As part of that approach, we are also seeing many firms grapple with the “build it or join it” question. For those mid-sized firms who have had success over the years, but now find themselves at a crossroads to get to the next level, they are faced with the daunting and risky task of raising capital, acquiring talent and weathering the time it takes to build out the technology, operations and service models needed to gain scale and growth.
While heading out on this journey, existing clients often find themselves neglected as firm resources are focused elsewhere on the build-out of the firm and become at-risk of leaving. Additionally, many principals don’t factor in the support and recovery resources that will be needed if it doesn’t work out and their grand vision fails to get to market. Will you have enough capital to recover and rebuild if things don’t go according to plan?
Because of this high-risk profile for “building it” including the expertise to do it, many firms are finding success joining existing firms that already have built out the front- and back-office infrastructure that can scale with growth, have a full suite of services to offer, and the capital to reinvest in the business for long-term value creation. By joining, mid-sized firms can get rid of the administrative, compliance and HR tasks that many of them loathe and instead find themselves, their clients and their staffs with a much better experience without having to bet the ranch on a build strategy just to achieve a similar result.
Yes, 2021 was a record year across the board and I think that 2022 will even bigger as the industry continues to change and evolve. The good news for everyone is that fiduciary advisors will remain in high demand, continuing to fuel the growth and success of the RIA industry.
Dave Barton is vice chairman for Mercer Advisors and leads the firm’s M&A practice, having successfully completed 57 deals representing $22+ billion in AUM.