How to Prepare for a Wealth Management Acquisition

First and foremost, if you are interested in a wealth management acquisition, you need to secure RIA financing and form a relationship with a bank that funds wealth management loans. Most wealth management acquisitions fall apart due to the buyer's inability to obtain RIA financing and financial advisor loans. In a hyper-competitive M&A market, RIA financing and its immediate liquidity can be a significant deciding factor in a wealth management acquisition.

There are situations when an SBA loan is appropriate for RIA acquisition financing and other scenarios where conventional financial advisor financing is most accommodating. Ensure that you evaluate your options for financial advisor loans before funding. SkyView Partners can aid advisors in the selection of an appropriate loan structure and RIA lender.

For tips on how to set yourself apart from a crowded field of buyers, follow these simple steps.

Transition Process

Advisors should begin preparing clients for acquisition as soon as possible. Clients applaud complete transparency throughout the acquisition process. There are several key considerations for a successful wealth management acquisition:

• How long will the selling advisor continue to service clients?
• Are specific employees assigned transition responsibilities?

Service Model

Different practices have a myriad of approaches as to how they service their client base. Some advisors have a documented service model segmented by client AUM or revenue. Other advisors custom tailor services for each household. Regardless of service structure, key questions emerge:

• What service model have clients become accustomed to in the past, and what will they receive going forward?
• Which personnel have been client-facing in the past?
• Will client-facing personnel be retained by the acquiring practice?
• Which service members will be client-facing going forward?

Investment Philosophy

Advisors' approaches to their clients' investments vary greatly. Some advisors have a clearly defined investment process uniformly applied to all clients via model portfolios. Other financial advisors custom tailor the investment portfolios for each client. Important considerations:

• What investments are currently held in clients' portfolios?
• Will there be a significant change to clients' portfolios due to the acquisition?
• Are there any tax consequences of portfolio changes?
• If changes are implemented, who will communicate the changes?
• Will a member of the seller's practice communicate the changes?

Fee Structure

The decision to utilize commission-based shares, annuities, life insurance, or advisory fees varies among advisors. When advisory fees are utilized, the percentage charged by different financial advisors may vary. Client considerations around fees are crucial to a successful transition, including:

• Will there be a shift from one type of fee structure - commissionable versus advisory?
• Will there be a shift in the transparency of fees?
• Will the seller communicate fee changes to clients?
• Which personnel will be included in discussions around fee changes?

Geographic Footprint

Practices differ in their geographic diversification. Geographic considerations may include:

• How will remote clients be serviced?
• Are satellite offices required?
• What costs will be incurred from remote clients?

Technology

An advisor's integration of evolving technology is commonly driven by their respective IBDs. Key considerations for technology consolidation include:

• Are the buyer and seller at different IBDs?
• If so, what technology platforms are utilized at each?
• If differences in technology exist, which programs will be utilized going forward?
• Should the consolidated entity consider other/new technology?

Personnel Integration

A client's decision to stay or leave the new consolidated practices often hinges on retaining client-facing personnel. Daily communications are commonly assigned to select staff members, who have more frequent contact with clients, rather than the selling advisor or a chief investment officer/analyst. Personnel decisions are crucial to transition success, such as:

• How long will the selling advisor remain in contact with clients?
• Is there an overlap in personnel?
• If so, will responsibilities be reassigned?
• Will personnel be terminated?
• If so, who will communicate terminations to personnel?
• What impact could personnel termination have on client conversion?

Culture

Advisory practice culture is unique to each practice. Both buyer and seller need to recognize cultural differences and address several key considerations:

• Is there a clearly defined organizational chart at the newly combined firm?
• What are the expectations for work ethic at both firms?
• Were “summer hours” employed at the acquired practice?
• What is the PTO policy of both practices?
• Will there be changes to benefits packages?