Podcast: How to Find an RIA to Buy and Successfully Close the Deal

Mike Langford:

Hi there. It's Mike Langford. Welcome to the Advisor Financing Forum, a podcast presented by SkyView Partners. This week on the show, Scott Wetzel and I are joined by Nick Asmus, president of Berger Financial Group. Nick and the Berger Financial team recently completed an acquisition of another firm by utilizing the full suite of SkyView-powered solutions. The deal started with listing Berger Financial as a buyer on APO and verifying their purchasing power score. From there, they were introduced as a prospective buyer to a firm in Arizona. Once the match was made, they leveraged the power of the SkyView investment banking team and close the deal using financing secured through SkyView lending.

Mike Langford:

You're going to love this episode of this show as we dive into a lot more than just how the deal was made. We dive into explore other concepts, such as why the employee stock ownership program that Berger Financial created for their team is proving to be such a powerful engine for growth and stability. It's fantastic stuff. Now before we get started, as always, if you have questions about your specific M&A plans, please feel free to visit skyview.com or call 866-567-6282 and the SkyView team will be happy to walk you through the options that are best for you and your business. Okay, let's get to our conversation with Nick Asmus. Well, Nick Asmus, Scott Wetzel, so wonderful to see you gents. Welcome to the Advisor Financing Forum Podcast. Great to have you.

 Scott Wetzel:

Thanks for having us.

Nick Asmus:

Thanks for having us.

Mike Langford:

Yeah, it's going to be awesome. One of the things I love about this is we get to do the prep show, the prep call. We get really comfortable with each other. We were busting each other's chops before we got started here. Scott couldn't hear us before he figured out how to use the microphone and the speakers and stuff so we were going pretty hard on him. It's good stuff. Good stuff but-

 Scott Wetzel:

It all comes back around, my friend. All comes back around.

Mike Langford:

That's right, exactly. I know. Well, he has teased me multiple times, Nick, about the couch in the background and my wife must make me sleep there because it looks extra comfy at times. But by the way, that is a great napping couch buying there for the viewers.

 Scott Wetzel:

Yeah, Nick, one minute [crosstalk 00:02:17].

Mike Langford:

I knew you [inaudible 00:02:19].

Nick Asmus:

It does look comfy.

Mike Langford:

That's right. That's right. It's just a random sleeping on the couch there anyway. Oh well, Nick, we're absolutely thrilled to have you on the show because when Scott reached out to invite you, he was pumped because he was telling the story about how Berger Financial was one of the first firms of note to use the full suite of SkyView Partners' powered solutions to complete an acquisition and I thought it'd be a great place to start the show, before we go into the details of that acquisition, maybe to tell us a little bit about the history of Berger Financial and some of the high level details about the firm so the audience can really have a picture in their mind of what's happening there.

Nick Asmus:

Yeah, sure, absolutely. I mean, just to get started high-level, we now, after this acquisition, manage roughly 1.5 billion. We have 2,500 client relationships. I think first of all, for a firm our size, that already sets us apart quite a bit because most firms our size have a high concentrated number of clients that are high net worth. Not to say that we don't serve those too, but if you do the math, our average client has 600,000. We don't say, "No," to pretty much anyone so a lot of firms our size have minimums of a million, 2 million, 5 million maybe, and we'll take anyone. We have clients that have a thousand dollars, $5,000. Right there, I think we're very different than most firms our size. We have six locations now, again, with this acquisition. We have roughly 45 employees and the biggest differentiator that compared to us to our peers is the fact that we have an ESOP, which is very unique. It stands for an employee stock ownership plan, not option plan.

Nick Asmus:

Given that it's financial services, most advisors probably know what that is, but the short version of that is it allows employees to have ownership in the firm just for coming to work. That's how an ESOP works and there's only 10,000 in the country. There's only two others in our space that I know of so that makes us pretty unique. But to get started, 1981 the firm was founded by Larry Berger, so 40 years ago as of this year, and we just have grown slowly over time until about 2010. Then we got involved in acquisitions and this was our 12th acquisition that we just completed. Over the last 11 years, we've been pretty aggressive in the M&A space.

Mike Langford:

That's fantastic. I love that you... There's so much unique there. I love the fact that this strategy is, "Hey, we'll work with anyone as a client." And it almost feels like a mission-driven firm, that you want to make sure you're providing financial services and advice and guidance to anyone who needs it and who comes to the firm. The notion of the employee stock ownership program is fascinating too because in the conversations I've had, and Scott, maybe you might echo this, one of the challenges... Actually, we have talked about this, Scott, you and I, one of the challenges that often happens when junior staff or junior advisors want to acquire the business as the older advisors look to age out, the initial owners may be looking to age out, one of the things that Scott's pointed out is that's often problematic because they don't have any equity share, right?

Mike Langford:

And so, it's very difficult for them to buy a firm that they own nothing in now, and they haven't built up a nest egg or whatever. Scott, would that be something that you would be in favor of other firms doing, just a little aside here. It might be helpful, right?

