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We’re not acquirers. But we’re friends with acquirers, and we notice some common challenges as they work their way through their growth strategies.
A lot of hard work goes into the integration side of RIA acquisitions. You rarely hear about the heavy lifting that happens after the handshakes and big announcements. My work as a COO at an advisor tech company gives me a rare view into the process. It’s not uncommon for us to work with new clients to onboard them to our tools. Often, a newly consolidated firm will approach us in the process of finding a tech stack that scales with their ambitions.
This is difficult to solve, because any kind of major shake-up is difficult. Even —with the positive changes, where all parties are aligned and see the benefits of strategic growth together. A good RIA will focus on the “mechanical” parts of post-M&A integration. They get everyone’s technology to play nice with each other. They sync up compliance protocols and sort through legal and operational logistics.
But great RIAs will pay just as much attention to the human side of integration.
Realizing the value-add
An RIA making any kind of major change will focus on its “time to value.” At what point do the benefits of change begin to materialize? Throughout my career, I have noticed the firms that achieve the fastest time to value are the ones that make change management and cultural integration their upfront priorities.
It doesn’t matter if it’s a completely new CRM, or an acquirer promising better resources and bigger teams. If you don’t include people into the integration of a big change, they will feel alienated by it. You see it in the quiet chain of departures after an abruptly handled deal, or in the low adoption rates for a new piece of technology.
When people feel like something is happening to them instead of for them, they disengage.
To counter this, great RIAs will look at the human side of integration and change as a formal, structured process. Power users — those members of the firm who use the CRM the most — are great. And that manager on your team with a lot of emotional intelligence can play a big role in the strategy, but there has to be a strategy to maintain the momentum of integration and assure consistency over the long haul.
I think this is one area where RIAs should copy their advisor-tech friends’ homework. Good tech firms designate people to look at culture and internal alignment as a way to speed up adoption and time to value. We do it because it’s our livelihood. After all, we want people to use our platform!
Beyond client outcomes
On the RIA side of things, it feels like it is more common to see post-acquisition work that focuses on client-facing outcomes and operational efficiencies. And that makes perfect sense. Those client outcomes are how advisors earn their pay. However, when you don’t make cultural alignment and change management an explicit part of the integration strategy, culture-building doesn’t happen with consistency … until a problem surfaces.
You don’t need me to tell you the impact that culture breakdown can have on client relationships, quality of service, firm morale, and employee retention. Clients are already hypersensitive to change in a tumultuous market climate. They will be able to tell if there is trouble behind the scenes, and they will worry about the potential impact on the financial guidance they receive.
This is all to say that integrating teams and systems is just the tip of the iceberg. The RIAs that really understand the assignment are asking, "Who’s helping our people adapt and stay connected to our mission?"
Emily Wilcox is chief operating officer of Practifi.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.