Succession or sell: when wealth managers reach a fork in the road


Tuesday, October 15, 2019 | By Steve Leivent, SVP Advisory

Succession or sell: when wealth managers reach a fork in the road

After upending the commission-driven brokerage model back in the 1980s, the independent, fee-based wealth management business surged beyond anyone’s expectations over the next three decades. It’s no secret that the baby-boom clientele that fueled and sustained that growth is now reaching or well into retirement age. As are many of the pioneering advisors and firm founders who defined the industry. Today, they are looking at a vastly different landscape and weighing their options—merge, sell, or leave their firms in the hands of groomed successors.

Not surprisingly, M&A activity in the wealth management world is brisk—and favorable to those seeking an exit strategy. According to our whitepaper, “Merger and Acquisition Activity for Investment Advisors,” there are 10 potential buyers for every firm that wants to sell. Consolidation is the key to gaining scale, and many firms see mergers or acquisitions as a way to multiply asset size virtually overnight, without a corresponding increase in operational overhead.

Whether buying or selling, as the paper points out, technology is critical for positioning a firm in the best light. Buyers need to convince sellers that they can deliver a superior client experience, which increasingly means the effective use of digital communications tools to strengthen client engagement. For the seller, a modern, efficient and integrated technology stack can help maximize a firm’s valuation and sale price.

But what about firms that prefer the path of continuity? Firm owners that want to see their business survive and thrive beyond their departure date need to plan for succession—not only within the firm’s leadership, but also in its aging client base.

Our whitepaper, “Turn Heirs Into Clients,” explores the challenges and opportunities of intergenerational wealth transfer, with ideas on how advisors can connect more effectively with the emerging investor class. Here again, technology is crucial to attracting both the next generation of wealth builders as well as up-and-coming advisors. Prospective clients and employees alike have grown up with pervasive technology in their everyday lives. Newer investors will expect ready access to their portfolios and advisory communications via their laptops and mobile devices. Newer advisors will be drawn to work at firms that are leveraging advanced technologies creatively to make them better at their jobs.

Our Black Diamond team is focused on delivering solutions that “wow” both hands-on users and their end clients, and that will also make a positive statement when a firm’s leadership is looking to buy or sell. No matter which direction you are thinking of going, check out our M&A and Turn Heirs Into Clients whitepapers for helpful insights and inspiration.



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