 Scott Wetzel:

Yeah, yeah. It's very helpful for what Nick's doing and I've not seen it elsewhere. Setting up an ESOP, you need to meet some minimum eligibility requirements. I'm vaguely familiar with them, but I think it's a extremely powerful tool for really addressing that problem, that if you're a junior advisor in any practice, you're really beholden to that owner that hopefully someday they decide to transfer ownership to you at the near, or at the end of their career. Whereas with the ESOP structure, you're actually getting to participate in the equity and the growth of the firm at a much earlier stage and that equity is locked in.

 Scott Wetzel:

It's not this never-ending popularity contest with the owner that you got to be concerned about how he or she is feeling [inaudible 00:07:08]. You've got equity. I think it's unique. I think it's a really good thing for all the advisors within the broader ecosystem and it's just surprising more practices haven't pursued something similar, but you probably have to be over that billion dollar mark and Nick, you know a lot more about the nuances of what it takes to qualify to do an ESOP, but you need to have a very robust organization.

Nick Asmus:

Yeah, and you are correct. It is. Generally speaking, you have to have enough employees to diversify and do a feasibility study and it's a long process to do. It's expensive to get started, but once it's set up, it is a fantastic competitive structure too. In 2019, for example, we weren't trying to get really aggressive with M&A and we ended up getting four acquisitions and three of the four we stumbled upon just because of the ESOP, because we were able to do so much more and be more nimble and unique and competitive. There's one other big firm that I'm friends with that they became an ESOP, I think, a few years before us and they started at a billion as well and they've grown tremendously for the same reasons. It's just a great structure.

Mike Langford:

And it seems like it would also strengthen the firm. And I know we're staying on this probably a little longer than... See, this is the curve ball I was talking about by the way, when we're prepping, that sometimes really interesting nuggets come out when you start talking. It seems also regardless of future M&A activity, it would strengthen the future of the firm, right? Knowing that the advisors have ownership stake in the firm, the clients are like, "Hey, listen, these aren't going anywhere, right? My advisor's here and, oh, by the way, there's other advisors at the firm that will take over in the event that my advisor retires or passes or whatever so that there's a built in succession structure there that I feel this firm is around for a long time, because everybody there has ownership."

Mike Langford:

And then of course, it absolutely makes the process of the potential transfer eventually... As again, as these senior partners look to retire, maybe they can be bought out by the rest of the population of advisors that are still there over time and dwindled down there, or have a purchase program or exit program facilitated by the SkyView's of the world. It'd be awesome.

Nick Asmus:

I was going to say... I didn't even talk about that, but the retention is phenomenal. I mean, every owner has to worry about that. A lot of times, and Scott can talk to this too on the sell-side of the world, but so many times what you see happen is, older advisors, they have a guy or a girl that's going to come in and take over the business and they're grooming them or they're not paying them right or they get a different offer and they sink two to five years into that person and then they leave. And they do this cycle and they start it when they're 60. They do this cycle a few times and then they're 75 and that's where the SkyView's of the world come into play too. But just having these, the retention, that we just don't have that issue.

 Scott Wetzel:

Well, and I was looking more towards also recruiting and it enables Nick to be more creative with deal structure. If you have somebody that still wants to be involved with the practice and wants a, we call it a sell and stay, he can not only provide liquidity in it, but they also get to participate in ESOP. It's a compelling structure and offering for recruiting and retaining, which at the end of the day, according to Steve Jobs, are the two top things that a CEO does. It's a good tool.

Mike Langford:

Yeah. Yeah, it is so true. There is still a war for talent. I'm getting a little semi-famous for saying that. High quality people are always going to be in demand someplace else. Somebody is always going to be willing to pay them more to pull them away from you. And so, having that ownership structure in place is going to make somebody want to stay, right? I own a piece of this business. I'm part of this family, right? It's much more unlikely that an advisor wakes up one day and says, "You know what? I've had it with you Berger people. I'm out of here. I'm taking my stuff across the street," right? They're like, "No, no, no. This is a part of my team. I am Berger Financial." It's fascinating.

 Scott Wetzel:

Yeah. We're sick of this dress code at Berger with the Button-down shirts, short sleeve shirts. We're tired of adhering to the strict dress code that they have at Berger. We're out. Nick, Scott, I'm a [inaudible 00:11:51]. They ain't going anywhere, right?

Mike Langford:

Short sleeves on a Tuesday? What are you thinking?

Nick Asmus:

I don't know. I apologize. What can I say?

 Scott Wetzel:

Yeah, it's [inaudible 00:12:02].

Nick Asmus:

COVID. I blame it on COVID.

 Scott Wetzel:

Yeah. Yeah, but in Minnesota we get 13 nice days a year. I mean, we got to take advantage of the three short sleeve shirts that we have, right?

Mike Langford:

That's fantastic. I love it. I love it. I think we're all on this podcast old enough to remember the days where casual Friday was actually a big deal. All of a sudden, you hear the company is going to let you not wear your tie on Friday. I just remember that was amazing. I don't have to wear a tie on Friday. Then casual Friday became more of a pain in the butt than the other days because I had to think about what I was going to wear whereas the other days it was just grab the suit off the hanger and just rock and roll. But now it's a polo shirt every day is just way it works.

