Balasa, Dinverno & Foltz gained many efficiencies after joing together.

    Sometimes the clichés are true. Such is the case with the two smaller Chicago-area financial planning firms that merged four-and-a-half years ago to become Balasa Dinverno & Foltz LLC. The resulting total has proven to be far greater than the sum of the two parts, both in terms of assets controlled by the growing firm and the satisfaction of the parties involved.
    Balasa & Hoffman was a ten-person firm in Schaumburg, Ill., co-owned by Mark Balasa, a talented investment advisor with a background in accounting who loved the technology side of the business and ran an informal, sort of free-flowing office.
    His good friend, Armond Dinverno, who shared Balasa's accounting background and was also an attorney, was more of an organization person who would rather read a book about management style than deal with a software issue. He and Michael Foltz had a law firm in Oak Brook, Ill., that had evolved into the investment advisory firm of Dinverno & Foltz. By the time the leaders of the two firms began talking about merging their businesses, both had switched to fee-only investment services and provided a full range of financial planning services. But each found they were beginning to feel the constraints of their size.
    Now, not quite five years after the lengthy merger was accomplished, they have more than doubled the firm's assets under management, from $450 million, and yet have grown by only one more employee to 21. They still service business owners, entrepreneurs and executives, but they have increased their minimum for a client's investable assets from $400,000 to $1 million, with most clients falling in the $2-million to $20-million category.
    "We were both good, but you can get in a rut and you have to think outside the box in which you live. Mark and I were coming at this from two different vantage points, but fortunately both of our firms were willing to think outside the box," Dinverno says. The entire merger took longer than some of the biggest corporate mergers on the books. From the glimmering of an idea in early 1999, it was mid-2001 before the merger was complete-and then there was still more work to do.
    When Financial Advisor profiled the firm in 2002, Mark Balasa's partner, Dan Hoffman, was candid in discussing some of the merger and transition issues that followed creating the combined entity. "We've had to give up the more informal atmosphere; they, in turn, have learned to relax a little," he said at the time. Since then, Hoffman has left the firm.
    It took some time after that "before everyone was on the same page," Dinverno says. "We lost some people [including Hoffman] because they did not have the same expectations, and that is hard. But we are more focused and we can do so many things today that neither of us could do separately. We can use everyone's strengths" by allowing everyone to specialize. The firm now operates on a team approach: Clients who were with either firm before the merger retain their original advisor, but new clients are assigned to a team of professionals.
    Three thoughts are repeated over and over by the partners and other members of the firm when asked about the merger. Number one: Communication among all members of the firm before and after the merger is a key. Number two: The process is going to take longer than anyone thinks. Number three: In the case of Balasa Dinverno & Foltz LLC-the results have been "fabulous."
    "I did not have the skill set to manage more than ten people," Balasa explains, "and I felt we needed more depth. Armond and I had been friends for five or six years, but I probably did not fully appreciate our differences in styles and interests at the time. Armond is more focused on structure, and I am more willing to try things differently, sometimes to my detriment."
    By all accounts those differences in style and temperament are part of what has spelled success for the combined firm. But communication ahead of time, among both firms' partners and members, and a clear delineation of duties, especially when there are co-presidents, is key.
    John Wright, a partner in a private equity firm in Chicago, has been a client of Mark Balasa for many years. "I am an entrepreneur, and my concern about the merger was that they would lose that level of one-to-one service. The founder of any company has his own approach. Mark is a brilliant financial mind and Armond is good at operations, but when you have two presidents, it raises concerns. But the separation of responsibilities in the firm is so clear, there is no power struggle," says Wright.
    "When you scale up in size you usually lose that 'kill or die' mentality, but I have seen no drop off in the level of service, and that is impressive," he adds. "Everyone I have sent to them since the merger loves them."
    Janice Ciszek, who is now marketing coordinator for the firm, echoes the sentiments of the clients. She has helped not only Balasa Dinverno & Foltz grow, but she started with Dinverno when it was the two partners, Dinverno and Foltz, herself and a receptionist, and they had $32 million under management.
    "I have always worked for small firms, and it has been a pleasant surprise how well the principals work together here. Each partner has an area of expertise and there is not much overlapping. Armond is a planner; Mark loves technology and is a free thinker; Michael has 20 years in estate planning, and Heather (Locus) is an expert in retirement plans, education and college funding, plus she does a great job with human resources."
    For herself, Ciszek says she can now focus on marketing, instead of trying to work those duties around several others as she did before the merger. Members of the firm come from a wide range of backgrounds, including lawyers, accountants and MBAs, in addition to being CFPs, which allows the members to bring varying skills to the table.
    The larger size also allows the firm to save clients costs by aggregating investments for a number of clients. "We like to say one of the reasons the merger worked is because we dated before we married," Ciszek says. "We got to meet the other team (firm) and got to know everyone."
    While the merger was taking place, each member still had to concentrate on servicing clients. The firm has a 99% client retention rate and firm members are rewarded for that as well as for bringing in new clients.
    In the process of creating a new firm, Dinverno's organization moved twice, once to join Balasa's firm in Schaumburg and then to totally new quarters for both organizations in Itasca, so that space was no longer "mine" and "yours" but is now "ours." Balasa's people also had to get used to a more structured environment. The key to making all of it work, according to Locus, is to focus further into the future than you probably think is necessary.
    "We are always focusing on the next step. We are about to achieve $1 billion under management, but we are planning for when we will be a $5-billion firm. We are thinking about what is best for a 25-member firm and then a 30-member firm. We were good at this kind of planning when we merged, but we are even better at it now."
    Foltz agrees. "Each principal in a merger has to be as forward thinking as possible," he says. "Advance the time frame ten years, or 15 or 20, and see where you envision yourself to be. Sometimes people are so concerned about getting the deal done today, they do not think enough about the future. You also have to consider how to advance the careers of your professional staff because if they are all on board, obviously, you are better off."
    The larger size of the firm allows young professionals to hone their skills in an area of expertise and handle clients with substantial wealth, opening up a more lucrative career path, while still having the potential of making partner someday. Most of those recruited to the firm now are rising stars who are just starting their careers. One exception is Chuck Neff, a wealth manager at the firm, who joined the firm in February after he decided it was time for him to leave the five-person firm that he had helped create more than ten years ago.
    "I could have gone out on my own when I was ready for a change, but this combined firm seemed to be a powerhouse in terms of talent and expertise. On my own, I would have had to wear lots of hats," says Neff.