As the past 12 months have demonstrated, the future can be difficult to predict with any accuracy. With a new president settling into office and the pace of COVID vaccinations gradually picking up, however, some key opportunities are coming into focus for growth-minded advisors.
Many of these opportunities revolve around a coming acceleration in practice M&A–and should be top of mind not only for advisors themselves but also for the wealth management firms that support them.
In short, the pandemic has condensed many potential sellers’ timetables for exiting the business and will most likely create new avenues for hungry buyers to grow through acquisition in the coming years. Taking advantage of this development will mean laying a solid foundation for navigating the M&A market–starting today–as well as filling gaps in advisors’ tech platforms as they seek to automate their practices and become more rapidly scalable.
Here are some key steps advisors can take to turn these trends into growth opportunities over the next four years:
Renew Preparations to Expand Through M&A
While the pandemic’s full impact on the M&A market remains to be seen, there are strong indications that it has shortened many veteran advisors’ time horizons for exiting the industry. Many who had been planning to retire in five years are now interested in leaving within two or three instead.
To capitalize on this faster-moving market, it’s incumbent on prospective buyers to familiarize themselves with the basics of valuation, deal structures and legal requirements, as well as the acquisition support their wealth management firm partners can provide.
Many such firms, for example, offer training and education on the M&A process; help with identifying ready sellers in their networks; and assistance in facilitating financing. Some well-run firms can even offer competitive financing options themselves.
Advisors whose businesses are prepared to scale quickly and effectively will have a critical leg up in this coming environment–making technology and practice automation (as addressed below) even more important to driving growth.
Prospective acquirors may also want to start exploring the market by building relationships with potential partners. This process could be as simple as making more phone calls to fellow advisors, becoming more active in community organizations, having staff send letters to identify potential sellers or attending more virtual industry events.
Step Up Practice Automation
The shift to remote work during the pandemic has further clarified the crucial role technology plays for advisors in operations, client service and client interaction. The coming uptick in practice M&A opportunities will further highlight the need for advisors to leverage the potential of digital solutions as fully as possible, even if they have already made some strides toward automating their practices using cutting-edge technology.
Carefully auditing existing technology platforms is a good starting point. Do they have a solid CRM, for example, but not an account opening solution that automates the process of obtaining client signatures? Do they have solid portfolio management systems, but not a collaborative financial planning platform?
Whether it’s moving quickly to acquire an attractive practice from a retiring advisor or bringing on additional assets from existing clients, capturing growth opportunities in the years ahead will require advisors to work with the wealth management firms that support them to fill any gaps in their practices’ digital capabilities and turn their businesses into nimble, scalable client acquisition and service machines.
Clients today expect a more integrated end-to-end digital experience in all the aspects of their lives. By conducting an in-depth review of their technology capabilities and filling gaps expeditiously, advisors can meet these expectations—and free themselves to drive additional growth, less hindered by limitations on their client service capabilities.
Mark Contey is chief business development officer for LaSalle St., a family of firms comprising an independent broker/dealer, an SEC-registered investment advisor, and a provider of annuity and insurance products.