 Scott Wetzel:

Yeah, our dress code is migrated towards just no pajamas. That's what we call it.

Mike Langford:

That's fantastic.

 Scott Wetzel:

I was trying to figure it out. My daughter had PJ day for school in elementary and I'm like, "Wow, this would be too far. Fire engine truck PJ's for my credit guys getting on Zoom." Okay, so no PJ's, whatever. Everything else works. Shorts, jeans, T-shirts, any of those.

Mike Langford:

Perfect. Perfect. I love it. Well, Nick, I want to shift gears to what brought us together here and it was the M&A activity that you took advantage of the SkyView ecosystem for. One of the initial things was you took advantage of APO and there are a lot of other RIA marketplace solutions out there today. How did you and the team discover APO and then what set it apart from the others for you and decided, "Hey, this is where we're going to start hunting for deals. This is where we're going to list ourselves as a potential acquirer of businesses." What was that like for you?

Nick Asmus:

Yeah, that's a great question. Well, we've always been involved in get the emails and you sign up for all the stuff with FP transitions, RIA in a box, and APO, I don't know if they just did a good job marketing. I always view them as one of the key national sellers and what I like about APO though is you could sign up a profile, which I think we did a few years ago, and you didn't have to put a bunch of money down. You didn't have to use their services. You could sign up and it was free to join.

Nick Asmus:

To be honest, we just, I think settled upon it with all the other ones and I feel it must be a competitive space because they seem to keep coming up and... Yeah, this is the first... We've never done a deal with an investment bank as sourcing it. We've done 12 deals. 11 of them, we just had a buyer-seller relationship and so, this was a first... Even though we're experienced in the M&A world, this is a first for us. And so, I felt like we were a little green in working with someone like SkyView ourselves, but it was a different process and there's certainly some advantages to having that relationship. We've enjoyed it so far.

 Scott Wetzel:

Yeah. Nick, I appreciate you pointing out too that we really sought with APO to really a democratization of the buyer universe out there and really provide a Zillow-type experience. Really, any advisor can go on, register for the site, see the listings and compete for any listing on the site at absolutely no monetary commitment. The only commitment is just providing enough data that we can produce a purchasing power score for you. That's been really the whole genesis behind the site since day one. We are launching some designations next month that will come with fees associated with additional features. But really at the end of the day, the site is really intended to allow everybody to compete on a level playing field and can be across the nation or across town.

Mike Langford:

That's fantastic. Scott, many of our conversations on this show historically have tended to lean towards referring to the M&A partners as the advisor. It almost feels like we're talking about a solo RIA frequently and I know that's not the case. SkyView works with firms of basically every size. And particularly when we talk about Berger Financial, it's a fairly large RIA although Nick was, I think being a little demure in saying that it's just average size. I think it feels pretty big to me. And they've got a good sized staff, as you said, about 45 folks. That's a real business, right? This isn't just some guy like me running a business out of his house and having a distributed team. No, this is a real-

 Scott Wetzel:

Renting out his couch.

Mike Langford:

... business in place. Renting out his couch to vagrants. That's just fantastic.

Nick Asmus:

It's called a multi-purpose facility.

Mike Langford:

Next time, Scott-

 Scott Wetzel:

Airbnb in the back and podcast in the front.

Mike Langford:

Look, it's all about how do you make-

Nick Asmus:

Are you putting it on your taxes?

Mike Langford:

That's right. Maximizing revenue. You got to do it where you can. I recently learned about the Augusta Rule. Apparently you can rent out parts of your house for a couple of weeks a year and you can get tax-free income from that. I'm going to take advantage of that bad boy. Awesome. Well, anyways, getting back to the fact that Berger Financial is a real business, unlike my couch rental business in the back there. Let's dive into how you and the SkyView team go about serving a firm like Berger and its growth goals, maybe versus just say a solo RIA because there are many more needs, right? There's a larger firm at stake. This is an employee stock ownership program, right? What are some of the things that set working with a larger firm apart versus individuals?

 Scott Wetzel:

What's interesting about our relationship that really came to fruition with Berger is really they were a counterparty to our investment banking sell-side client. And through APO, Berger signed up on APO. They had ranked very highly on a state basis and also on a national basis. I believe they're in the top 25 in purchasing power nationwide. And then when we listed a practice for sale in Arizona from one of our investment banking clients, Berger had provided an indication of interest and I think we had 70 plus indications of interest for that practice. It's really been quite fascinating recently to see the interest in practices in more tax-accommodative states, such as Arizona, Texas, and Florida. The multiples and the interests we're seeing driving valuations there are really exciting for us obviously, and for the RIA community and for the entire RIA universe, but really that's how Berger... We were aware of Berger. They were in the Minneapolis marketplace. I think one of the top five largest firms in Minnesota.

