Much less of a problem for these growth-oriented advisors, but still sources of unhappiness, were operational and compliance problems, disagreements about the strategic directions of their firms after the sale, or the emerging firm’s culture.
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.”
Being Critical
Since more advisors are likely to sell or merge their practices in the coming years, it would serve them well to bring a critical eye to potential acquirers and merger partners. It’s easy to be enthralled by promises of big money and the promise of ample business development and support services. So advisors need to be highly confident that their expectations will be met before they do deals.
Good word of mouth about the deals will help the acquirers, too, as they pursue new targets and partners. About a third of the satisfied advisors who sold or merged their firms said they recommended their acquirer or merger partner to other advisors. (See Exhibit 5). A good reputation can create a more robust pipeline for an acquirer and win them more acceptance.
But keep in mind: More than nine out of 10 dissatisfied advisors have criticized their partners to other advisors (Exhibit 6). Unhappy people tend to be vocal, and it’s likely bad news will steer advisors away from buyers or harm their reputation.
But much of a good relationship starts by managing expectations in the first place. If an acquirer overpromises and underdelivers, it’s detrimental to everyone involved. They need to be clear up front and make sure that a seller’s expectations are realistic.
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.