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Lead with a Steady Vision in Unsteady Times

How can leaders continue a steady business vision in what feels like unsteady times? Contingency planning is key.

RIA merger and acquisition activity broke records last year thanks to low interest rates and a robust business climate. A quarter into 2022, the business community is facing inflation, interest rate increases, continued COVID-19 waves and conflict in Europe. How can leaders continue a steady business vision in what feels like unsteady times? Contingency planning is the key.

Many business leaders create and follow a strategic plan to drive their business goals each year. Traditionally professionals in the financial services industry, including RIAs, have compliance and risk at top of mind when creating strategy and making decisions. Global and national events are raising questions among business owners about security and rising interest rates, respectively.


At a recent RIA conference, conversations centered around technology and hackers. Financial services is among the top industries targeted by these modern day bank robbers. In 2019, financial firms experienced as many as 300 times more cyber-attacks than other companies. Last year, the banking industry experienced a 1,318% year-on-year increase in ransomware attacks in the first half of 2021, according to a Trend Micro report.

While no one can control the next cyber scheme, we can think and plan a step ahead to reduce risk.

  • Lenders are required to communicate risks. In fact, new cybersecurity rules went into effect on April 1, 2022, with a compliance date for banks of May 1, 2022. Banking institutions are required to report any major cybersecurity incident to their primary governmental regulator as soon as possible but no later than 36 hours of discovery. Banks also must notify customers if they experience an incident with impact that lasts more than four hours. This rule further signifies the responsibility of all institutions to protect the assets/information of their clients.
  • With new rules in place, align with your bank’s treasury management team by using security tools provided. Online and mobile tools for accounts give bank customers the ability to customize security alerts, including two factor authentication. Set up dual control systems to make it a requirement for two people in a company to approve expenditures over a set amount before payment can be sent. Positive pay allows a banking system to recognize duplicate payments and alert customers before the transaction is completed.
  • Research cybersecurity insurance that offers coverage to protect from data breaches and other cybercrimes, including malware and phishing. Most banks now require this type of insurance as part of their commercial loan requirements.

Interest Rates

In March 2022, the federal funds rate increased 25 basis points with future rate increases expected. Our team is hearing concerns from customers and prospects about rising interest rates, long-term debt and the potential of restructuring.

Business owners should work with their lending partners now to optimize the ideal balance of debt with limited interest rate risk, while historically low interest rates are still in place. Don’t abandon strategic plans, review them and redesign with Plan B, if needed. Many owners designed business strategies with growth around mergers and acquisitions. Some owners are just a few years from retirement and considering selling as an exit strategy.

Whether your firm is focused on long-term growth or a short-term exit strategy, understanding the current landscape is important. According to DeVoe & Company 2021 4Q RIA Deal Book:

  • RIA merger and acquisition activity set a record last year. There were 242 transactions posted among the $100 million and higher segment, compared to 159 transactions in 2020.
  • Twenty-one firms executed 129 transactions, on average six transactions each, with the top 10 acquirers absorbing 46% of the total transactions last year.
  • Business valuations are high, covering a broad spectrum, with nearly 40% of advisors saying that they expect valuations will increase in 2022.

Regardless of RIA firm size, a contingency planning strategy and vision should take place regularly. Frequently ask yourself: Is the changing financial landscape directly affecting the company vision and strategic plan? If so, adjust as needed.

Consult with your accountant and use online planning tools to assess how interest rate increases could impact an acquisition strategy. For example, most lenders have online calculators for clients to create loan estimates. Be sure to focus on the long game. Rates fluctuate, and loans can be refinanced in the future. It’s important to have a good partner who understands the need to assess one’s liabilities on a regular basis and who has the stability and availability of capital to continue to give you access to debt for future opportunities.

Consider how a business strategy could be impacted by business debt and how the changing financial landscape impacts that. For companies using debt as part of the growth strategy, this could be a problem if they’re over leveraged. What’s the contingency plan to reduce debt to continue growth?

Business owners looking at the short-term exit strategy may consider an accelerated acquisition timetable since valuations are expected to continue to increase in 2022. Sell high is a great mantra going into retirement.

Business climates change and global events happen. Strategies and plans are not designed to be inflexible. How leaders adapt and determine what’s within control to continue operating is what separates the good company leaders from the great company leaders who lead with a steady vision.

Rick Dennen is the founder, president & CEO of Indianapolis-based Oak Street Funding, a First Financial Bank company with customized loan products and services for specialty lines of business including certified public accountants, registered investment advisors and insurance agents nationwide.

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