Consider diversity when it comes to mergers and acquisitions

Calculate the demographics when considering the value of adding advisers

Apr 19, 2019 @ 11:15 am

By Alex Chalekian

As society becomes more diverse, it's time for a broader swath of the independent financial advice industry to reflect the country's changing demographics. Simply put, we need more women, young people and ethnocultural minority advisers and support staff.

At the same time, these same groups represent chronically underserved segments of the financial advice market, offering advisers an opportunity to forge new relationships and grow their businesses. These dual and largely overlapping initiatives create an opportunity for the industry to leverage M&A to both increase diversity and enter new markets.

To be sure, advisers can (and should) hire from a diverse pool of candidates when it makes sense. However, acquiring practices that already serve diverse groups, often while having key personnel on staff who are members of those groups themselves, may be the most efficient way to enter those markets — especially for advisers seeking to expand in major metropolitan areas.

Most big cities have a high number of ethnic and cultural minority households that at once have significant wealth but no relationship with a professional adviser. The industry should recognize the value and long-term potential of such would-be clients.

(More: Financial literacy could make advice more accessible to women of color)

There's no question, however, that practices that mirror society will have an easier time capitalizing on this opportunity, since prospects from immigrant families or those who speak a different language often feel more comfortable with teams with similar backgrounds.

If a client or prospect, for instance, prefers to speak Spanish, having a multi-lingual adviser or someone else on staff who can facilitate a conversation may help to uncover needs that probably would not have been revealed otherwise. There are countless other examples where being armed with an understanding of the sometimes-subtle nuances between cultures can be relevant when delivering advice, especially during major life events such as marriage.

Along with life-expectancy factors that make it more likely for wives to outlive their husbands, the rise of households with female breadwinners means financial advisers have an incentive to create women-friendly practices. One way to pursue this goal is to seek out M&A deals with women-led groups or, at the very least, with groups that have a healthy mix of male and female advisers.

When merging practices with this purpose in mind, male advisers ought to make it a priority to learn from their new female colleagues. What prospecting and client communication best practices have worked well for them? Which types of women are they most successful in serving, and why is that the case?

Rather than looking at women-focused M&A deals through a purely transactional lens, male advisers will enhance their overall value proposition by genuinely collaborating with the women advisers they bring into the fold — which means men also should be open to sharing the secrets of their success.

(More: What a man can learn by attending a women's financial conference)

Most top advisers are either baby boomers or come from Generation X. To a considerable degree, most clients do too.

But as millennials approach their prime earning years, practices must get younger. This generation — which grew up in the Internet era and came of age at a time when everyone carries a smartphone in their pocket — is typically more comfortable communicating via text or through social media platforms.

The idea of physically coming into an office for a meeting multiple times a year will be foreign to them. Because of this, they will likely seek out an adviser whose client communication model reflects this generational difference. Moreover, such a client will naturally want to work with someone whose career arc mirrors their own, versus an adviser who is counting the days until his or her retirement.

Age-based strategic M&A (i.e., pairing practices comprised of older advisers with ones in which there is a higher level of diversity) can help the broader industry stay in tune with the preferences of the next generation of investors while helping many longtime veterans transition out more gradually.

At a time when so many practices look the same, creating a diverse team will not only aid advisers in their efforts to stand out from peers but the broader independent advice industry to move forward by growing into underserved markets. Mergers and acquisitions can ignite that process.

Alex Chalekian is the founder and CEO of Lake Avenue Financial.


What do you think?

View comments

Recommended next

Upcoming event

Oct 22


San Francisco Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print