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Time for a Transition (II): Acquisition Time?

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My three-part series "Change is in the Air" focuses on three things advisors could be thinking about now to position themselves well for the future. Last month, I wrote about – going independent or switching to a new and better-suited broker/dealer.

This month, we'll explore expanding through acquisition — or, on the flip side, how prudent pruning of your client list can facilitate growth by freeing up time for you to focus on your best clients. Next month, I'll write about how marketing to a niche can increase momentum and growth.

Time to Acquire?

With recent upticks in the market, we all find ourselves taking a deep breath, reflecting on what's important, and redirecting our energy to capitalize on emerging opportunities. Today, advisors who "back-burnered" plans to grow their practice through acquisition are pursuing leads with buyers who may be more willing to consider offers.

Donald J. Patrick, CFP?, managing director of Integrated Financial Group in Atlanta, Ga., says advisors looking to expand by acquisition should be guided by one overriding fact that remains constant since he purchased a firm a few years ago: Buyers far outnumber sellers. In fact, according to FP Transitions, an acquisition consulting firm for the financial services industry, today there are 43 interested buyers for every practice currently on the block. "In such a seller's market, you have to move quickly to determine the value of the practice you're interested in," advises Patrick.

To keep his negotiations moving forward, Patrick relied on FP Transitions to analyze a broad range of parameters across three major indexes Transition Risk, Cash Flow Quality, and Marketplace. In particular, as Patrick's evaluation occurred in 2003, just as the market was starting to recover from the Dot Com bubble, he says he evaluated how the firm fared in the 2000 crash, from how the advisor managed money to how he communicated with clients. "Examining recent history is just as important today," he says. "You don't want to acquire disgruntled clients."

Patrick cautions, however, that determining the value and settling on a price is just the beginning of the work involved in fully integrating two practices. In his case, the transition was complicated by the fact that one third of the new firm's clients lived in Savannah (Patrick's office is in Atlanta).

"In preparation for two days of face-to-face meetings with those clients, we spent quite a bit of time with the seller discussing each client's background and family information that may not have made it into the client folder," he explains. "Also, in advance of those meetings, which the seller also attended, we sent a letter describing why we were selected to buy the practice and the seller followed up with a phone call to discuss the sale."

Patrick, who also met personally in his office with all clients in Atlanta, says the real key to integration success was having a seller who was willing to roll up his sleeves and get involved. "We agreed on a five-year earn out, so the seller had monetary incentives. However, more importantly, he truly cared about his clients – and his clients understood his commitment and trusted me because he endorsed me," he notes.

Patrick also credits the energy and support of his staff and the firm's longstanding dedication to providing exceptional client communication for his success. In fact, his acquisition has worked so well, he continues to look for new acquisition opportunities. "Buying a practice is a great investment because it offers a good return and you have control over it — something that's especially attractive in this market," Patrick concludes.

For tips on how to position yourself as a buyer in a seller's market, Patrick suggests advisors download a free white paper offered by Securities America called Buyer Prepare: Marketing Yourself as a Practice Buyer. In addition, FP Transitions is offering a virtual coaching program called Acquisition Secrets: 12 Months to Become a Better Buyer ($25 per month or $275 per year, participants receive the complete 12-month series and can join any time).

Time to Prune?

Patricia Hinds, CFP?, Granite Financial, Saint Cloud, Minn, plans to grow her practice through client segmentation and selling lower tier clients. Specifically, she expects her ability to provide more services to the clients she's placed in the ideal client category will result in more referrals to spark practice growth.

Business owners and successful executives between the ages of 55 and 70, Hinds' ideal client is approaching or in retirement. Further, she targets individuals and families who value professional advice. She specializes in working with women who are the financial decision-makers in their families.

Hinds sold her first block of clients in 2007 to an advisor who shared the same broker/dealer relationship as she did. "The price tag was minimal, but we had a clause that stipulated if he was able to maintain what we projected as the next year's revenue, we'd receive the same amount a year later," she explains. "That happened, and he asked to buy another block of clients."

In addition to meeting that request, Hinds is completing an agreement with an independent advisor at Granite Financial to buy half of her remaining lower tier clients. That will leave her with 150 clients who fit her profile. In order to enhance her client services and generate more referrals, Hinds is dedicating the time she has freed up to cultivate a broader professional network. She's pursuing a number of professional alliances, including a local law firm with a five-attorney estate planning department and several CPA firms.

"Creating a network of advanced planning experts will add more value for my clients," she says. "What's more, I'm finding the other professionals I'm speaking with are very interested in learning who we are and what we are trying to accomplish by affiliating with them. They really seem to understand and appreciate the value I bring to my clients."

Noting that the wealth management process is especially labor-intensive in the first year, Hinds has set her goal for growth at four to six new clients a year. That's a number she expects will be easier to adhere to because she now has several trusted advisors to whom she can refer clients that don't fit her profile.

In support of her new focus, Hinds recently redid her firm's logo, brochures, and marketing collateral. A new overlay for the firm's website will be launched soon. "Our Client Advisory Board will receive the first draft of what we're calling our "evolution letter," she says, "I'll also be asking some of my top clients to review our marketing materials –and to take a set to give to family and friends."

Looking ahead, Hinds' continued success, like Patrick's, will be informed by a willingness to invest the necessary time and resources in pursuit of a clearly defined goal – a lesson both advisors likely have taught many clients through the financial planning process.

Marie Swift is president and CEO of Impact Communications, a full-service marketing communications firm for independent financial advisors and the institutions that support them. Read her Best Practices in the Financial Services Industry blog, follow her on Twitter, or visit for more information.



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