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