TRANSITION TALK

One of the fastest ways for independent financial service businesses to grow is to acquire another book of business, adding a lump of clients and their assets to a portfolio all at once. The reality is, however, that setting out to buy a business isn’t that simple. 

First, your business must be able to handle a sudden influx of new clients. Your infrastructure must be strong, you must have the people and resources available to provide quality service to clients immediately following the transition, and you must have the financial means to purchase. Second, the current marketplace right now is favoring sellers more than ever. Not only are we experiencing a 50:1 buyer to seller ratio on the open market, but values are at a high and the competition is stiff. We’re seeing a greater number of experienced buyers vying for a seat at the table, and we’re seeing more savvy sellers making strategic decisions. Finally, being able to meet the asking price alone doesn’t necessarily constitute a good fit. Even if you have everything in place to make an acquisition, you must meet a seller’s specific criteria in other areas to be considered.

The good news is that our industry has several other ways to achieve the same exponential growth as buying a book of business without a “traditional” acquisition. Strategies like mergers, continuity partnerships, succession planning, strategic partnerships, and sell & stay tracks offer alternatives for advisors who may not have the enterprise strength to execute a traditional acquisition strategy. The following avenues take planning and patience, but they can yield incredible growth and value in the long run.

1. Neglecting Internal Compliance Audits

If you wait until you’re faced with a regulatory audit to look at your policies and operating procedures, you’ve waited too long. By reviewing the business periodically, you’ll not only be able to head off potential issues before they arise, but you’ll be prepared for any observations a regulator could make during a compliance audit. In addition to the security in knowing everything is running smoothly and within regulation, you’ll also be able to confidently answer any questions a regulator or outside party might have about your business.

In the past month it seemed like our inboxes and Twitter feeds exploded with articles on “robo advisors.” Not necessarily a new technology, these automated platforms are setting off some threat alarms in the financial services industry.

It seems robo-advising can’t be avoided, which shouldn’t come as a surprise in our world of evolving technology and “gotta have the next big thing,” “how can I get the most bang for my buck” mentalities.

I dove into as many of these articles as I could in order to compile a list of the ones I think offer the best insight into the rise of robos and how traditional advisors can meet the challenges they pose head on.