One recent merger of a financial firm from Connecticut with another from New Jersey, a deal that created a regional presence for both companies, offers a lesson to any smaller advisories looking to expand.

Lawrence J. Annello and Sheri Iannetta Cupo joined their firms after 10 years of working with each other. The existing relationship allowed them to smooth out some of the kinks that often crop up in these ventures. Both principals say they felt as if they were operating as one entity even before they actually were one.

The merger took intense planning and some adjustments. But now SAGE Advisory Group LLC in Morristown, N.J., with $59 million in AUM, and BroadView Financial Planning of Farmington, Conn., with $32 million in AUM, have re-emerged as SageBroadview Financial Planning in a deal completed this past January.

Mergers and acquisitions among smaller firms are growing, according to a Schwab Advisory Services 2013 report of activity in the market. The number of M&A deals among RIAs jumped 20% in 2013 over the previous year, while the average deal size declined by 38%, Schwab says.

RIA-on-RIA deals that dominated the year’s 54 transactions usually involve smaller firms, which is why the size of the deals declined.

The way Annello and Cupo conducted their long-term merger is ideal for smaller firms that want to position themselves as a regional force by joining together, says Annello, though it may not take everyone a decade to do it.

The marriage of their firms began as a chance meeting a decade before. Annello and Cupo sat next to each other at a Napfa conference in Mystic, Conn., in 2004, and started talking about their experiences and needs.

They came from different backgrounds. Annello first became immersed in finances when he was 16 and his mother passed away, “leaving me and my dad in survival mode on everything from managing money to learning how to cook. My dad taught me early on the lifelong importance of looking out for each other and making responsible financial decisions.” That is a philosophy he now tries to impart to his clients.

Annello started his career as an accountant with Del Conte, Hyde, Annello & Schuch P.C., an accounting firm. He began doing some financial planning work for the firm’s clients—an activity that eventually grew into the separate financial advisory business of BroadView Financial. The emergence of a separate planning firm from the accounting outfit was evolutionary, Annello says.

“I met Sheri and I started doing some tax preparation work for her clients.”

By 2012, he was offering investment advice and managing assets. BroadView was owned by the accounting firm, where Annello remains a partner. (He is now co-principal with Cupo at SageBroadview, which is owned half by the accounting firm and half by SAGE Advisory Group.)

Cupo had a completely different type of experience. She started as a corporate executive for General Electric, serving in a variety of financial and customer service management positions before abandoning it to study financial planning. She founded SAGE Advisory Group in 2001, working out of her home in Morristown, so she could care for her two young sons.

Just as the recession hit in 2008, Cupo broke her neck in two places when the family was involved in a serious car accident. The long, slow recovery gave her time to reflect.

“The experience strengthened my resolve to help others face their own challenges, especially in connecting their financial decisions with their deepest life goals,” she says. She went back to work, but her practice remained small: Cupo and her sister Lynn Iannetta Baker as staff.

Both Cupo and Annello found they needed more resources and personnel if they wanted to grow beyond their local offices. So the two principals first hit upon the idea to begin sharing the staff that neither firm could afford to hire on its own. David Principe and Chris Annello [Larry’s son] worked in the Connecticut office and were on the BroadView payroll, and Cupo reimbursed Annello for the time they worked for her. (Annello remains based in Connecticut and Cupo in New Jersey, and technology connects them, although they visit back and forth regularly, as they did before the merger.)

Although sharing services was working, the two firms were duplicating a lot of their work: Both were doing compliance, both maintained a Web site, they each had to deal with software issues. Merging seemed like a good option.

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