News & Insights
Selling an RIA business is a major decision rife with emotions. A new study from HighTower uncovers what advisors really feel about selling to a larger wealth management firm – and offers tips on ways to address their concerns.
CHICAGO – Dec. 10, 2019 – Selling an advisory practice isn’t just a business transaction: For advisors who have spent their lives building their wealth management firms from scratch, selling to a larger firm is an important life event that can spark a range of complicated emotions. To better understand this process from the advisor’s perspective, HighTower partnered with market research firm Optima Group Inc. to conduct an in-depth study on the issue.
The study, Beyond the Paycheck™: The Emotional Aspects of Selling, uncovers the human aspects of deal-making – what advisors think and feel when considering selling all or part of their firms to a larger entity, and their perceptions about ceding some element of control to others. The study, which consisted of one-on-one interviews with advisors pre- and post-deal, found:
- 70% of respondents experienced anxiety about the decision to sell
- 64% reported their top concern as losing operational control
- 45% were anxious about losing or diluting their brand identity
- 36% said they were worried clients would react negatively
- 32% expressed concern about having to change aspects of their investment approach
Every advisor in the study said they viewed culture and values as a top priority, and several said they would only consider a partner that could support an elevated, high-touch client experience. As one interviewee stated: “If a buyer does not put clients first, it’s a deal breaker.” Although study participants expressed concern about how clients would react to a sale, they also said clear communication can help clients view the change as positive.
The research showed that advisors are driven to sell their advisory businesses for a variety of reasons: 50% of firms interviewed said their primary motivation would be to capitalize firm ownership (take chips off the table), 41% said they thought it would help them to streamline succession planning, 27% wanted access to capital for growth initiatives, 27% hoped to gain a better technology platform and 23% wanted to outsource back-office operations.
Although the advisors surveyed all asserted their desire to retain control of client relations, with some, trust was an issue; one respondent, who had not yet sold, expressed concern about how a promise of autonomy could potentially change during a down market.
“Advisors looking for an acquirer are passionate about finding, first and foremost, a firm with human beings they can trust to shepherd them into the future,” said Bob Oros, CEO of HighTower. “While valuations, legal paperwork and negotiations are all necessary, what matters most is getting a read on the people and culture you’re joining. Have the acquirers taken the time to get to know how and why you started your business decades ago? Have they sought to distill and recognize the talents and strategies that led to your present success? Do they see your continued autonomy as a key strategy for organic growth?”
Mr. Oros’ tips for advisors include having several meals together, getting to know members of the extended service teams (not just the deal-makers), and visiting the firm’s corporate offices to people-watch and familiarize yourself with the culture (do the employees walk with purpose and have smiles on their faces?)
“Ask yourself: Do I really like these people? The end-goal is to make sure you have found an acquirer that aligns with your culture and values. When those are aligned, trust and true partnership follow,” said Mr. Oros.
The Optima Group study consisted of 30 in-depth, one-on-one interviews with key decision makers of advisory businesses with AUM of more than $750 million, both pre- and post-transaction. Interviews were conducted by phone between September 20 and October 24, 2019. For additional data and advisor insights, click here to view the study’s Executive Summary.
HighTower is a national wealth management firm that provides growth capital and front- to back-end support services to independent-minded financial advisory businesses. Operating as a Registered Investment Advisor, HighTower provides investment, financial and retirement planning services to individuals, foundations and family offices. Corporate services include 401(k) consulting and corporate cash management. Visit www.hightoweradvisors.com.
Securities offered through HighTower Securities, LLC member FINRA/SIPC. HighTower Advisors, LLC is a SEC registered investment advisor.
About Optima Group Inc.
Optima Group is a market research and consulting firm that provides qualitative and quantitative market research, including industry trend analysis, competitive benchmarking, product evaluation and segmentation for financial services firms. Optima’s research includes large-scale quantitative surveys, qualitative research, including focus groups, triads, dyads and one-on-one interviews, competitive analysis and in-depth product and service delivery model analysis. Optima Group is based in Fairfield, Connecticut. For more information visit http://www.optimagroupinc.com/
HighTower Advisors is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.
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