An Advisor Merged Her RIA. She Wasn’t Happy.

Sandra Nesbit expected lemonade. What life served up instead, when she merged her RIA with a national wealth management firm, was lemons.

“Succession is one of the most important decisions an advisor will make. Unfortunately, many don’t know what they don’t know” about it, Nesbit insists in an interview with ThinkAdvisor. She was one of the many.

Now principal of Mainsail Capital Group, a consultancy, she’s guiding investment advisors and registered reps to avoid the pitfalls of merging, selling or acquiring a practice. There’s far more to such transitions than just the numbers, as the former FA knows from, well, bitter experience.

In the interview, Nesbit, who was with Merrill Lynch and RBC before launching her own RIA, discusses the best reasons for merging or acquiring a practice. She also highlights six frequent mistakes FAs make in effecting those transitions.

The former 27-year FA isn’t advising on the deals themselves. As an impartial counselor, she’s consulting on critical aspects that attorneys and accountants typically fail to bring up in negotiations. Feelings, for instance.

Indeed, from day one of her merger, the entrepreneur for seven years was caught off balance when she suddenly had a new role: company employee.

“It was an emotional reaction that nobody prepared [me] for,” she says.

In February 2018, the Certified Divorce Financial Analyst merged practices with Mercer Advisors, clearly not a match made in heaven; for in June 2019, she left to open her consultancy.

Nesbit became an advisor in 1998 at Merrill Lynch, having joined the firm six years earlier as a financial planning specialist training FAs. After a six-year stint at RBC, in 2012 she co-founded the RIA GFS Private Wealth, specializing in serving affluent individuals and families.

At the time of the Mercer merger, GFS’ AUM was about $364 million; and it had nearly $500 million in assets under advisement.

ThinkAdvisor recently interviewed Nesbit — a certified estate and trust specialist and a director at National Advisors Trust Co. — speaking by phone from her Gulf Coast office in Clearwater, Florida. To be sure, FAs of retirement age are M&A candidates, she concurred, but added: “I would hope they wouldn’t wait till they’re 65 to decide and want to retire the next year.”

Here are excerpts from our conversation:

THINKADVISOR: What are the best reasons for an advisor to merge or acquire another practice?

SANDRA NESBIT: One is that they have to retire due to unforeseen reasons. Or they need more depth of professionals on their team. They want to create a wider career path for those professionals. Or they just want a larger presence for their clients.

What mistakes do advisors make that are likely to result in a bad merger or acquisition?

Not doing all the legwork early on or waiting too long [to start the process], which could turn all the potential positive outcomes to negatives. Also, creating a bad culture by not making sure there’s cultural alignment for both employees and clients. The loss of professionals leads to loss of clients.

Any other pitfalls?

Not knowing and understanding all the options. Not being prepared emotionally. And not having a disinterested third-party advocate.

Do advisors often make these transactions for psychological reasons, such as burnout?

In those cases, they’ve waited too long to decide — and frustration has set in.

Are there other reasons that prompt FAs to merge or integrate?

You can solve for almost anything, but you have to take the time to make sure you know what your business model is and what your needs are — and then get introduced to the right people.