Do right by your employees

There’s a lot of consolidation in our industry. While many people understandably felt the pandemic would stall the number of sales and mergers, we’re seeing the exact opposite. As the market has gone up, it’s taken asking prices with it, and principals are selling while the values of their firms are high.

But price isn’t the only reason.

Some advisers are seeking succession plans. The main motivation here is for the practice to continue forward seamlessly in the event the adviser retires, becomes sick or passes away.

Succession? High valuations? At some point, everyone thinks about selling. But probably the single biggest reason that deals eventually get completed often ends up being the vastly greater career opportunities available for employees.

Most financial advisory firms are small businesses. There’s an owner or two, along with a handful of staff people. As is the case with any small organization, employees are asked to do a variety of tasks, from answering phones to placing trades to completing paperwork.

There are clearly some benefits of working for a small firm, such as the fact that employees don’t have to follow mountainous piles of bureaucratic rules and procedures. Employees are often the ones who get to decide what procedures are in place, and they typically have quite a bit of autonomy.

The downside of working for a small firm is that they tend to provide limited career opportunities. An advisory firm that has grown from two to four employees over a decade doesn’t exactly provide a robust career path.

However, when one of these small firms merges with a larger advisory firm, the career opportunities can be almost endless. A person who’s been doing client service for the last decade at a small firm may be offered limitless opportunities for growth after the sale.

As an example, our firm has grown from 60 employees to over 200 employees in just a few years, in large part as a result of our M&A activity. As we’ve merged with other smaller advisory firms, we’ve seen dozens of people take on ever-greater responsibilities and reshape their careers.

We have people in leadership who are manning positions that were not available in their previous organizations. We also have people in specialized roles that didn’t even exist in our firm just a few years ago, as well as people who have embarked on career paths in areas that are entirely different from their roles with the smaller firm.

What we hear from them is that it’s motivating to see the breadth of available job opportunities. Clearly, some are content just continuing in a familiar capacity. But others, who may have been bored previously, but hesitant to make a change, have found new life and are reinvigorated about realizing their potential.

If you’re at the point where you are beginning to search for options for your financial advisory practice or firm, of course get your price, but choose wisely. And let the straw that stirs the drink be the doors it can open for your loyal employees.

[More: Growing your firm for the future]

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with $8 billion in AUM.