An increasing number of well-established, independent financial advisors have begun to pursue a planned exit from the profession. This accelerating trend has introduced a surge of new acquisitions-based growth opportunities for independent financial advisory businesses. But being presented with an opportunity to acquire a business is one thing; being able to capitalize on that opportunity is another.

Even when advisor-owners of fast-growing independent practices want to aggressively implement new acquisition initiatives, finding true “blue ocean” opportunities are elusive for many. Aside from serving existing clients, pursuing new prospects and cultivating client referral sources, many successful independent advisors also oversee a number of other areas within their business, such as marketing, operations, supervision and administration.

One potential solution that is starting to gain more acceptance is for independent advisors who are serious about growing through acquisitions to hire a dedicated "mergers & acquisitions czar." This is a senior professional whose primary responsibility is to hunt down transaction opportunities that are a strong fit for both buyer and seller, and make a deal happen.

While on the surface this idea sounds simple enough, independent financial advisors who have decided to hire a dedicated M&A czar should take the following three steps to maximize a successful outcome for their business:

  1. Hire your M&A czar from frequently overlooked segments of the industry. Two frequently overlooked areas to consider are industry veterans (retired executives in the areas of marketing, sponsor relations, business consulting or sales) as well as senior product wholesalers seeking a career change. Think about it—these individuals, based on their wide-ranging professional networks, breadth of experience and industry knowledge, have an ideal resume for a position like this, with the ability to speak the language of the advisor community across business models and niche markets while easily generating trust and credibility. 

  2. Get creative in how you structure the role. Rather than think about this role as a traditional W-2 position, with a set salary and other fixed, inflexible costs, a better approach might be to create an independent contractor role. On top of operating as an M&A specialist, the person in this role could also be tasked with servicing a portion of the new business they bring to the firm (while also keeping in mind the broker-dealer’s policies surrounding outside business activity). Building on the above point, it’s not at all uncommon to encounter home-office team members or wholesalers who were once advisors expressing a desire to work with clients again on a limited basis.

  3. Arm your M&A czar with the tools to succeed. In conjunction with your broker-dealer, develop an M&A pitch book that clearly articulates why your independent advisory practice represents a good fit for selling advisors. Much like a prospective client brochure details the benefits and services of working with you, an M&A pitch book should be designed to promote your firm for a B:B audience with the goal of recruiting the advisor and/or book of business. Included in these materials should be an explanation of your value position and long-term vision, firm financials and organizational design, as well as the various compensation and affiliation options available based on the seller’s exit strategy. Leveraging confidentiality and non-disclosure agreements during the negotiation process also helps position your firm as a seasoned acquirer of advisory practices.

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