How firms deal with the return to the office following the pandemic will determine, in part, how successful they are at retaining top talent, according to Bernie Clark, managing director and head of Charles Schwab Advisor Services.
A workforce wants flexibility in their work environment, Clark said at the DeVoe & Company M&A + Succession Summit in San Francisco on Friday. At the same time, there is value in creating a community in the office, he said.
“Many advisors want to get back into the office, but with a better balance between office and remote work,” he said.
Clark and David DeVoe, founder and CEO of DeVoe & Company, a consulting firm and investment bank, discussed trends in the financial industry and the merger-and-acquisition activity that continues to define it.
At least half of advisory firms will retain some element of remote work for their advisors after the pandemic passes, both executives agreed.
“I believe advisors have always had flexibility in their work environment,” Clark said. “But you also need a community in the office. Firms will want to be attractive to the best possible talent, including young talent. There is a new generation that is going to shape the environment for coming back into the office.”
A trend that is well established in the financial industry is that firms are getting bigger and will continue to do so. “But there will always be a place for the small and mid-sized firms,” DeVoe said. The industry has seen more deals where billion firms are merging to create even larger entities, including ones like Schwab, which is in the process of integrating TD Ameritrade with its organization. DeVoe noted that firms that want to sell are going to have to “cut through the noise” to find the best deal.
Currently, there are two buyers for every seller, he added. Buyers want to buy talent and sellers want to add services for their clients or prepare themselves for succession to the next generation of advisors.
Most buyers in the market now are seasoned acquirers who already have completed at least one acquisition, DeVoe said. Only 15% of deals last year were done by firms that had not previously completed at least one merger or acquisition. Deals can range from just an influx of capital to a complete takeover or anywhere in between, he said.
Despite the number of successful mergers and acquisitions that are taking place, succession planning continues to be a problem in the financial industry that needs to be solved, DeVoe said. Twenty years ago, 20% of advisory firms had a succession plan; 10 years ago it was about 24%; now it might be 30%, he said. “We have put in a lot of work trying to increase that number, without much progress,” he said.