Compliance is a “have to” in the financial services industry. Advisory firms are required to have a compliance officer or a designated third-party compliance administrator. While your business might technically meet internal compliance requirements, there’s much more to consider in order to keep your business protected from regulatory scrutiny.
We recently teamed up with
Bates Group to film a series of special Roundtable Talks centered on the importance of staying on top of compliance. One of Bates Group’s Managing Directors, David Birnbaum, JD,
joined us to talk about the ways to achieve good compliance management, as well as how it can impact the value and growth of your firm. From these conversations we’ve found the following five compliance mistakes to be the most common to many financial services businesses.
1. Neglecting Internal Compliance Audits
If you wait until you’re faced with a regulatory audit to look at your policies and operating procedures, you’ve waited too long. By reviewing the business periodically, you’ll not only be able to head off potential issues before they arise, but you’ll be prepared for any observations a regulator could make during a compliance audit. In addition to the security in knowing everything is running smoothly and within regulation, you’ll also be able to confidently answer any questions a regulator or outside party might have about your business.
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Topics:
Acquisition,
Business Value,
Roundtable Talks,
Compliance
Whole Foods has been a bastion of the organic movement since its founding in 1980. Urbanites flocked to pay top dollar for picture-perfect produce, wines curated by professional wine stewards, and abundant organic, non-GMO options to suit any number of nutritional requirements. However, competition eventually flooded the market. Enter Amazon. The online retail giant acquired Whole Foods in a $13.7B deal that left consumers eager to see price reductions, but concerned that the brand that they have come to trust would suffer for the sake of supply chain efficiency.
As a brand, Whole Foods became synonymous with healthy living, quality, and friendly customer service. How the acquisition will impact brand reputation and consumer trust is yet to be seen. Indeed, this is a concern of every entity when considering a merger or acquisition. In the financial services arena, a strong reputation and client trust is hard won over many years of dedication and commitment to a fine-tuned value proposition. Large or small, the success of a merger or acquisition depends on protecting the relationship capital of the business.
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Topics:
Acquisition,
Commentary,
Buying & Selling,
Client Retention
The following sections are excerpted from the book Buying, Selling, and Valuing Financial Practices by FP Transitions president and founder David Grau Sr., JD.
Let's highlight the importance of having a strong transition team in your corner as either a buyer or a seller. In fact, it's important to have a comprehensive team when jumping into most business evolutions, including (but not limited to) entity creation, compensation restructuring, and internal succession planning.
Assembling and Managing Your Team
Advisors who want to buy or sell a business will need some help to do the job right. A typical team for this purpose will include:
- A qualified valuation analyst
- A tax professional
- A lawyer
- Someone familiar with your regulatory structure and your IBD/custodian’s rules & procedures
- A qualified and impartial intermediary
To be clear, this list applies to both buyers and sellers. Both parties typically need their own team, with some slight overlap.
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Topics:
Selling Your Practice,
Acquisition,
Buying & Selling,
"Buying, Selling, and Valuing Financial Practices",
Published
It’s been a while since “keeping it in the family,” assumed your literal family. Yet, many advisors approach succession with pride when they have the opportunity to pass their advisory legacy to a son, daughter, niece, cousin, or other relative.
Choosing a successor who is a part of your blood family doesn’t mean the succession process becomes 10 times easier; it doesn’t mean you just hand over the keys one day with a, “See ya later, kid. Don’t burn the place down.” It requires the same careful planning and communication to ensure ownership of the business ends up in the right hands.
Tom and Paul Morrone of US Wealth Management in North Haven, Connecticut have always been a close father / son unit, but that didn’t automatically mean that Paul would step into his father’s shoes one day. Instead, he forged his own path before recognizing the business and the life his father had built was exactly what he was striving for. And still, ownership wasn’t just handed to him.
Tom insisted that Paul EARN ownership, and together they sought help for the succession process. It wasn’t a matter of trust. It was a matter of making sure they hadn’t missed any detail, and that they had the most beneficial path for both of them.
Below, watch the Morrones put their journey in their own words.
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Topics:
Succession Planning,
Acquisition,
Webcasts,
Business Growth,
Testimonial,
Client Success,
Family Business,
Next Generation
In the M&A space for the financial services industry, everyone wants to acquire. Few advisors, however, take the time to sit back and think about what they want from the acquisition: what kinds of clients and assets would complement the existing business, what new staff and advisors are required to run a larger book of business, and what will the new business look like post transition.
In our experience, the advisors who are most strategic are the most successful.
Michael Lutz of Legacy Financial Strategies in Overland Park, KS understood that acquisition was a viable and smart path for growing his business. He wasn’t just looking to gobble up as many practices as he could, however, because he also understood that if he chose his targets strategically, he could not only grow his business but he could ensure its legacy by using acquisition as a vehicle to recruit Generation Two talent to his firm.
Using FP Transitions Enterprise Consulting to develop and execute his internal succession plans, Michael offered equity, and with it a modicum of control, to recruit smaller advisors with existing books–and new advisors without–to Legacy Financial Strategies and created his “growth machine”. These mergers and additions increased the value of what they all now own and are committed to continue building.
With the right strategy, instead of just acquiring clients and assets, a “growth machine” is created, and the foundation for future growth is built with succession through acquisition.
Watch Michael’s story below.
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Topics:
Succession Planning,
Acquisition,
Webcasts,
Business Growth,
Testimonial,
Client Success,
Next Generation
When it comes to finding the right buyer, the prospective buyer pool need not be large if it is filled with candidates that fit your criteria and are willing to meet your terms.
Our newest case study follows the story of one seller who was left at the proverbial altar by a qualified buyer, then found a better match–and an above market offer–using the FP Transitions open market system.
After being burned by an independently found buyer, this seller turned to the FP open market, determined not to be taken advantage of again.
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Topics:
Acquisition,
M&A,
Buying & Selling
“In the acquisition marketplace, the impression you create can make or break your success. The market is competitive, the industry is tightly regulated, and decisions can be made based on intangible matching criteria and gut feeling. This is the real story of three buyers, and how their various approaches to the transaction ultimately led one to the winner’s circle.”
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Topics:
Acquisition,
M&A,
Buying & Selling
One of the most important factors in structuring an acquisition deal is figuring out payment terms, including down payments, payments schedules, and expected annual adjustments, if any. It has become a common practice to fully buy out a business over the course of 4-6 years, and that a seller must wait until then to receive the full value of their business. But what if there was another way?
Don't forget to subscribe to get future acquisition tips and the latest news right in your email.
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Topics:
Acquisition,
Tip of the Week,
Financing,
Bank Financing
In our experience, the smoothest, most successful deals come from buyers and sellers who build a rapport, and cultivate trust through transparency.
Don't forget to subscribe to get future acquisition tips and the latest news right in your email.
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Topics:
Acquisition,
Tip of the Week,
Due Diligence
