The Financial Advisor M&A Guidebook: Best Practices, Tools, and Resources for Technology Integration and Beyond

142 Pages·2018·1.62 MB·English

by  Greg Friedman

GREG FRIEDMAN AND SHAUN KAPUSINSKI
Foreword by Mark C. Tibergien
THE FINANCIAL ADVISOR
M A
&
GUI DE BOO K
BEST PRACTICES, TOOLS, AND RESOURCES
FOR TECHNOLOGY INTEGRATION AND BEYOND
The Financial Advisor M&A Guidebook
Greg Friedman · Shaun Kapusinski
The Financial Advisor
M&A Guidebook
Best Practices, Tools, and Resources
for Technology Integration
and Beyond
Greg Friedman Shaun Kapusinski
Private Ocean HIFON LLC
San Rafael, CA, USA Wadsworth, OH, USA
ISBN 978-3-030-00002-8 ISBN 978-3-030-00003-5 (eBook)
https://doi.org/10.1007/978-3-030-00003-5
Library of Congress Control Number: 2018958727
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG,
part of Springer Nature 2018
This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
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This book is dedicated to my Mother, Eleanor Duemling, and to my late Father,
C. Hugh Friedman, from where all of my success flows…
Greg Friedman
To Mariana, Jude, Eden, and Lila.
Shaun Kapusinski
Foreword
I have known Greg Friedman for many years. He is a man of many pas-
sions: his family, his friends and colleagues, music, the great outdoors, and
business. Greg was raised by incredible parents who taught him how to live,
love, and share; to be fully committed to whatever he chooses to do. He has
led an incredibly fulfilled life in all respects. Now, why he would choose to
go through the agony of writing a book for the financial industry makes me
question whether he has learned anything along the way!
For those of us who share his passion for the business of financial advice,
Greg’s affliction is our gain. To create this book he partnered with Shaun
Kapusinski, founder of HIFON (High Impact Financial Operations
Network). Together Greg and Shaun have assembled a deeply-layered, prac-
tical approach to building, managing and operating a financial advisory
business that will survive through transitions and last the next 100 years.
I know from whence I speak, having been in and around financial services
for more than 40 years. I myself have suffered the pain of writing four books
on a range of topics including mergers and acquisitions, strategy, structure,
people, processes, and profits. I began as a reporter for a financial maga-
zine, transitioned to investment management and research, built a success-
ful practice management consulting business at Moss Adams LLP and now
serve as a Managing Director at BNY Mellon Pershing, a significant part of
the largest custodian in the world. Over my career, I have consulted with
thousands of financial services firms throughout the USA, Europe, Canada,
Australia, and, to a smaller degree, Asia and the Middle East.
I share my background to assure readers that I approached this book
with a critical and cynical eye. I am pleased to report that I unequivocally
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recommend The Financial Advisor M&A Guidebook. Greg and Shaun’s labor
has delivered a well-formed and constructive explication of practice manage-
ment, business leadership, and mergers and acquisitions in the new financial
services industry.
Our industry has experienced a profound transformation over the last
fifty years. In the 1960s, most RIAs were stock and bond pickers who exe-
cuted trades through institutional brokers in return for research. Most
retail-oriented financial professionals worked as employees of stock broker-
age firms that paid them a commission for their work.
In the 1970s, the business began to shift from an investment-forward
industry to a planning-forward profession, triggered in large part by the
recognition of financial planning as a legitimate discipline. The Certified
Financial Planner (CFP), Chartered Financial Consultant (ChFC) and
Personal Financial Specialist (PFS) became accepted professional designa-
tions. CFP emerged from the investment world, ChFC from the insurance
business and PFS from the accounting profession. Now we see a closer har-
monization of these disciplines as financial professionals attempt to serve
their clients holistically.
Also in the 1970s, Wall Street brokerage firms experienced a fundamental
change in how they made money when the Justice Department and SEC
ruled that fixed commissions were a form of collusion that disadvantaged
investors. This ruling heralded the demise of many old-line firms, gave rise
to the discount brokerage model and set the stage for a new type of broker/
dealer—the independent contractor. This model shifted brokers from a con-
trolled process of selling proprietary products to a supervised independent
structure wherein registered reps have access to an investment marketplace
not solely manufactured by their own firms.
These developments planted the seeds that gave rise to the retail RIA
movement. Financial professionals soon realized that under the Securities
Act of 1940, they could operate under a fiduciary standard rather than a
simpler suitability standard. They could become professional buyers instead
of professional sellers. They could establish their own independent busi-
nesses and purchase services from other providers including custodians,
financial technology companies, and outsourced investment management
firms.
Today, RIA firms account for almost 30% of total retail assets (Cerulli
Associates, 2018). The average size of RIA firms continues to rise and the
rate of consolidation continues to grow. Each year, the industry witnesses
hundreds of mergers and acquisitions, many funded by private equity invest-
ment and others created by strategic combinations of like-minded firms.
Foreword ix
As a result, retail wealth management continues to evolve. Practices are
becoming businesses. Advisors are becoming managers. Single-location firms
are becoming part of branch networks. And managing the balance sheet is
becoming as important as the income statement.
In other words, we are entering a new period of complexity that may
