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When Self-Discovery Is the Ultimate Destination

Even when due diligence does not result in a change of firm or model, the knowledge gained through exploration has tremendous value.

In this industry, due diligence is customarily thought of as exploration in search of a destination—a painstaking and sometimes painful process to endure.

But what if exploration had value in its own right? That is, as a “thought process”—an opportunity to revisit goals and priorities, reassess important aspects of the business, and test assumptions?

When approached with an open mind, the due diligence process can provide fresh perspective on your own practice.  

Seeing yourself through the lens of a different opportunity, outside the familiarity of the status quo, can inspire a new way of thinking about your business and allow you to reevaluate priorities and goals more freely. While due diligence may, for some, be initiated as a thoughtful exercise—not as a search for a new home—sometimes even those with no intention of moving wind up doing so because they discover an opportunity so compelling.

The idea is to take an arm’s length look at your business, and take a step back from working in the business to working on the business.

Eight Key Areas to Reassess

In taking a step back, we counsel advisors to ask themselves threshold questions specific to these eight key business areas:

1. Retirement Plans or Alternative Opportunities to Monetize the Business
Do you intend to retire at a particular time? What does the exit strategy look like? Is the preference to leave the business entirely or to stay involved in an evolving capacity? Is the firm’s sunset plan attractive? Does it accomplish what you need it to financially and personally? What are the trade-offs for accepting the firm’s plan? Can you customize an individual retirement plan?

2. Building or Joining a Team
Do you have the scale, bandwidth, efficiency and expertise you need to optimize results and performance? Do you have the right support staff in place? Do team members have the right roles and responsibilities? Do you need to add talent to address gaps? Is your preference to join an established team with the right support already in place? Is such a team or talent available within your firm?

3. Partnership Structure and Relationships
Are you satisfied with your current partnerships? Are you on the same page with respect to client service and the vision for the future? Is the structure fair and equitable? Are you getting what you need from the partnership? Have you established a process for resolving differences?

4. Wealth Management Approach
Are you interested in changing your investment management approach—for example, to do more on a discretionary basis, to manage portfolios more directly or to outsource more of the investment management responsibility? Can you identify services that would benefit your clients that you do not currently offer? Are you taking full advantage of the relevant resources and technology available both within and outside your firm? Do you have the right service team in place?

5. Client Makeup
Are you considering creating a niche practice or taking the business more upstream such as by raising account minimums? Are you working with the clients you believe you can best serve? Are there clients you would prefer to jettison? Do you have a manageable number of households? Do you have the capacity to add new relationships? Do you want to diversify the makeup of your book? What are your plans for growth? Do you have a process for developing referrals?

6. Successors/Next Generation Advisors
Have you identified the appropriate successor? How confident are you in finding a successor? Aside from any plans to retire, would you like to build a multi-generational team? Do you have the capacity to mentor new talent? Have you developed a strategy for working with your clients’ next gen?

7. Branding and Marketing
Have you created the image and message you want to convey, both to existing clients and for business development? Do they capture your value proposition and what you are trying to achieve? Are you taking advantage of multiple forms of communication such as social media and customized emails? Do you have a process for generating timely and responsive content, both original and firm-created?

8. Economics
Are you satisfied with the structure of your staff’s compensation? Have you reviewed your own compensation plan and evaluated changes that impact payout? Do the current partnership splits still reflect how the business is being run? Are you satisfied with the structure of client fees?

Due diligence is an obvious opportunity to vet another firm or model. But it’s also an opportunity to get reacquainted with your own business and rethink choices that may no longer best serve you and your clients. It’s the combination of both that provides the greatest clarity for how to plan your next chapter and be prepared for the future.


Barbara Herman is a senior vice president at Diamond Consultants in Morristown, N.J., a nationally recognized boutique search and consulting firm in the financial services industry

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