Many brokerage-industry watchers agree that mergers and acquisitions can be rather tiresome for clients, eroding their confidence in the firms and, often, in the reps, too. Considering the wave of deal-making in the brokerage industry of late, you might think there would be a lot of disgruntled clients.
“Most clients have figured out by now that brokerage firms can be pretty ephemeral; they get taken over, and all of a sudden you're dealing with a totally different entity,” says Andre Cappon, CEO of the CBM Group, a Manhattan-based industry research and consulting firm.
Following the advisor to the new firm can be a real hassle for clients. The name change, the new operating system, account statements, products, etc., can mean more meetings, more paperwork and maybe even more fees. “Clients may resent their advisors and firms for dumping more on their already busy plates,” says Thomas C. Kane, president of Investment Program Solutions, a management consulting, training and coaching firm for financial firms and advisors based in Fairfax Station, Va.
That makes them a perfect target for a prospecting rep. “Think about it,” Kane says: “A merger can affect every one of your competitors' clients. So, why not position yourself as a stable advisor at a stable firm who can make their lives a little easier?”
How To Play This Game:
Size Up the Playing Field: It is an obvious first step, but one that Kane stresses will require you to do a good deal of homework — and be critical to your success. “Learn as much as you can about the changes facing clients who'll be affected by the merger,” he says, “so you can communicate intelligently with them about what's happening. Do you know anyone with accounts at either of the merging entities who might discuss things with you? Study the websites of both firms,” he says. And, ask yourself the following questions:
Which clearing firms are involved? What effect will this have on account conversions, and which firm will go through the conversion?
Will branches in the area close or consolidate? If so, will this affect clients' comfort levels and convenience?
Will multiple advisors be covering the same turf? How has the acquiring firm handled such conflicts in the past? Are any clients likely to be assigned to a new advisor?
How are advisors responding to the merger? Are any advisors planning to leave? That could create further confusion and discomfort for their clients.
Do advisors of either firm stand to get hit by increases in workload and/or inherited clients?
Does the acquiring firm have a history of passing along more expenses to the clients — such as inactivity fees, IRA fees, termination fees, etc.?
Will the new firm capture the cost basis on all points?
Does the acquiring firm have a history of pushing proprietary products?
Answering these questions will help you to position yourself favorably with prospects — and to illustrate how you can alleviate their discomfort, Kane says. “Be prepared to highlight your competitive differences with the acquiring firm.”
Market To Your Target Group: Reaching clients affected by a merger can be a challenging task considering brokers don't exactly publish their client lists. Kane offers two strategies he says can be used independently — or together — to help in your quest. The first he calls the shotgun approach: “Identify zip codes in which your competitors have branches, and conduct mass mailings there,” he says. “Take out ads in the local papers addressing the disruption often caused by mergers, and highlight your stability, consistency and other competitive advantages.”
“TD Ameritrade is running an ad campaign right now which digs at E*Trade Financial without ever having to mention their name,” notes Chip Roame, managing principal of Tiburon Strategic Advisors, a financial services industry research and consulting firm based in California. “They stress the notion that it's best to hang your hat somewhere ‘stable.'” This same strategy can easily be used by individual reps, he says. “I recommend holding seminars early on during the acquisition process based on this premise. You won't need to mention names, and you'll attract clients who, quite simply, are ‘tired of being acquired.’”
A second way to uncover ripe prospects is what Kane calls the “rifle approach.” Here, you look to close in on your target market by focusing on groups especially affected by the merger, he says. For example, the acquired firm may have a relationship with a particular local employer. “If so, approach that employer to discuss the impact the merger may have on its employees, and offer yourself up as a helpful resource. Perhaps you can conduct a seminar at the firm, or write an article for the company newsletter,” he says.
Another example of this approach would be to identify clients at closing branches and target them. And, since many clients frequently do business with more than one firm, spread the word at yours. Don't overlook your own clients, Kane says. “Unbeknownst to you, some of them may do business with the merging entities.” His advice? Simply call them and ask. “One of my advisors generated $100,000 of revenue in a month after two other firms merged, simply by leveraging her branch and calling her own clients,” he says.
Execute Your Plan: Create a timeline for yourself and follow it in a disciplined manner, Kane says. Be sure to act quickly to catch prospects in the midst of a change. “That's when the deepest negative reaction is likely to arise, and those unhappy with the situation will be most open to other options.” Remember that the conversion process, loss of a branch or an advisor, increases in fees, etc., do not occur at the onset of acquisition, he says. “It takes time for these issues to manifest.”
Top 10 retail brokerage deals in the last decade ranked by price.
|Deal Value ($M)
|1. Wachovia Corp./A.G. Edwards
|2. Alliance Capital Mgmt. Holding/Sanford C. Berstein
|3. Ameritrade Holding Corp./TD Waterhouse Group
|4. Fleet Financial Group/Quick & Reilly Group.
|5. Investor Group/Linsco/Private Ledger
|6. Royal Bank of Canada/Dain Rauscher
|7. Thomas H. Lee Partners LP/Refco Group
|8. Nomura Holdings/Instinet Holding
|9. First Union Corp./EVEREN Capital
|10. Wachovia Corp./Prudential Securities
|Source: SNL Financial 3/2008