 Scott Wetzel:

We knew them, had a relationship with them. No business relationship with them, but really they were a counterparty for our investment bank and going through that process with Nick and in representing our client. Now the other side of the house, we have a SkyView investment bank, which resides here in Los Angeles and then we have the SkyView's credit facility, which resides in Minneapolis. Investment bank and the credit facility have very different clients in the sense that we're representing these sell-side advisor and the investment bank. It's very different that the client for the credit facility is the borrower/buyer and that's where Nick had a bank solution. And we said, "Hey, if we can compete, we'd love to provide the financing on this. If not, that's great too. We just want to get the deal closed." But then also we were able to present them with a financing package through SkyView credit and have them come in as a client over on that side of the house. That was appealing.

Mike Langford:

In our prep call Scott provided some details but I wonder if you could provide the story from the Berger perspective, Nick. How did you and the team go about preparing for the acquisition process? Obviously you've been through it multiple times before. What does that overall process look like for a firm like Berger? Okay, are we just constantly hunting or is it something where you reach a certain growth point and you're like, "We want to acquire another business in a certain area." You mind taking us through that process on your end?

Nick Asmus:

Yeah, absolutely. Well, first of all, it's funny you say that because a lot of advisors want to acquire, and there's all these quotes on ratios of 20 to 1 or 40 to 1 or 70 to 1 depending on the area. And in my conversations, there's not as many repeat buyers and I wish that wasn't the case, but for some reason, I don't know if that many actually go through it and do it. It was interesting because I think for those that do want to buy, I think having an investment banking partner first is the way to go. For us, it was really strange because it felt backwards. We're used to putting our own pitch book together, doing all this stuff and trying to schedule the conversations, trying to manage the process, and we didn't know what it was like to have someone do that for you.

Nick Asmus:

In a lot of ways, we were all anxious to do stuff and it was hurry up and wait just to be able to rely on them to lead the process. It was strange for us from that perspective, but I think for firms wanting to do it, it would be great because even if you don't win... Scott made a comment there was 70 firms that were competing for Arizona. I think going through that a few times is a prudent decision because you're going to learn so much. Speaking of ourselves, in 2019 when we were aggressive with acquisitions, I told you that we did four, I think we talked to over 40 firms. There's a lot of times where we say "No," or they say, "No," and it is a contact sport to some degree. And so, I think it's a great experience. I don't know if I really answered your question, Mike. I went off on a tangent.

Mike Langford:

Well, you did... Well, it's fine. I like it though. Just the notion, I mean, that right there is a really important point for any firm who's interested in acquiring another firm is that, look, you're not going to be the only suitor. And even if you are the only suitor, if you've come to a firm and you're the only one, congratulations, you're lucky, but that probably isn't the only one you should look at either," right? You're looking for a good match. You're looking to add the right business to your business for growth. You don't want to just acquire the first one you come across, right? Is that the way you go or do you look at... You make a decision and you're like, "I want to look at," like you said, 40, and then whittle it down to four, or is it you're just constantly looking and evaluating deals as you go along?

Nick Asmus:

Yeah, it's that. We're always looking for good deals and I think sometimes too, we're well-connected in our space, especially locally, and there's been times where we find a seller has talked to one of our friends and we'll call each other up and say, "All right, I don't want to compete. If it's a better fit for you, you take it," right? This is for the clientele or whatever. I'm not going to step on your toes, so to speak too. I think sometimes it is just all about finding the right fit and the right culture and it has to match.

 Scott Wetzel:

Yeah, and to that point, for us, we put each prospective buyer that provides an indication of interest through a 10 phase diligence process to boil that down to make sure that we're all on the same page in terms of our sell-side client's key transaction objectives and what's really important to that advisor in selling, merging, partnering with their practice. And at the end of the day, we're able to make introductions for ourselves and a client. I believe 10, 12 different advisors throughout the country and Berger and another couple of firms were the finalists. But at the end of the day, that's really then out of our hands because as the investment bank, we want to ensure that we're meeting the client's real key objectives. But then when it comes down to that cultural and tangible, personal fit, that's left to our client. As much as we thought Berger was exceptionally competitive, we really had no clue who our client was ultimately going to decide to partner with. And at the end of the day, Berger was the best fit for them culturally and for many other reasons as well.

Nick Asmus:

Yeah. On that point, we did feel... I'll try to say this as humble as possible. We actually felt very confident with that acquisition because we just aligned. There were so many things we had experience in, that they had experience in and even just... I said earlier, we take anybody. They take anybody. We have a tax practice. They have a tax practice and there were several other things too, where we just stepped back and we're like, "Wow, this is a dream match," because it was perfect from our perspective.

 Scott Wetzel:

Yeah, we certainly felt from our client's standpoint all the key objectives that they had outlined to us from the onset of the relationship, that it was a pretty good fit with Berger. But again, those intangibles, if they don't care for buttoned-down shirts and short sleeved shirts, and that's just their culture and they didn't care for Nick, they don't care for Nick, and that was definitely not the case. Synergistically, I think, between the two, our client and with Berger Financial, I think it's a merging of two great firms that are to do a lot more together than separately.

