The distractions caused by integration can lead to project delays, miscommunications and operational inefficiency. Consultants may struggle to access the information and tools they need to deliver quality work, further jeopardizing client relationships. In some cases, clients may become unwilling participants in the integration process, forced to adapt to new systems and processes that may disrupt their own operations.

Landmine 5: Talent Drain
A key asset for consulting firms is their people. Consultants bring their knowledge, experience and relationships with clients to the table. Many of these top consultants may feel uncomfortable recommending that retired participants roll over their accounts from an institutional retirement plan to a retail IRA with the advisory firm. Others may reject the notion of cross-selling proprietary investment products over independent, objective investment recommendations. During a merger, the new demands of the acquiring firm, with uncertainty and instability, can trigger an exodus of top talent. Consultants who are uncomfortable with the changes or see limited career opportunities in the new organization may seek employment elsewhere.

This talent drain can be detrimental to both the acquiring and acquired firms. The loss of experienced consultants can weaken capabilities and hinder the ability to deliver on client commitments. Clients may also lose trust in a firm that appears to be hemorrhaging talent.

To successfully navigate the minefield of acquisitions and consolidations, advisory clients should consider the cultural integration of an acquired firm and pay meticulous attention to the motives of the acquiring organization. Many of these mergers have diluted the distinction between broker advisors and independent advisors, moving to arrangements fraught with higher fees, conflicts of interest and the potential for increased liability for clients. Given the recently settled and outstanding litigation related to cross-selling, it seems imprudent for advisory clients to engage in practices that may increase liability.

Rick Rodgers, AIFA, is a principal and consultant at Innovest Portfolio Solutions. Rodgers is a member of Innovest’s Retirement Plan Practice Group, a specialized team that identifies best practices and implements process improvements to maximize efficiencies for our retirement plan clients. He is also responsible for new business development in Innovest’s retirement plan practice. 

Frank Cornett, CFP, is a vice president, consultant and a member of the Education, Due Diligence Team, Investment Committee and Capital Markets Group. Cornett provides consulting services to Innovest’s high-net-worth and retirement plan clients. Innovest’s education team prioritizes educating plan participants to understand the nuances of their retirement plans and simplify financial planning concepts.

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