Finding the Right Fit
“I don’t want to work with an aggregator who puts all of the risk on the RIA; they take a first position on future cash flow; you’re selling a future revenue stream and they’ll get paid whether or not you’re making money”
The fit must be right
All of the advisory business leaders interviewed say their firm’s culture and values are paramount and “if an aggregator does not represent our core values, it would be a deal breaker.” They are also entrepreneurs who value decision-making control and want to ensure client relationships will continue to come first.
Despite the benefits of a large brand name with support, many practice leaders prefer to retain their identity.
Choosing a partner is like choosing a spouse
One advisor says partnering with an aggregator is like entering into a marriage, and expressed concerns about potential surprises, since “many marriages end in divorce.” Advisors have often built and nurtured their businesses for 20 to 30 years or more and feel protective of their firms. As such, they feel obligated to take necessary precautions. Advisors say they would do their homework before agreeing to a deal, including checking the firm’s reputation and compliance history and assessing its culture and target market alignment.
Before making a decision, potential sellers would consult people they consider knowledgeable and informed, such as partners, colleagues and peers, industry specific investment bankers, and attorneys. It would be especially important, they say, to seek the input of other financial advisors who have already partnered with the aggregator in question to learn whether “promises made were promises kept, and what worked and what did not.” In addition, they would seek information from custodians who would have insights into the firm’s reputation.
What would be your primary concern(s)
in entering into a relationship with
an aggregator?
What would be your primary concern(s) in entering into a relationship with an aggregator?
Losing Operational Control
Firm’s Valuation
Losing/Diluting Brand Identity
Becoming an Employee
Clients Reacting Negatively
Changes to Investment Approach
