Hue Partners is proud to share the Spring M&A Confidential article authored by Aaron Hasler, Managing Partner of SkyView Partners.
Throughout my career, I have helped hundreds of RIAs with their lending needs. I am reminded of the countless conversations and lessons that have shaped my understanding of the industry. With over twenty years of experience in wealth management and seven years in lending, I have witnessed the evolving landscape of financing and capital, particularly as it pertains to Registered Investment Advisors (RIAs). Today, I want to share insights that can help RIA founders navigate the complexities of M&A, avoid common pitfalls, and ultimately thrive in this dynamic environment.
Recently, I had the opportunity to speak to students at my alma mater about the financial advisory profession. I was struck by the blank stares I received when explaining what a financial advisor does. This moment was a stark reminder that many people still do not fully understand the value advisors bring to their lives. It also underscored the importance of education—not just for potential clients but for the advisors themselves.
In my early days, I learned that the key to success lies in understanding one's own business. Advisors who are aware of their strengths and weaknesses are better positioned to make informed decisions when it comes to acquiring new practices and planning out their long-term succession. This understanding is particularly crucial for first-time buyers, who often enter the M&A landscape with a mix of optimism and uncertainty.
Through my work, I have had the privilege of guiding both first-time and experienced buyers through the M&A process. One of the most significant mistakes I see them make is failing to understand their financing options early on. Many advisors approach potential acquisitions without a firm grasp of how much capital they need and what financing structures are available. This lack of preparation can lead to costly missteps down the line.
For instance, I advise prospective buyers to engage with their financing partners before signing a letter of intent with a seller. By conducting a thorough analysis of their financials and the proposed deal structure beforehand, advisors can avoid the headache of having to backtrack or renegotiate terms after an LOI has been signed. With this foresight, a buyer can negotiate with confidence of execution.
Before diving into acquisitions, I emphasize the importance of getting one's house in order. This means having a clear understanding of your firm's goals, identifying the services you want to add, and focusing on organic growth. A robust marketing strategy can significantly enhance your firm's integration value, giving confidence in your ability to potential sellers.
Advisors should also consider what their firm will look like post-acquisition. Are you looking to expand your team through acquisition, or are you primarily interested in increasing revenue by adding clients? Building a long-term vision will help you focus on the right acquisition targets and ensure that any new practice aligns with your overall strategy.
One of the most exciting trends I see in our industry is the emergence of junior partner buy-in opportunities. Historically, comprehensive training has been lacking in the industry, and new advisor creation was more of a war on attrition.
Firms today are increasingly recognizing the value of training and investing in next-generation advisors, providing a pathway to acquire equity over time. This model not only incentivizes and rewards junior advisors for their contributions but also ensures the continuity of client relationships and firm culture. By investing in the next generation, we create a more sustainable and resilient industry.
The ability to offer equity to junior advisors is a game-changer. It allows them to take ownership of their career paths and encourages them to build lasting relationships. As a firm owner, this approach fosters a sense of loyalty and commitment among your team, making it easier to navigate the complexities of succession planning.
Moreover, firms with diverse ownership structures tend to be more attractive to potential buyers. When junior partners have a stake in the business, it signals to the market that the firm is well-positioned for growth and sustainability. This not only enhances the firm's value but also improves the client experience, as clients benefit from a team that is invested in their long-term success.
While the future of the advisory industry is bright, it is not without its challenges. As we continue to navigate a rapidly changing financial landscape, advisors must remain agile and adaptable. The key to success lies in continuous education and a willingness to embrace new ideas and practices.
As I look ahead, I am excited about the opportunities that lie before us. The ability to empower the next generation of advisors, coupled with a growing recognition of the value of financial advice, positions our industry for tremendous growth. By fostering a culture of collaboration and innovation, we can create a vibrant and sustainable ecosystem for all stakeholders involved.
In my time with advisory firms, an underlying theme centers around the importance of education, preparation, and self-awareness. For RIA founders, understanding the intricacies of M&A and the evolving landscape of capital is crucial for success. By avoiding common mistakes, building a strong foundation, and empowering the next generation of advisors, we can collectively elevate our industry. The possibilities are endless, and I am excited to see how we can shape the future of our industry.