challenge the entrepreneurs among us. Many probably envisioned fewer
headaches and fewer people to be accountable to when making the move
to “independence.” Independence has morphed into interdependence, how-
ever, with the critical necessity of choosing and collaborating with strategic
partners. Integrating this technology during a merger or acquisition requires
thorough planning and precise execution, all with the underlying goal of
enhancing the client and employee experience.
The Financial Advisor M&A Guidebook will become one of your most val-
uable resources as you enter a merger or acquisition. Herein Greg and Shaun
outline a linear process for this complicated transition, offering insight and
advice for every step, anticipating dangerous areas and pointing the way to a
smooth integration.
I find it refreshing that individuals who have gained so much from their
careers in financial services are so eager to help others create successful busi-
nesses. Truthfully, I would not have expected anything less from Greg and
Shaun.
It is a privilege to be asked to write the Foreword for The Financial
Advisor M&A Guidebook. The journey to an enduring financial advisory firm
requires careful navigation. Thankfully, firms may now draw on this valuable
reference as they work to overcome obstacles, achieve milestones, and con-
struct a better workplace and client experience.
Jersey City, NJ, USA Mark C. Tibergien
Chief Executive Officer and Managing Director,
Pershing Advisor Solutions, LLC, BNY Mellon
Preface
I have been fortunate to lead somewhat of a double life professionally. It has
been the best of both worlds, having access to information and an incredible
variety of people which has afforded a unique experience in this industry.
Working in financial services for over 30 years, much of that time starting
and building my own wealth management firm while along the way owning
and building a fintech firm, I’ve seen monumental change in all aspects of
what we do to help our clients live happier, more fulfilling lives.
Technology’s role in our industry since the early days has gone from an
afterthought, to something “interesting,” to a critical and necessary priority
for our business. It defines how we do what we do and if used properly, it
can elevate a firm as it grows, working alongside us almost as a real, flesh
and blood member of the team. But that’s harder to achieve than it sounds.
Technology can also be an unwieldy adversary that causes more frustration
than efficiency and a significant business cost if not given the appropriate
amount of attention and time investment. Throw into that a second level
of technology during a merger or acquisition and you’re sitting on a ticking
time bomb that could threaten to bring your newly established firm’s opera-
tions to a grinding halt.
I’m not trying to use scare tactics here, but speaking from experience, the
distractions and costs associated with poor technology strategy and deci-
sions can be enormous! When Friedman & Associates merged with Salient
Financial in 2009 to become Private Ocean, we felt confident that we had
checked all the right boxes. We had done our homework. Before we ever
signed anything, we had extensive, ongoing in-person meetings, discussing
everything from our values and philosophy on financial advice to analyzing
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our processes, our operations, our technology, and our people. We consid-
ered it a marriage—one that would go the distance and evolve with inten-
tion. As an outspoken advocate for technology, we even took a closer look at
how both firms used their systems and how they would need to adapt over
time.
But there was no guide, no checklist, no warnings or red flags, and no
“right” way to pull off the technology integration that turned into an enor-
mous part of our merger. Despite our best efforts to find materials on this,
there simply wasn’t anything available at the time. Frankly, we assumed that
given the lack of information available, this process must not be that diffi-
cult—and did we underestimate the challenges!
Which brings me to the purpose of this book. To say technology is at the
heart of what we do is an understatement. A huge one. On the surface, it
seems secondary to our relationships and our focus on clients and people
and what really matters. But it is the central vehicle that we all use to accom-
plish our goals, stay competitive, and scale upward. Our goal with this book
is to help firms avoid costly mistakes that can have lasting, damaging effects
on a firm’s future.
When I started talking to Shaun Kapusinski, an operations specialist and
fellow fintech-aficionado, we had already met a few times at industry confer-
ences over the years, exchanging stories and lessons learned about integrating
technology within merged firms. On one occasion at an advanced leadership
conference, we sat outside and had drinks and talked shop, realizing quickly
that we had a mutual passion in moving our industry forward through
shared information and experiences. Those conversations turned into ideas
that we thought would be helpful for other firms in our position. I felt con-
fident that he was the perfect partner to help write this book, as he is both
of the “new-guard,” and brings the right combination of forward-thinking
process with hands-on experience helping firms navigate all of the aspects
of integration. I know I would have benefitted having him as an advisor in
some of my M&A dealings.
As for what you can expect in the chapters ahead, we’ve broken down
the book to mirror the cycle of how you would naturally approach technol-
ogy integration before and after a merger or acquisition. We will walk you
through the steps of strategy, timing, assessment, implementation, adoption,
and growth, all while considering how to best inspire and galvanize a firm’s
most valuable asset—its people. I will share my own personal experiences
and tips as I have applied them in my firm’s M&A activities, and Shaun will
provide a more operational, hands-on perspective to help you proactively
plan, assess and execute.