Acquiring an Advisory Practice: A Decision Beyond the Math Part 2

Acquiring an Advisory Practice: A Decision Beyond the Math Part 2


Exploring the Psychology of an Acquisition

By: Charlie Latimer, Director of National Recruiting
Published May 22, 2019

Extending from part one of last week’s blog, I wanted to highlight a few additional areas to consider when navigating through the psychology of an acquisition. While much of this may appear as common sense, no doubt we all tend to overlook the simpler side of things. Acquisition discussions clearly take on a life of their own as every deal is different, so be prepared to navigate through the psychological continuum of possibilities.

Managing the Psychological Aspect of Acquiring an Advisory Practice
  1. Paint the Winning Picture. Separate from price, what are the seller’s wins? Some sellers have a clear sense of what they want while others don’t. It’s your job as the buyer to identify their range of wins (big and small) and show them how such wins will be realized. They don’t have to win every win, but leading them down a path of discovery might reveal wins they haven’t even thought of. Some that come to mind are: helping the advisors understand that their legacy will live on, invigorating their practice with organic growth, bringing a new service capability that their clients will be excited about, providing the seller’s practice with operating leverage and technological advancement improving productivity, positively impacting the overall value proposition and client experience, etc.
  2. Stage it like a Pro. “Stage yourself” and be prepared to tell a compelling story. Much like realtors will make a home more appealing by “staging” it, buyers have to stage themselves and become the absolute best version of themselves. The seller wants to understand the various ways the deal will be accretive to their stakeholders (employees and clients) in a non-financial sense. Things such as their approach to wealth management, client service, a vision of the future, office culture, and the relentless pursuit of providing value are just a few aspects. Operationally, it would be wise to demonstrate how your technology is leveraged to automate time-consuming, non-value added tasks with process-driven, repeatable workflows that yield consistent results. Generally, you want the pair the seller’s vision and the unrealized goals they have for their firm and bridge that gap with what you bring to the table.
  3. Plan a Smooth Transition. Provide alternatives as to how the consolidation of firms can be executed over time to minimize client, employee, and operational disruption, not to mention unforeseen challenges. The speed of consolidation should be reflective of the seller’s comfort zone. Merging brands, websites, and intellectual property should be expected to happen in the immediate term. However, downsizing is a separate, delicate consideration. If in approaching the seller, the emphasis is on cost reduction through eliminating redundant, overlapping expenses, it would be wise to tread with caution where human capital is concerned. The seller may have a deep sense of affinity with their staff and feel protective of them. While eliminating positions will become an inevitable necessity as the new relationship consolidates, a heavy-handed approach may be perceived as threatening by the seller (even if it is the most logical course of action at the onset).

If you’re a buyer, you need to initiate these conversations directly with other advisors.

As a general theme, succession planning is a major problem for many RIAs, which are essentially small businesses. Interestingly, many advisors who think they are in the market to acquire other firms, are actually great candidates themselves to be acquired since they realize that scale and differentiation are critical to success in the evolving competitive landscape. They very well may be more open-minded to exploratory conversations than one might expect. That said, allow your active listening to identify their emotional queues and what they attach importance to and bridge any gaps with a great story! Think of it as a little fairy dust, if you will.