An RIA is dedicated to their clients’ future: helping them toward financial and personal success. So, you’ve probably given a lot of thought to your own future: what will happen to your business and your clients if you retire, get sick, or pass away.
Or have you? Too many advisors are too busy with their day-to-day to build a practical roadmap to “someday,” especially when ownership could someday be transitioned in any of several ways. But just as one of the first points you address with a client is the importance of having a will, every RIA should consider their own future generations of Partners, team, and clients.
While even a simple transition of ownership entails complex legal and financial steps, three areas – all outside of financial and legal – can make a transition difficult. We’ll call them the three C’s: Culture, Control, and Continuity.
Culture
We often hear about the importance of culture in business, especially when there’s a merger, an acquisition, or a change in ownership. The RIA world is no different. Because the relationship between advisor and client can be considered the engine of a firm’s success, if a clash of cultures in a transition spills over to client relationships, it can ultimately hurt a firm’s reputation.
If you’re joining another firm, through merger or acquisition, get to know that firm. Not just the handful of Partners you’ll meet, but let your team talk to their counterparts on the other team. And listen to the feedback you get. If you’re changing ownership internally, ask people about their concerns and questions.
While everyone may have different opinions, if you repeatedly hear a concern about a cultural issue, address it. Don’t let yourself become so fixated on the finish line that you assume any issues will work themselves out. Just as in a marriage, what seems like an annoyance before marriage can become a major problem over time, driving away good people and limiting your success.
Control
Continuing the marriage metaphor, ask questions about who has what household responsibilities before tying the knot. While Partners and certain key team members’ responsibilities may be explicitly spelled out, other things may be simply assumed or even withheld by one party.
As an example, one Partner at a successful RIA, a few months after a change in ownership, was told that she was to stop her personal podcasting, authoring, and speaking. This Partner had relied on these activities to generate new business, and because none of this discussed before the purchase, it had a negative effect on trust across the acquired firm.
If you have any sponsorships, commitments, or responsibilities that are important to you but not addressed in an ownership change, address them before anything is signed. By understanding control under new ownership, you’re better able to maintain continuity.
Continuity
If you can maintain or even improve culture while responsibility for key duties is understood, you’ll likely find it easier to maintain continuity. While change is inevitable and often can drive growth, continuity is also needed to minimize the wrong sort of change.
Take technology as an example. Changing portfolio management systems is a major undertaking. If, at the same time, a change in ownership entails moving assets to a new custodian, new computers and email addresses, a new network, and a new website, you need to be prepared. What are the possible repercussions if one change goes over budget or takes longer than planned? How prepared are your people to adjust? Will you regret any personnel changes that seemed like a good idea a few months ago? When things go wrong – and they will – will it affect your client service, your business development, or your internal operations?
Continuity requires communication. People often speak of how a duck looks serene as it glides along the water, but under the surface it’s madly paddling away. Consider focusing communication not only on the paddling but allowing clients and staff to see the duck above the water line. Plan your emails, phone calls, and even crisis communication (just in case) well in advance of the transition. In the absence of communication, people may create their own stories, so when you are confident in your continuity plan, demonstrate that confidence through reassuring communication.
At Moneta, we understand the challenges and rewards of building a successful RIA. In fact, we are 100% Partner-owned, without private equity money. That means we understand from our own experience how important your client and team relationships are, and how important it is that you have a plan for not just the next year or three, but for generations to come. If you’re investigating options for your firm’s future in an increasingly competitive market, let’s talk.
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