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Practice Management > Succession Planning

Solving Succession Planning Via M&A: Getting Started

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As an RIA, no matter where you are in your career, you should be thinking about succession—either yours or the older owners in the firm. After all, a strong foundation for any firm established through hard work, dedication and the accumulation of more than a few gray hairs, should be the plan for the continuation of care for your clients and a way to monetize your ownership stake in your business. As a financial advisor, the end game isn’t just to take care of your clients’ financial goals today but to ensure that they’re set for tomorrow. The same could be said for the financial health of your practice.

Mergers and acquisitions play a significant role in today’s succession planning considerations. Even if you are planning an internal succession plan, M&A can still be an important part of your plan as it is also a great strategy for growth.  It’s your responsibility to do what’s right for your firm (and no one knows what “doing right” is better than you), but as an advisor, you’ll basically find yourself in one of these positions when it comes to your firm’s future and M&As:

  1. You’re open to a merger or acquisition but not actively pursuing this as an option for succession planning.
  2. You’ve made either a merger or acquisition a formal part of your succession and/or growth strategy.
  3. You’re not open to a merger or acquisition and you’re happy where you are for now. (But you have been or will be approached.)

So what are your options?

A) You can “ride it ‘til you die,” i.e., simply just work until you die and have your clients referred out when this happens. 

B) You can be acquired, after which you either stay with the firm, for a specified amount of time or longer term, or leave. 

C) Or you can merge with another firm to build scale, either for an internal sale or to possibly increase the value of the firm for an external sale.

Whatever you decide, here a few initial considerations I would recommend based on my own experience with a merger in 2009.

Start With Your Personal Goals

To begin, ask yourself what is it that you want to achieve for your future and how a merger or acquisition could help meet those goals. What about your clients and your staff? If you’re like me, you got into this business because you wanted to help people meet their financial goals, live comfortably with peace of mind and not outlive their money. Those same basic goals could be applied to you and your staff, but what else do you want to achieve? Do you want to sell your business to help fund your own future, to leave behind a legacy or to help your firm evolve by continuing to be a presence after you pass on the reins?

Making sure your goals match up with the merging or acquired firm’s is not only critical to your success; it sets the necessary tone going forward for your successors.

In my case, my firm was a small boutique practice, with about $250M in AUM. Our model was to lead with financial planning and charge upfront planning fees while also providing investment management, all with a very high-service, high-touch model. The firm we merged with was twice the size, with nearly twice the AUM and a model that focused more on academic investment expertise than financial planning.

Despite those differences, where the two firms aligned was in our philosophy to service our clients, our ideas for growth vs. scale and, most important, our decision to go with an internal succession plan for the company.

When meeting new clients, we often break the ice with a conversation about those clients’ short- and long-term goals. Initial talks with potential merging firms should begin the same way, with many of the same questions asked. 

Expect Growing Pains; Lots of Them

Mergers are TOUGH!  As if running a firm day to day wasn’t tough enough, there are literally hundreds of extra decisions that need to be made, from leadership structure (Who’s in charge here?), to business structure (What from each firm should you keep and implement?), to technology systems to staffing.

Knowledge Is Power

Whether or not you decide a merger is the best path for your firm’s future, arming yourself with knowledge is your first step. Mergers are admittedly hard work, but in my case, it was the right choice. I was able to ensure the longevity of my firm’s ability to service clients, choose the team that I’d be proud to have succeed me and achieve my own peace of mind knowing the legacy I leave behind will continue to grow and evolve.


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