Nick Asmus:

I wore a suit the first meeting and she told me next time I came down, she said, "Don't wear a suit. You're overdressed."

Mike Langford:

Well, I'm glad. We're half joking here but this is really true though. I mean, culture matters, right? And not only does it matter for the team and in the workplace, but it matters for the clients, right? If they've built a practice where people are walking in short sleeve shirt-type, more of a relaxed feel to it and personable-type thing, and not the oak office-type deal with the suit and tie, you're not going to be a good fit. It's going to be a cultural challenge. We're half joking about this, but this is reality, finding a good fit, not only economically and business-wise, but there's a big component.

Mike Langford:

And I always joke about it. I'm like, "Listen, clients have a choice of any financial advisor out there, right? They all sell the same stuff and they all charge about the same price and they all have about the same level of services. I mean, some offer more complex services and so forth in terms of tax planning and the like, but they are choosing you because of you and the firm," right? And so, there's going to be a level of continuity that should be happening when you've acquired another business.

Nick Asmus:

Well, and you're right. It's a relationship business. Yeah, go ahead.

Mike Langford:

Yeah, 100%. No, I was going to say, I want to talk about the investment bank in a little more in depth, Scott, and Nick, you chime in please as well. Maybe I'm wrong, but I suspect most of the folks listening to this show or watching the show are not all that well-versed in how investment banks work and why they can be so valuable to the M&A process. We just talked a little bit about it there. You know both sides of the equation, right?

 Scott Wetzel:

Yeah, absolutely. If you look at a majority of the transactions in the industry that the financial advisor is not retaining an M&A consultant or an investment bank, and I always point out to our prospective clients, "This is presumptively one of your most valuable assets. And if you're going to say, let's say, sell your home, which is presumptively another one of your most valuable assets and a much simpler transaction, would you do it a for sale by owner?" And there's a very, very small percentage of the US population that does that, whereas financial advisors are very well-versed in wealth management. A very small percentage are well-versed in M&A consulting. I'd say Nick is an exception that he doesn't need a buy-side investment banker to help him. He knows this business and knows it well. Therefore, as a counterparty, it was quite seamless to engage with them.

 Scott Wetzel:

But if you're doing a sell-side transaction and Nick included, utilizing investment bank, everyone thinks, "Well, you're just going out and finding me a buyer, right?" No, that's actually the easiest part of the process. The more difficult part of the process is taking them through 10 phases of diligence to ensure that they're meeting all FINRA check backgrounds, they actually qualify, and they have financing available. They qualify for it or they are good credit worthy, and taking them through all the nuances of what it takes to really acquire this practice and be a good candidate and the best candidate on a national basis, of a national pool of candidates from APO to acquire this practice.

 Scott Wetzel:

And then also, meeting the key transaction objectives of what does this client's expectations for purchase price? What is this client's expectations that... What we spend a lot of our time around is helping them understand that they can define how they exit the industry and that your buyer isn't defining how you exit the industry and how things work. And that's what you see in a lot of transactions without an investment bank, is, many buy-side advisors, they want to just dictate, "Well, here's how we value your firm. Here's our process. We're eliminating you from our roster. We're going to send a retirement party in two weeks. It's going to be a lot of fun and then goodbye, but you have to move all the clients too, by the way."

 Scott Wetzel:

Whereas utilizing an investment bank, we're sorting through those buyers quite quickly and determining which buyers really understand how to get this done from a mechanical standpoint of the actual process of acquiring, but then also understanding that every single one of our sell-side clients has different wants, needs, interests, desires, as it pertains to... Everyone focuses on purchase price. I mean, that's the easiest part, but what do they want their life to look like post-transaction? In Nick's case, the advisor wants to be a part of the practice for X amount of time and then move on into retirement in a fairly short amount of time. And we identified with Nick that he not only has a process for acquiring practices, but he has a very defined process for transitioning the practice. That transaction will be successful and will not be burdensome on our client post [inaudible 00:31:54] of our investment banking engagement is extremely critical to us.

 Scott Wetzel:

What is your process? And Nick has a team that's deployed, that goes into their office and relates to our clients, making the introductions, sitting at the table, having Nick or one of his advisors shaking the hand of the client. But really, Nick's teams coming in and doing a lot of the heavy lifting that most sellers really fear of, "Oh, I got to move my book again?" The good news is savvy buyers have an internal team in place that goes in and does that for you. As the investment bank, we're working through to make sure that we're finding absolutely the best buyer for you, who really knows how to get this done, is going to be a seamless process, and sorry, Nick, but as a counterparty, we push purchase price as high as the market will provide. And at the end of the day-

Nick Asmus:

I was aware of that.

 Scott Wetzel:

Sorry about that. Yeah. Well [crosstalk 00:32:48].

Nick Asmus:

I mean, all joking aside there's truth to that. It was fairly priced. It wasn't necessarily a... If we didn't have as much creative alignment, we would've walked away. But I don't mean to interrupt, Scott, but if I was selling... I mean, we always tell this to sellers. For a lot of these people other than having kids, this is the most important decision of their life. This is the biggest transaction of their life. I tell our team that. And if that's true, why wouldn't you want to go through the extra steps to make sure it's fairly valued, to make sure... I'm sure you do... Scott, I don't know. Do you guys do a due diligence process to get it ready and make sure? I mean, I'm sure there's things you follow with that too to make sure it's [crosstalk 00:33:39].

