Brett Van Bortel, director of consulting with Invesco Global Consulting, observes, “Aggregators must place a premium on accurate expectation setting with recruited advisors. They need a clear, implementable strategy for organic growth and the resources and expertise to help advisors implement it. Without it, expectations become empty promises very quickly.”
Implications
As noted, more advisors will sell or merge their practices in the coming years because of demographics and competitive pressures. These advisors would be well served if they were especially critical of potential acquirers and merger partners. It is easy to be enthralled by promises of big money and a plethora of business development and other support services. The advisors need to be highly confident that their expectations are met.
From the perspective of the acquirers or merger partners, positive word of mouth would be very beneficial, as many are likely looking for advisors wanting to sell or join. About a third of the satisfied advisors who sold or merged their firms said they recommended their acquirer or merger partner to other advisors (Exhibit 5). This can only be beneficial by creating a more robust pipeline and more positive acceptance of an acquirer or merger partner.
In contrast, more than nine out of ten dissatisfied advisors have criticized their partners to other advisors (Exhibit 6). Unhappy people tend to be more vocal about their situation, which is evident here. There is a high probability that negative comments steer advisors interested in selling or merging away from these acquirers or merger partners, and the potential partners are none the wiser.
Firms looking to grow through acquisitions are rewarded when they know what will happen to advisors who sell or merge with them. Overpromising and underdelivering are detrimental to everyone involved. Clarity is essential, and expectations must always be realistic and kept in alignment.
Jerry D. Prince is the director of Integrated Academy, part of Integrated Partners, a leading financial advisor firm. Russ Alan Prince is the executive director of Private Wealth and a strategist for family offices and the ultra-wealthy. He has co-authored 70 books in the field, including Making Smart Decisions: How Ultra-Wealthy Families Get Superior Wealth Planning Results.