, he wanted to see it grow under a new manager. It was time for a transition plan. It took McDonald seven years to put one into place.

Transition planning is one of the most difficult processes for financial planners who want to move on. It's not like walking out the door with a severance check and a plaque for lifetime achievement. It's hard to walk away from something you've built and grown, yet finding the right exit strategy can be nettlesome.

McDonald, 62, started his firm in 1986 and grew it to manage more than $340 million with 17 employees. A Vietnam vet, former army drill sergeant, carpenter, cowboy and stockbroker, McDonald noted, "I wanted to build a business, not a book of leads." He became a commentator on local radio in 1990 (later expanding to television) and as his fame grew, so did his practice. But in 2004, he realized that he didn't want to work the way he did when he was 35. So he put a transition plan in motion.

He knew he didn't want to sell the firm outright, and one planner who had worked on staff didn't work out as a potential successor.

Then, one day W. Eric Hehman showed up to ask for a job, even though McDonald wasn't hiring. Hehman was a college senior. McDonald gave him 15 minutes to tell him why he wanted to intern, then asked him to write down his goals in an essay. McDonald says he "threw it back at him," saying, "you don't talk like that, so for God's sake, don't write like that." Hehman, now 35, began at Austin Asset Management in 1997 and grew into his job as a planner-and ultimately, CEO.

FINDING BALANCE

Hehman now owns 40% of the company and runs day-to-day operations of the firm while McDonald spends more time on his TV show, charitable and community activities, and playing blues guitar. McDonald structured a profit-sharing deal (exchanging notes for shares) so that Hehman could buy equity at a discount over time, from 2000 through 2009.

McDonald, who still owns the majority of the firm's voting shares, also allowed other employees to buy stakes in the firm. McDonald also expects Hehman's ownership stake to remain at 40%. He has negotiated a buyout agreement with Hehman, which is funded by life insurance.

Guided by a creed that he posts on his firm's website, McDonald is hoping to continue the mini-corporate culture he's created with Hehman at the helm. As he seeks balance in his transitional life, McDonald's view is, "if you're at the office more than 50 hours a week, your life isn't balanced. But occasionally you do need imbalance in your life." McDonald explains that he realizes there will be time when employees will need to put in 12- to 14-hour days, although it shouldn't be the norm.

SMOOTHING THE BUMPS

For McDonald, the transition hasn't always been smooth. At one point in 2005, he wanted to fire Hehman, because he didn't feel that Hehman respected him. McDonald needed help with the professional and emotional dilemma he faced.

"Eric needed to give me his respect and I needed to learn to trust him with my future," he says today.

The growing tension prompted McDonald to bring in Austin-based management consultant Melinda Figeley Dean to help guide the firm through the management change. McDonald has since hired Figeley Dean to handle human resources, organizational development and various other roles at the firm.

McDonald calls Figeley Dean an essential component in the process. "Her personnel evaluations, along with various communication workshops and an executive coaching program, have helped us all understand and work with the emotional tumult that comes with changing leadership roles," he says.

For example, Figeley Dean did personality and leadership tests and initiated group discussions on employees' strengths and weaknesses, as well as how to work effectively with different communication styles. Each participant was able to reach some conclusions on what traits were most effective and which strategies to start, stop or continue. Each employee also received a three-year development plan, which will be updated annually. The process was necessary since McDonald wanted to change the firm's way of dealing with clients from a silo model-in which one practitioner deals exclusively with a select group of clients-to a model with a collaborative team approach.