 Scott Wetzel:

Enter the onboarding self by client, you mean?

Nick Asmus:

Yeah.

 Scott Wetzel:

Yeah. One of the key things we do is sit down with clients and understand what we call, our KTL's transaction objectives, and say, "What is really important to you with this transaction? You define to us exactly how you want this to proceed, what the terms, conditions, what's your retirement, what you want this to look like?" We take that as an intake and then we come back to them and say, "Hey, either we can accept this engagement or we can't because either, yes, we can meet all these objectives based on what we're seeing in the marketplace," or "No, there's one of these things that just doesn't fit and we're going to have a hard time sourcing a buyer at this price."

 Scott Wetzel:

A good example is A seller came to us. We're working with him and he's at a broker dealer with only 80 advisors and he insisted that someone had to come to that BD or be at that BD and also wanted a purchase price that was a premium. And we just said, "Hey, both those things aren't attainable," and we couldn't accept the engagement because really, the biggest risk we have in taking on each investment banking client is we're assuming all the transactional risks whatsoever. There's absolutely no termination, no penalty fees. If someone comes to us, and it's happened, and says, "Hey, you know what, I decided I want to keep working," and it just happened to us. And I said, "Hey, Steve. Hey, I'm happy for you. I don't know why'd you sell in the first place. I think you got a great practice. I think you should keep doing what you're doing. You're a young guy and keep moving on."

 Scott Wetzel:

But really that transaction risk is borne by us and getting that transaction to close, not by our sellers. At the end of the day, we need to make sure that number one, we are not in the business of selling people on the concept of selling their business. We need to make sure that our clients on the sell side are firmly interested in selling their practice prior to us assuming that transaction risk and pulling a lot of man hours to that, and then having really nothing, because we only work for a success fee. If there's no closing, we have a lot of sub costs.

Mike Langford:

One of the things that I heard was a recurring theme in what we were just discussing here was the value of working with people who have done this before. Most advisors in RIA firms, if they're going to sell the business, they're only going to do that once, right? They've never done that process before. On the sell-side, chances are, this is the first time they've even thought about doing this and they've started walking down the road to do this. On the buy-side, there may be firms like Berger Financial that have done multiple acquisitions and they're experienced in it and as you said, Scott, they're getting more comfortable with the process. They know the questions asked. They know where their process lies and where's their yes and where's there no point and all that type of stuff.

Mike Langford:

But to have another firm, a third party firm involved that's like, "Hey, look, we've done this before. Let us coach you, seller, on the things that you need to be thinking about. Let's make sure that this is the direction you want to go because we don't want to have all that sunk costs here and then have somebody walks away from the table at the end." And then on the buyer side, yeah, let's make sure we find you the right firm. It's really, really a smart process.

 Scott Wetzel:

Right. And also, Nick had a very defined process in his acquisition strategy, transition strategy, everything else, but also had market awareness of where market pricing is going today. And market pricing is going dramatically higher than what you'll see in any valuation. I think our average closing right now is pricing about 165% over valuation price, which is just indicative of actual market price. It's not inflated pricing. We have relationships with all the PE firms. Their valuation matrices are exceptionally high and we're pricing to that. And Nick, when we engaged with them in some of the first calls, we get a lot of hate mail. Usually the SkyView investment bank's over priced. [inaudible 00:37:44] said something, the same thing he said earlier in the call, which it was a well-priced.

 Scott Wetzel:

It's a good thing he has a keen interest in golfing and Phoenix. That helped, I think. But also, Nick understood that this is current market pricing. We are not overpricing. PE is willing to pay at these prices therefore, we have individual buyers coming in that are not PE-backed. They need to be competitive with what PE is willing to offer and we think that we have a solution for the buy-side with bank financing, that we can get the buy-side competitive with PE through a bank note.

Nick Asmus:

And that's a good point, Scott. That's how we felt. I felt like it was fairly priced, which I think on some metrics people would define that as it was expensive, but I think it was fairly priced. But the nice thing is, like Scott said, that we had a banking relationship here locally and it was great. It was a good relationship and Scott wanted to see if he could compete for it and I said, "Absolutely. Let's see what you guys can do." And they did. They came back and they have a deep relationship with other banks.

Nick Asmus:

And as we continue to grow, what SkyView and Scott were able to help us with is get a bank partner that will grow with us and could restructure our bank situation, our bank in order to compete with private equity, in order to compete and continue to grow because if there's not a lot of... Like I said earlier, we have competitive advantages with ESOP and other things, and we don't want to lose out on the ability to acquire. I mean, we were really pleased with that side of the business, as much as the investment banking side.

