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Practice Management > Building Your Business

The 4 Personality Keys to M&A Success

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A recent study released by Hightower, a wealth management firm and strategic acquirer, focuses on RIAs’ decision making when considering a strategic partner.

Related: Fidelity: RIA Deals Accelerate in Q3

According to the study, the RIA industry addresses the objective business factors around partnering up: how to get the right price, identify the right structure of independence and support, or navigate operational logistics.

Hightower wanted to know whether these considerations would help advisors make better decisions. It wanted to know what factors advisors thought were important.

The resulting report was created with market research firm Riedel Strategy and a team of social scientists, who developed a scientific approach to help advisory businesses considering a transaction find the right cultural fit.

“While the industry has many avenues to help advisors think through the business considerations of an M&A transaction — from valuation and deal structure to operations — interpersonal compatibility often falls by the wayside,” said Hightower’s chief executive Bob Oros in a statement.

“We hope this study can be an informative resource to enable advisors considering a transition to find the best possible fit for themselves and their teams.”

The study found that advisors considered valuation more a curiosity than a driving concern. They were agnostic about models of independence, seeing these as a means to an end rather than an end in themselves. As for operational details, these were nice-to-haves, not need-to-haves.

Related: Annual Growth Tops 7% for Small RIAs: Schwab

Instead, advisors’ big desire was to find the right “fit,” a term the study found they used consistently to refer to a compatibility of subjective factors: values, cultural beliefs, manners, interests, goals and philosophies.

In referencing these factors, advisors used fit to question whether a prospective partner was aligned with the heart, soul and identity of their firm.

The report noted that the RIA industry and advisors had long assumed “fit” could not be coached or controlled, but researchers found that fit is patterned and predicated on whether compatibility exists around four specific personality factors, which the report said psychologists working across industries have found ways to effectively define and measure.

Following are the four personality factors that play a key role in the long-term success or failure of a strategic partnership.

1. Culture — What motivates a firm’s relationship to clients and colleagues.

The research found four personality orientations related to culture:

  • Visionary, focused on innovation and creativity
  • Nurturer, focused on togetherness and mutual well-being
  • Protector, values stability, efficiency and above all integrity
  • Achiever, motivated by success and achieving goals

The report said most firms have elements of all these orientations, but one always dominates. Alignment on this dominant orientation is critical to successful partnerships, it said.

2. Drive — What an advisor is driven to accomplish with his or her business.

The research found three personality orientations related to drive:

  • Builder, focused on aggressively growing and scaling the business
  • Optimizer, focused on work-life balance
  • Transitioner, with the ultimate goal of stepping down, focused on successfully and honorably transitioning clients

3. Passion — What an advisor loves most about being an advisor.

According to the study, a strategic partnership gives advisors hope of getting back to what brought them to the industry in the first place, while most of their counterparts have to do everything but that, such as run operations, market, hire and fire, and stay abreast of regulations.

The study identified four general orientations related to passion:

  • Entrepreneurs are competitive and focused on growing and running a business.
  • Engineers are happiest optimizing systems and operations.
  • Investors care about clients, but are mainly interested in investing.
  • Coaches/Guardians love nothing more than working with clients.

4. Control — A firm’s relationship to leadership and change.

There are four personality orientations related to control:

  • Delegator, comfortable with change and letting others be in charge
  • Democrat, comfortable as long as he or she has a seat at the table
  • Autocrat, not comfortable giving up control to others

The report pointed out that these leadership styles usually are not malleable, so it behooves an advisor to understand them all when negotiating with prospective partners over degrees of control.

Related: 4 Steps to Take Before Making an Acquisition

Hightower said the researchers used the above factors and orientations to create a four-step personality test to help advisors on the verge of a transaction make informed decisions.

Advisors can use the framework to clearly define their approach to business, know what questions to ask and focus on potential blind spots.

For example, an advisory business with an autocrat orientation to control may need to find a larger partner that will allow the firm to run its practice as it sees fit, while an advisory business with a coach/guardian orientation to passion will want a partner that empowers it to spend more time serving clients.


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