Succession Planning

Smarter tech can mean a better deal

An IT upgrade makes your firm more attractive to the next generation of wealth managers

Dec 13, 2015 @ 12:01 am

By Sam Attias

Selling a successful wealth management business is one of the hardest things an owner will ever do. Intense negotiations and emotions compound the pressure of determining an optimal valuation for the firm while also keeping the practice running smoothly through the transition process.

Adopting better technology and using it effectively can ease the burden of succession planning. Upgrading IT infrastructure makes registered investment advisers and broker-dealers more attractive to the next generation of wealth managers, easier to integrate into the purchaser's book of business and more valuable, thanks to improved efficiency.

Better technology alone does not replace the human element that makes a business worth buying, but it can give you and your team a competitive advantage.


Many younger business owners looking to expand their companies prefer to acquire firms with the most up-to-date hardware and software. These owners are still in growth mode, so they need tools that draw in large clients, provide operational scale and withstand regulatory scrutiny. Younger business owners are likely to desire firms with integrated financial applications hosted on cloud-based platforms that allow for automated, real-time communication across different types of mobile devices. And they'll want these systems to be user-friendly.

A series of customized application program interfaces, or APIs, should link your customer relationship management, investment portfolio management and business administration tools. This way, your team spends less time rekeying the same data in various computer programs and tweaking different spreadsheets from those programs to become compatible for data analysis. Better software integration leads to better team productivity. Robust tools should be able to gather the information you need to solve your most complex solutions — account aggregation, e-signatures, remote check deposits, online document storage and even social media posting.


Of course, potential buyers of your firm should be confident you've implemented strong workflows for maximizing the technology. Perhaps more important, buyers must be able to easily adopt your technology and processes or incorporate them into existing systems. Part of the solution here is to use technology vendors that are highly regarded in the wealth management industry. The other part of the solution has several steps: Write down formal operational guidelines that apply to specific functions of your business; share those guidelines with the relevant team members; publish those guidelines on your internal computer network; and make sure your team actually conducts business according to those guidelines.

This a good way to grow your business and to help a purchaser of your business take over smoothly. It's also a regulatory requirement. The Securities and Exchange Commission has been known to penalize firms that lack written procedures for serving clients and protecting digital data. However, a caveat to codifying workflows is that the more idiosyncratic their rules, the less a purchaser will want or be able to repeat them. Therefore, business owners should stay aware of industry best practices.


Firms that invest in these improvements are better positioned to enjoy higher valuations than firms that remain outdated. The reason is simple. Ramping up IT ramps up operational efficiency. That in turn enhances profit margins, which ultimately merits a higher multiple for the firm.

In contrast, wealth managers who lack proper systems have little to offer potential buyers besides a list of clients. A $100 million book of business that depends on one person's ability to memorize personal information about clients is less appealing than a $100 million book of business that lays out how to serve those clients through an integrated, automated, cloud-based platform capable of adding more clients and staff as needed.

Always remember the power of scalability. Buyers must trust that clients and staff will stay on after you move on. That's what gives the buyer the foundation to grow by leaps and bounds in the future. If you alone are the value proposition for your business, you may struggle to sell it at a desirable valuation. Better IT infrastructure, on the other hand, empowers you in the succession-planning process.

Sam Attias is managing director of financial services at External IT.


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