When targeting an acquisition, successful advisory firms don’t wait for an opportunity to arise. They act swiftly, knowing they’ve already taken deliberate steps to position themselves to do so. As we approach the end of the year, it’s an ideal time to evaluate your acquisition strategy — and prepare your business to seize these opportunities.
First, given the high competition to win acquisition opportunities, ensure that your firm stands out. Consider undertaking a strategic marketing exercise, just as you do when prospecting for new clients. That means defining your ideal acquisition target and articulating a compelling value proposition for that audience.
By profiling your ideal acquisition target, you can identify and address the seller’s needs. Consider factors that are important to you, such as client profile, demographics, revenue mix, investment philosophy, financial planning approach, affiliation model, niche specialty and time frame.
As part of this exercise, identify the objectives, needs and concerns that your ideal acquisition target may be facing. Many buyers, eager to negotiate and win the opportunity, focus too heavily on the economics, structure and mechanics of a deal. Although those factors are important, most sellers are also deeply concerned about the experience of their clients and their legacy. Often, they’re also struggling with retirement readiness and the emotional implications of transitioning from business owner to retiree.
After orienting yourself to the seller’s perspective, you can define a compelling value proposition and take the right tone to connect with them. You might highlight successful past acquisitions to illustrate your expertise. When dealing with sellers struggling with retirement readiness, you can offer more flexible approaches, such as phased retirements that allow them to remain active in the business longer.
The bottom line is you need to deeply understand the seller’s perspective, position your firm strategically, and ensure that you’re listening and addressing their needs, objectives and concerns.
Second, seasoned acquirers prepare in advance to be acquisition-ready anytime. By evaluating and preparing your team, processes and partners, you can ensure your firm is ready to hit the ground running when an acquisition is set in motion.
From a team perspective, you’ll want to evaluate your operational and advisory capacity. Serial acquirers often make key hires ahead of the need, knowing how long it takes to recruit and onboard talent. You could add staff from the seller’s firm as part of a deal — and that could add continuity for clients who are joining from the seller’s firm — but that’s not always an option. Ensure that your firm isn’t so constrained that you can’t deliver a great client experience during transition.
It’s also critical to evaluate whether your firm has adequate capacity to add a large number of new clients. Developing a pipeline of paraplanners, investment analysts and service advisers who can grow into adviser positions can help your firm handle the additional client relationships.
Next, I recommend evaluating your acquisition process from A to Z. Do you have checklists for completing all aspects of a transition? Templated communications for newly acquired clients? Website content to announce the transition? A structured plan for meeting with clients, along with the buyer and seller? Which roles are your operations staff and service advisers expected to play?
By preparing processes, checklists and templates in advance and getting everyone at your firm on the same page, you can focus on what’s most important once you secure an acquisition — building relationships with new clients. As you build your tool kit, it can be especially helpful to envision the acquisition process from start to finish for each of the key parties — firm, seller and clients — separately. By taking this first-person perspective, you can ensure that all stakeholders will have a smooth transition.
Finally, it’s critical to evaluate your business partners. To successfully complete an acquisition, you’ll need expert counsel for legal and tax considerations. You may need assistance with valuation and structuring the deal. You’ll want to line up financing options. And you’ll want to understand resources available from your home office partners, as you’ll likely need to interface with many operational teams at your partner firm to execute the transition of client accounts. Building and sustaining long-standing relationships with your expert network ensures that you’ll have the right resources when you need them.
If completing a successful acquisition is on your wish list for 2022, be sure to address your strategy as part of your annual business planning process. By taking a deliberate approach, you can ensure that your firm is delivering a compelling value proposition — and that you will be acquisition ready when an opportunity arises.
Kenton Shirk is vice president of practice management at Commonwealth Financial Network.
Wealth management firm has seen an aggressive period of growth in the past year.
Survey reveals widening gap between investment ambition and workforce readiness across the sector
“It’s time for an economic reset,” wrote the California governor, in a post on X.
Masterworks was launched in 2017 but its RIA, Masterworks Advisers, is just three years old.
One 2017 form, no broker license, and a $42 million gap they say surfaced on a webinar.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
