Acquirers in the wealth management industry these days aren’t looking for sleepy one-person firms but those with specific characteristics.
Here are four qualities that they seek:
1. A defined and scalable investment philosophy. One firm which with I am working decided from the day that it launched that its value was grounded on its investment discipline and research capabilities. It is involved with many merger candidates that are eager to have this type of platform and skills.
These candidates get a clear and well-articulated investment process that works for their clients and allows them to focus on client acquisition and service. Judging by their pipeline and quality of advisers with whom they are in talks, this strategy is resonating with advisers looking to join a growing and professional enterprise.
2. The right talent. We often look at growth though the “increase-assets-at-all-costs” lens. Recently, one of our firms took a very different approach to their plan for growth, doing a full review of the solutions that it provides clients and realized that there was a gap in its offerings.
The firm developed an ideal adviser profile and marketed the request to its sources. It saw significant lead flow and hired a talented partner who owns the responsibility of financial planning at the firm.
Since getting the right talent, the firm is engaging clients with its newfound planning capabilities, which has helped win new assets.
3. Strong financial controls. This is a requirement in the competitive and sophisticated wealth management market. It is critical for registered investment advisers to not only enforce strong financial controls on spending but also to keep meticulous financial records including tracking assets, cash flow and revenue growth.
It is also important to structure risk controls around legal issues and compliance.
4. Service that is aligned with clients. Re-engineering the firm's service model often leads to a couple of points of awareness. One of Dynasty Financial Partners’ firms recently ran through the exercise of segmenting clients and service levels to ensure that it was relevant and valuable.
We challenged the firm to turn the process on its head and pick a price point that would provide revenue growth and profit expansion.
As it went through the process of re-engineering the service levels for each client segment to meet the defined price point, the firm realized that many of its clients weren't profitable based on legacy activity and service support. The firm also experienced an awareness of missed opportunities to raise its service levels.
The firm is operating under a defined service model that is laser-focused on solutions that address the specific needs for each segment at a price point that it can more than justify and feel good about. Clients are satisfied, different solutions are being implemented that will aid retention, and profits and revenue are on pace for a record year.
These are four major characteristics sought by wealth management acquirers. Other important considerations are having a clearly articulated plan for growth and a plan to connect to younger generations.
This story is part of a 30-30 series on strategies to boost your practice.
