Asset managers should have realistic expectations. Just because you are partnered with a firm with distribution does not mean they will drop everything and focus on you. They have other strategies to focus on. You want to ask the right questions in the dating phase to ensure their other strategic partners are having a good experience and are raising assets.
Make sure both sides have skin in the relationship. Sometimes the niche manager does not want to bring capital or pay for any collaboration with the strategic partner. They believe they brought the investment expertise and that is enough. At minimum, they will need to play an active role in the sales and marketing process that is now led by the strategic partner.
Asset managers want to make sure the cultures are a good fit. We try to source opportunities where we believe that will be the case. Sometimes, however, it’s good for a firm to walk away from the deal if they will be uncomfortable in the relationship.
Hortz: Any other thoughts or recommendations you would like to offer smaller-to-mid-sized asset managers about the options they have in today's business environment?
Sondhelm: There are clear trends that asset managers need to embrace if they want to grow. Many firms are nearing a tipping point where the only way they can survive, let alone thrive, is to think strategically about their future and how they can maximize their possibilities.
The timeframe from deciding to pursue a strategic partner to closing a deal can take months or years. It might take several months just thinking through who the right buyers are and the kind of arrangement that makes the most sense. It can take several months to position your firm for maximum appeal. You can spend another few months in discussions with potential buyers before finding the right partner and another few months negotiating final documentation.
The point is that the process can take a while, making it critically important to consider what is possible now to maximize your options and increase your chances for a positive outcome.
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation, and unique client/community engagement strategies. The institute was launched with the support and foresight of our founding sponsors—Ultimus Fund Solutions, NASDAQ, Pershing, Fidelity, Voya Financial and Charter Financial Publishing (publisher of Financial Advisor magazine).