 Scott Wetzel:

Well, and Mike, I appreciate you bringing that up because synergistically for our sell-side client, look, if the buyer can't show up with the check and can't deliver funding at close, we don't have a transaction, right? Really at SkyView, the first thing that we did is solve for the financing piece and it worked backwards to listing and investment banking. But really, the ability for us to deliver a competitive financing package to Nick enabled us to be a more, I'm trying to think of the right word here, but more diligent, but a more aggressive representative of our seller in terms of pricing because one of the things we did with the buyer finalists was we had them speak to our credit team and say, "Here's how you can afford this. It's called a ten-year amortization with a bank note and this is why this price is attainable." And that's really key to really leveling the playing field between the billion dollar RIA, like Nick did that is not accepted PE funding, nor do I think you ever should, and really can compete through utilizing conventional bank financing.

Nick Asmus:

I was just going to say that, Scott. I don't know if anyone on this is of that size and that range, but I do feel like a lot of firms that get to that 1, 2, 3, whatever that is, they want liquidity and they turn to PE and that's where they get their liquidity [inaudible 00:41:06]. I see it over and over and over again and I think if I'm one of them, consider other options. Not that I want more competition, of course, in this space. Careful what I say. But truthfully, I mean, there's-

 Scott Wetzel:

Yeah, and we do work with some of the PE firms. In all good nature, I did just say this the other day. I think a sentence that's never been said on Wall Street is, "I just got the best deal from a PE firm yesterday." No, PE partnerships are interesting, but if you're on the sell-side though, as an advisor, PE firms are coming in and they're extremely aggressive. These are really smart people. They're pricing at levels that we've never seen before, the historic two or two and a half times revenue. We can just throw that out the window. It's over. PE has changed the game and really, at the end of the day, they raised market prices for everybody, Nick included, that now his practice is worth a lot more because that injection of capital that PE has provided.

Mike Langford:

That's fantastic. Quick question, before we... Because we're getting ready to wrap it up here. I see we're getting close to the end of our time together. Is there firm size requirements for working with the investment banking side at SkyView or is it just [inaudible 00:42:28]?

 Scott Wetzel:

Yeah. Well, we're looking for an engagement. The amount of time and resources that goes into each engagement really does require us to put a bit of a floor in. We're really looking at firms and probably a minimum of 75 million in AUM and a purchase price of a million, 5, 10 million, and then all the way up because really, the complexity of the transaction does not change materially with the size of the practice. Actually, when you're dealing sometimes with a much larger practice, let's say Nick needed assistance in selling Berger, but he's only 15. No, but Nick looks very young for his age, but at the end of the day-

Mike Langford:

Thank you. I thank you.

 Scott Wetzel:

... selling is a bit more sophisticated practice and a heck of a lot easier in a larger practice. [inaudible 00:43:17] is with that as well because they have everything defined policies. They have utilizing Salesforce whereas in many cases, we have to go in with sell-side clients and help them really stage their home, for lack of a better word, and help them clean up some of those client databases, update their social media, update their website to make them most presentable to the buy-side market.

Mike Langford:

Yeah. I like that. It's really smart. I always joke about when do you know you should be using a professional, like in investment banking and using commercial financing through a partner like SkyView Partners. It's one of the consequences of you doing a poor job if you did it yourself, right? I always tease my dad because he refuses to hire a contractor for anything, right? He's always been a DIY-type guy and there were many occasions where it really shows like, "Dad, did you hang this door yourself? It looks fantastic." But there are certain things where it's like, "Okay."

 Scott Wetzel:

I think it's safe to say that I'm eating my own cooking because we have an investment bank that represents SkyView and our retainer with them is in the... It's in the seven figure range every year. We are an investment bank yet we require the services of an investment banker to get other things done here at SkyView that we are not well nuanced at. We're very, very good at what we do within the RIA marketplace but when it comes to engaging bank partners and bringing on those relationships, we rely on the expertise of an investment bank and I couldn't do it without him.

Mike Langford:

That's phenomenal. That's fantastic. Well, Nick, we're getting ready to close it out as I mentioned, but I'd be remiss if I didn't ask. This is one of my favorite questions to ask is, what are a few things that you've learned along the way, or what are things that maybe you wish you knew before, or maybe even more a fun way of putting it is, what were the surprises? Where were the surprises that popped up whether it's this transaction or others that you've been like, "Oh, I didn't see that coming. Wish I knew that was coming and here's what I would do differently in the future."

Nick Asmus:

Well, and I think Scott said this earlier too. I think the number one, especially for people who haven't bought before is everyone talks about price. Price should be last. I heard experienced people talk about this when we started getting aggressive too and I didn't get it as much as I do now that price is important obviously, but culture's number one. I mean, it has to be a match. Culture is the most important because you can make any price. Terms can fluctuate. You can make the price work as long as people are reasonable.

Nick Asmus:

I'd say that's the biggest thing. The other thing I think as a seller is people don't think about, or I want to say either a seller or buyer, if you do it right, retention is high. A lot of people, I think, have a fear that we're only going to retain 75%. We're only going to retain 85%. I mean, if you do it right over our 12 transactions, I think we're averaging somewhere between 93, 96% client retention across the board and I don't think that's an aberration. I think that's the industry norm. I think those are two things that I would think are probably the biggest surprises.

