Mergers and acquisition activity in the RIA industry continues to grab headlines and make history. Despite early setbacks from the coronavirus pandemic, 2020 dealmaking activity bounced back, and Echelon Partners recorded a record-high 205 deals closed last year. The pace has not slowed in early 2021, with Q1 activity achieving a 65% increase over the first quarter of last year.
Our team remains active in the M&A space as well, both at the corporate level and in supporting our partners in completing their own acquisitions. Our team has completed several successful acquisitions throughout our history, and we have built a dedicated M&A team to support our advisor partners as they evaluate acquisition opportunities.
We work closely with advisors who are active acquirers, as well as connect with potential partners for GVA, and are regularly connecting with potential sellers about their objectives. We have seen several common themes emerge from our conversations with sellers regarding what they are seeking in a partner. Here’s what we have observed as the top trends on the sell-side.
A consistent experience is paramount
The acquisition process is inherently disruptive, but for many positive reasons. In some aspects, consistency facilitates a stronger partnership and more seamless transitions. One thing RIAs often look for is a partner who uses the same custodian. Transitioning custodians can be catastrophic for RIAs, a major operational burden that brings a risk of client attrition. Our firm is aligned with LPL Financial, one of the leading custodial platforms in the nation. Our relationship with LPL has been a driving factor in some of our most successful acquisitions and partnerships, making it easier for partner firms to plug into the GVA model on day one.
Enhanced resources and tools close deals
Sellers are not just selling to make a specific profit; they want a clear understanding of how they will benefit from joining your firm. They will be seeking clear details on the resources available to them and how those resources will be delivered. These two factors come together to complete the overall deal structure and help sellers differentiate between potential buyers.
At GVA, our partners come to us because of our in-house expertise, executive leadership team, extensive technology and operational support services, as well as resources for retirement plan consulting and asset management. We most commonly hear clients ask about access to myself and my partners. We make it a priority to stay actively engaged with our advisors and are consistently creating solutions that facilitate even better communication.
Culture and the impact on staff cannot be overlooked
While the firm’s owners are dictating the sale, the entire firm — from advisors to front-office staff — will be impacted by the transaction. The advisors, the relationships they’ve built with clients and the work they engage in every day are some of the main drivers behind the sale, yet they rarely see financial gain from the actual transaction. Keeping a focus on culture creates an environment where advisors can continue to thrive and allows for a more seamless transaction.
We understand that the sales process is incredibly personal for the seller and we make it a priority to be transparent and responsive throughout the process. We make ourselves available to the entire acquisition partner’s team, ensuring their advisors and support staff have their questions answered, too.
Growth needs to be a mutual priority
Advisors who are aligning with another firm are largely motivated by growth prospects. They want the ability to continue running their business the same way, while having access to added resources, tools and scope to up-level their practice. GVA has built a structured firm with open-architecture features and flexibility for our advisors. Our team is growth oriented, and our goal is to help our partners achieve their goals.
As the sales discussions progress and planning becomes more actionable than aspirational, it’s important that both buyer and seller maintain a flexible perspective. While purchase price is almost always the deciding factor, there are certainly plenty of other opportunities to showcase value. Understanding the mindset of the seller is an important starting point.
Technology continues to dominate the conversation around advisor growth strategies, and the ability to leverage it as a growth tool remains an important focus for the future. Technology is my passion, and I have always been keenly focused on its role in helping businesses grow and adapt, as well as its ability to revolutionize how we approach our daily lives.
This has become even more apparent within the last year, as more advisors shifted to remote work and more firms were forced to invest in tech to keep business activities consistent. In fact, the TD Ameritrade RIA Sentiment Survey found that RIAs were investing more in technology than planned because of the pandemic, with 33% of firms upgrading tech capabilities because of the shifting workplace needs.
The last year has opened advisors’ eyes to the role technology plays in their practice and its ability to amplify impact or harness growth. Here at GVA, we have always placed a high priority on technology, leveraging it to improve how we work as a team and with the advisors aligned with us. This focus has been instrumental in our growth and ability to partner with advisors from across the country.
Technology is non-negotiable for sustained growth
While advisors know they must embrace technology in today’s world, it can be difficult to know where to start. I recommend assessing your current tech stack and examining what is working, what is being actively utilized by the team and how your practice is benefiting.
Once you have an idea of your baseline, you can begin shopping for other technology assets. There are two silos of technology: 1) tech you need and 2) tech that can help grow your business. The first category includes the basics, like your custodial platform, CRM system and other specific tools — the technology that helps you run your business efficiently. The second category involves the technology you need to grow and that empowers you to focus on specialties — the tech that gives you the “disruption factor” that will create real change.
Technology should allow you to streamline tasks, establish workflows and work smarter. When used correctly, technology can propel your practice to new heights. If your current technology package is not meeting these goals, it may be time to reevaluate how you are implementing tech into your work.
Leveraging technology for our advisors via open architecture
GVA is 100% technology-driven. We have put a very robust technology structure in place with elements that support growth. We have partnered with Align Cybersecurity to design cybersecurity policies and procedures. We offer Valor Asset Management, a comprehensive and technology-supported asset management platform; as well as AdvisorBOB, our dynamic advisor compensation software. We have worked to customize Salesforce for our team’s benefit, with specialized workflows, processes, automation and more to streamline activities and allow more time for business-building efforts. We are currently building our GVA Gateway, which will function as an intranet for our advisors to connect, share ideas and collaborate, as well as a centralized portal with the resources and tools they need to succeed.
We feel confident that we have the right tools and resources in place, and we have designed an open-architecture structure with our technology, allowing firms who align with us to opt to continue using their preferred technology platforms after joining us. They will gain access to our suite of solutions but it is up to them whether or not they use it. We view this is an excellent opportunity for our advisors to leverage what we have built to whatever extent they desire.
How technology has revolutionized GVA’s approach
Our focus on technology has been intentional and supports our larger approach to working with advisors. Our goal is to help advisors up-level their practices, as well as provide them with the tools and resources they need to grow their firms and meet their long-term objectives.
The technology we have in place is attractive to our advisor partners, but also allows us to collaborate with them in a better and more meaningful way, effectively elevating the conversation from surface-level to an in-depth and actionable discussion. We can quickly view and publish reports and benchmarks against similar advisors, and we have more visibility into our partners’ businesses so we can understand their challenges and trends. This allows us to explore challenges and create solutions in real time, connect them with other advisors who have faced similar challenges and collaborate in a way that makes everyone better. My colleagues and I can give real advice, outlining specific tools that will work for you and more. We are solely focused on helping you grow your business.
As technology becomes more central to our lives, it’s impossible to ignore the implications it can have on your practice. Technology is nothing if you don’t have anyone using it — and doing so to its full potential. We view it as one of the best tools available to meeting your short- and long-term goals and facilitating meaningful connections. For more insight on the technology we employ to improve workflows and empower advisor growth, and how we can help you leverage technology to grow your practice, schedule a call with us. Connect with us on LinkedIn and Facebook for our latest insights and team updates.