What It Takes to Recruit or Acquire

Growth at an advisory firm can be organic or inorganic, but advisers should have a strategy for increasing business. (See “Advisers Need Growth Strategy Plan.”) Organic growth comes from a firm’s expansion through increasing customer base, increased output per customer or representative, new sales, or any combination of these. Inorganic growth can occur through a merger and acquisition (M&A), or when a firm takes on more advisers.

“Creating Value and Certainty Within Your Independent Advisory Firm,” a white paper from the Alliance for RIAs (aRIA) details how to realize an ideal model and deploy an inorganic growth strategy. The paper is the fourth in a series on raising awareness of independent and wirehouse advisers to the challenges and opportunities in this channel. 

Inorganic growth may not be easy to achieve. An imbalance between buyers and sellers exists in the independent space, with many more firms looking to add advisers than there are advisers looking to join a firm, according to aRIA’s research. Getting into M&A and adviser recruiting is as difficult, perhaps more so than starting a business from scratch

This type of growth is a numbers game, the paper contends. Advisory firms that want to recruit advisers will likely need to talk to hundreds of advisers to find the right fit. Neal Simon notes, “Over the past five years, I have spoken to over 200 advisers about joining Highline. This has resulted in three professionals joining our firm in one format or another.” A simple way to think about this is a sales funnel.

The process of winnowing through candidates is a strategic one, John Furey, president and founder of Advisor Growth Strategies LLC, and a managing member of aRIA, told PLANADVISER.

“When we were building Schwab Advisor Services’ platform to lift out wirehouse brokers, we felt to get one deal done, we needed to have meaningful conversations with 10 advisers,” Furey said. “However, to get to those 10 meaningful conversations, we had to connect with 60 or 70 advisers.”

Set Your Target 

But numbers alone isn’t the answer. Do not be a random shooter. It is not difficult, Furey said, but an adviser must be systematic and realistic. “If you can’t articulate some unique proposition to advisers—‘Do we have something to offer them that is better?’—then you shouldn’t try to bring on advisers.”

The come one, come all strategy does not work, according to aRIA’s paper. Advisory firms that are experiencing success have a highly sophisticated and defined “ideal adviser” and they build their platform around the needs of that target. Take the time to understand who you are going after and why, identify their needs and provide a solution for those needs. Niche strategies work, not big tent concepts.

Usually the adviser joining a firm seeks the benefits of independence without having the responsibility of managing a business. Many advisory firms across the country are seeking to recruit advisers from wirehouses, or to tuck in smaller, existing independent advisers, according to the paper.

The reality is that inorganic growth is a blocking and tackling game that requires time, resources and commitment. If an advisory firm does not have the funding or resources to focus, it is probably better off sticking to organic growth or considering other affiliation options.

Some of the other key issues aRIA identified in growth and recruiting M&A are:

• It really is about the money: every deal must be accretive for all sides;
• A firm will have to go selling: no one will hand you books of business; and
• A firm’s growth story and messaging must be ready for show-and-tell.

The white paper, as well as other pieces from aRIA’s members, can be downloaded here.