Wealth management firms looking to grow and scale and might consider a merger or acquisition (M&A) to seize growth opportunities.
Eric Godes, Senior Vice President and consultant with FP Transitions is focused on helping financial advisors value, protect, grow, and transition their businesses. He is known for transforming financial services practices.
After 30 years of running wealth management firms, he now helps others learn from his experiences – and avoid his mistakes. I had the pleasure of chatting with Eric about what firms should look for when considering M&A. Click on the video below to watch the full interview.
Transcript:
Advisors that want to grow through M&A – first of all, need to think long and hard about why that's a strategy for them. Advisors are growing in two different ways. They're growing with their organic growth strategies and they're also trying to grow through M&A. It's really important that no matter what you're thinking in M&A, you can still grow organically through traditional sales processes.
M&A for many firms is a last resort. They can't figure out how to grow organically. They don't have the right staff in place, the right training, so they think, well, maybe I'll grow through M&A because that's an easy way for me to add 25% more to my business. But that's a very difficult proposition, particularly for a firm that's never done an M&A transaction.
Firms that are thinking about making an acquisition need to keep in mind a few things. One, it's incredibly competitive right now. There are probably 50 or more buyers for every seller. So, like recruiting a new advisor, think about why this firm that you have your eye on would want to join you. Are you differentiated? Do you have an interesting value proposition? How are you setting yourself apart from the rest of the market because you will be competing with 50 other firms?
Finding the right firm to buy is very similar to finding the right successor to your firm. And for many owners of these firms, it is their succession plan. So I think you go through the same process as you do with any other successor. Make sure you have the right fit, the right cultural alignment, and the right business vision before it makes sense to even get deeper into the discovery process.
The first thing firms always need to consider before they consider making an acquisition is…is their own house in order? By that, I mean, do they consider themselves a well-run firm? Do they have the right technology and infrastructure? The right staff? The right people in place to help integrate this new firm? So that's the first thing you need to have a very specific strategy in mind of why you want to make the acquisition. What’s second? Second is the hard part. The second is finding the right partner firm. Probably the most successful that we've seen are people that you've known for many years. They may be the competitive firm in your town or your state, but they are looking for their succession plan. They don't have it internally. So they're going to look externally and maybe that external partner is you.