Mike Langford:

Awesome.

 Scott Wetzel:

And Mike, I'll throw out the number one thing for us. It's always amazing to me that financial advisors spend their entire career listening to their senior citizen clients talk about their jelly bean collections. But then when they go to buy an advisor's practice, they fail to do the same thing they've been doing their entire career and it's just listen. And working with Nick and our top buy-side candidates, Nick was listening to our client, listening to us. This is what is important to our client therefore, it was important to us at SkyView. And some of the advisors come in on the buy-side and say, "Well, this is how we do things and we're going to change things. We're taking your name off the door and we're getting you out of here."

 Scott Wetzel:

Nick listened and for every other practice we're selling at SkyView, without thinking about it, we say, "Oh hey, the particular advisor, well, he or she listens." And if you're trying to engage someone that's not represented by an investment bank, really sit down and just ask the advisor what they're thinking about doing, what they want the rest of their career to look like, and make sure they define what they're looking for and see if it's a fit and they fail to miss that step but truly, this is... And Nick, it was wonderful working with him too because he's accustomed to the emotions that every seller faces near closing that we'll all have to turn over the keys one day. And so, I am exceptionally empathetic to that decision of someday I'm not going to have the key to the door at SkyView.

 Scott Wetzel:

I don't want to talk about it, but Nick, through the process, I called him at the end, and our client was a little slower towards the end and I'd call Nick and say, "Hey, sorry, we're going offline here for a bit," and he goes, "Oh, no worries. This is very common. We're accustomed to this," instead of saying, "Hey, this was supposed to be done last Tuesday." He listened and he understood and he was empathetic to the fact that this is an emotional decision for everybody that's built a practice over 20, 30, 40 years and not an easy one. And just because they're getting a big check, it does not assuage the emotion that goes along with making this transaction.

Mike Langford:

That's a really, really smart guidance.

Nick Asmus:

Well said.

Mike Langford:

Nick, is it safe to assume that Berger Financial will continue to grow via acquisitions? This isn't the last one, right? You're just like, "That's it. We're over."

Nick Asmus:

No, great question. No, I mean, we want to continue. Everyone is different. Everyone is unique and we still feel like we're learning after each transaction and we want to keep polishing that up. Obviously we don't want to get over our skis. Slow and steady, so methodical acquisitions, but absolutely, this is something... We have goals for every year and five-year, ten-year targets of pretty aggressive acquisition goals that we are going to continue.

Mike Langford:

Awesome. Well, I assume some of the viewers, listeners might be like, "Hey, not only is Nick incredibly handsome in his buttoned-down, short sleeved shirt, but it sounds like an attractive place, Berger Financial, for me to consider as an acquisition partner for my business. What's the best way for somebody to reach out to you?

Nick Asmus:

Well, I appreciate the sales pitch there, Mike. Yeah. No, we just love conversations too. Even just if they have questions about any of the topics we're always engaging and we're fairly friendly. Local or not, doesn't matter. But yeah, I mean, they could just send me an email. It's just nick@bergerfinancialgroup.com or give us a call. You can find us on our website too.

Mike Langford:

Perfect. Perfect. Well, this has been a fantastic conversation, Nick, Scott, thank you both for joining me today. Hope you have a great day.

 Scott Wetzel:

It's always a pleasure. Thank you, Nick, for having me on. Appreciate it very much.

Nick Asmus:

Thanks, Scott.

Mike Langford:

Thank you very much for joining us today. It was fantastic having you with us. I hope you feel a little bit of extra confidence in your own opportunities for M&A activities, whether you are on the sell-side and looking to find the best partner to continue your legacy or you're on the buy-side and looking for opportunities to grow. I think you'll agree, this was a fantastic episode to get some ideas flowing and to build that confidence as I mentioned. Huge thanks to Nick Asmus for joining Scott and me today as well. It was incredibly generous of him to share how the Berger Financial team is approaching their own growth via the acquisition path.

Mike Langford:

Okay, before I let you go, if you have a moment, please make sure you subscribe to the Advisor Financing Forum Podcast on your favorite podcast platform or YouTube. Of course, we're very active on YouTube as well. If you haven't done so already, please do make sure you subscribe and give us a comment. Let us know what you think. All right. We're putting all sorts of great content out there. You're not going to want to miss any of it and we want to hear from you. What do you like? What do you want to see more of? Who would you like to see on the show? The call lines are open. We're waiting to hear from you, okay?

Mike Langford:

Lastly, make sure you swing by skyview.com to learn more about your options for a financing to facilitate your plans for buying or selling an RIA or independent financial advisory firm. The SkyView team is there to help, not only with that financing, but also to help you discover opportunities for deals using APO, and to really get the deal flowing and close with the investment banking teams help as well. Awesome stuff. Make sure you reach out, okay? That's it for today. Hope you are having a wonderful day. Hope you're staying safe and be nice to each other, okay? We'll see you next time on the Advisor Financing Forum Podcast. See ya. Bye.