5 building blocks to becoming a successful buyer

RIA sellers want a buyer that has a brand and vision that align with their own, as well as a strategy to integrate and grow the business

Mar 19, 2019 @ 3:09 pm

By Michael DeSola and Matt Sonnen

There are more than 12,000 SEC-registered investment advisers in the United States trying to differentiate and grow their businesses across the competitive and fragmented RIA space — a veritable Wild West of firms at the forefront of change.

RIAs are not only competing with each other but also the deep pockets, expansive adviser networks and sophisticated models of traditional players. They must keep a watchful eye on industry behemoths with the firepower to build, buy or spin off their advisers to create a formidable RIA brand with massive scale.

(More: Harnessing RIA M&A strategies for growth)

The biggest RIAs are ahead of the game, controlling the majority of assets and pursuing M&A opportunities. However, buyers should beware that too many deals do not live up to expectations because the buyers either overpaid, did poor due diligence or paid inadequate attention to brand, culture and the degree of fit with the seller.

Many sellers want more than a payout. They want a buyer with a brand and vision that align with their own beliefs and goals; a buyer with a strategy to integrate and grow its business; a buyer they trust to invest in building a value-add experience for clients and employees.

Buyers who do so will be poised to reframe the negotiation around the power of what's possible together versus price alone — helping both parties assess and confidently determine whether the fit is real and additive for both firms, or simply appealing on paper.

To become a successful buyer, the acquiring RIA needs to build its:

1. Buyer brand. Ensure clarity regarding who they are, what value they provide, and what type of buyer they are — passive investor, strategic acquirer, etc. — to make it easier for sellers to understand the best fit for their firm.

2. Specific adviser pitch. Develop a value proposition that appeals to the seller's immediate needs and long-term aspirations. This pitch will feature different value points than the RIA's pitch to clients and prospective clients.

3. Onboarding plan. Build a turnkey process, plan, and timeline to direct how the buyer will seamlessly integrate the seller's firm with their own — including clients, employees, data, systems, and processes.

4. Client messaging and communications. Establish a marketing and communications plan to help the new adviser effectively communicate with clients. A buyer that has thought through its brand will be in a position to tell a powerful story to both the seller's clients as well as its own.

5. Post-merger integration. Align and execute, internally and externally, to welcome employees into a unified and growing culture, onboard client assets and personal data, and ensure ongoing planning to deliver a consistent client experience.

Consolidation means a world of opportunity for RIA buyers and sellers with shared strategic visions, beliefs, and value propositions. Buyers who think beyond writing a check and take the time to shape their brand will realize greater bang for their M&A buck — finding, negotiating and structuring better deals for immediate and ongoing growth.

As a result, they will be on their way to becoming a successful buyer.

Michael DeSola is the CEO of DeSola Group. Matt Sonnen is founder and CEO of PFI Advisors.


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