M&A activity in the wealth management space continues at a healthy pace despite headwinds that include higher valuations, increasing capital costs, ongoing market volatility and geopolitical unrest. Although the number and size of transactions are smaller than in years past, they are expected to grow going forward. And, like the industry itself, M&A is evolving in terms of its execution, intent and ultimate goals – for all parties involved.
When entrepreneurial businesspeople see an opportunity, they take advantage. The aging financial advisor population presents such a lucrative opportunity for aggregators and expansion-minded RIAs to build scale within their businesses. While the question, “Is bigger always better?’ is an eternal one, for today’s strategic consolidators, bigger isn’t necessarily the goal, or at least not the only goal. Leveraging complementary resources, capturing services that fill an existing gap to better service clients, driving operational efficiencies and providing succession opportunities for NextGen professionals – who are anxious to move the needle in terms of ownership – also come into play.
This evolution presents new opportunities for sellers as well. Traditionally, when a financial advisor began contemplating retirement, the process was a given: sell the business, transition the clients and retire. Case closed. Like the ecosystem in which financial advisors operate today, this once-standard process has become more complex. In short, financial advisors who are seeking a phased exit from the industry while simultaneously transitioning their businesses are seeing a growing number of potential partners to choose from. However, matching themselves with like-minded potential successors continues to be a challenge.
As a growing number of financial advisors approach retirement, the need for a solid succession plan and exit strategy take center stage. The “sell and stay” scenario has morphed into an expansive succession planning mechanism that offers sellers deal equity and drives higher levels of personal wealth. It is a lower risk/higher growth potential alternative wrapped in M&A packaging. It allows sellers the ability to monetize their businesses while continuing to grow them faster than they could on their own, creating a higher profit/lower risk situation. Plus, for advisors who do not want to leave immediately, they can ease into the exit while continuing to grow their business.
Has the creation of tools and platforms to execute these processes kept pace with demand? While individual firms have resources to initiate, promote and help execute internal successions, there is a dearth of tech-enabled solutions to connect disparate parties looking for a partner. For an industry focused on ensuring “suitability” when it comes to serving clients – rightly so – it falls woefully short when it comes to helping financial advisors connect with suitably qualified successors.
As with many challenges, technology can support these efforts in a cost-effective, efficient and painless manner. In an effort to address this growing need, we designed a new, interactive platform called Bridge Marketplace. It is the first and only search engine specifically created to help identify and match like-minded financial advisors who are either looking for successors or looking to become a successor. Used in conjunction with the Bridgemark Strategies’ team of expert recruiters and consultants, Bridge Marketplace helps financial professionals on both sides of the equation to connect with potential partners that align in the three areas we’ve determined as the best drivers of a mutually beneficial transaction: Feel, Fit and Financials.®