By James Ianaconi, SVP & Head of Partnerships at Aspen Standard Wealth

Historically, RIA leaders have faced a choice of two extremes when looking to sell their firms: one option is to sell to a much larger (often PE-backed) RIA that fully subsumes or “rolls up” the firms they acquire into the parent organization in a sort of a full-conformity “big-fish-eats-little-fish” scenario. Yes, the leaders of the selling RIA achieve a degree of liquidity and enjoy the scale that the larger firm provides, but they will inevitably sacrifice their boutique feel and brand equity they’ve worked so long and hard to build.

On the other end of the spectrum is partnering with more of a financial partner or a traditional PE firm that only has a pure (often short-term) financial interest in the RIAs they acquire. Sure, they let the RIAs they buy retain their brand and identity, but they offer little in the way of resources or expertise to grow the firm for the long term.

Thankfully, a “Goldilocks” option has surfaced in recent years in response to so many RIA leaders who refuse to abandon their culture, brand, and ultimately their legacy for the sake of liquidity and the resources to grow their firms. In essence, they can have it all.

Below is a list of what these “Goldilocks” RIA acquirers have to offer and why RIA leaders looking to exit should seek them out:

Commitment to preserving an RIA’s boutique culture and brand

Recognizing the value proposition in providing decades-long, if not generations-long, wealth management services to successful individuals and families, this new breed of “indefinite-hold” acquirers offer RIA leaders the opportunity to maintain their brand – and ultimately their legacy – for the very long term. Thoughtful RIA acquirers are well aware that the success the firms they acquire have experienced is largely due to the relationships they’ve built with existing clients over many, many years. In other words, their “brand.” A boutique RIA’s brand identity is often its most valuable asset, one that is well worth protecting and preserving. It’s what sets them apart from industry behemoths who inherently offer less personalized attention, which is often what attracted their clients in the first place.

Resources to grow organically

Many RIA leaders ultimately make the decision to sell because of the simple fact that they’ve taken their firms as far as they can with their existing teams and depth of resources. They’ve grown their firms admirably over many years, but the technological and talent investment required today to take their firms to the next level can seem insurmountable. Faced with that reality, they seek out potential partners with the ability to invest in and scale their businesses.

However, most RIA acquirers, certainly the ones who allow firms to maintain their brand autonomy, lean heavily on M&A to spur growth. Very few provide the resources and expertise needed to truly drive organic growth, such as cutting-edge digital and growth marketing capabilities, deep talent recruitment and development support, and other value-added resources that enhance the client experience. The best RIA acquirers provide those resources and expertise to help power the firms they acquire to grow organically for the long term.

Middle- and back-office support

The “Goldilocks” RIA acquirers also offer middle- and back-office support in a way that is typically not available in the traditional PE model. These firms are centralizing aspects of the business such as compliance, IT, FP&A, HR, marketing, and more in ways that provide a tremendous amount of scale to their partners in what are non-client-facing aspects of the business, while preserving the client experience. For RIA leaders seeking to scale beyond the natural inflection points in growing their firms while maintaining all the best parts of their organizations (culture, client service model, etc.), this type of partnership model blends all the best aspects of the two more traditional models available to sellers: scale and autonomy.

Support in recruiting and retaining top talent

On the short list of “headaches” (but also a key competitive advantage when done right) for most RIA leaders is attracting and retaining the next generation of top advisors. There are simply too few talented advisors in the industry today (as this recent McKinsey research points out), and too few new advisors filling the pipeline to replace retiring advisors. Therefore, to successfully serve their clients in the long run, RIAs know they must do everything they can to attract and develop the short supply of highly sought after advisors in the marketplace. That is no small feat and requires deep commitment, even deeper connections, and the infrastructure to develop advisors in a way that makes them “sticky” and unlikely to leave. It’s a tall order for a small- to mid-sized RIA that is focused on client service, which is exactly why partnering with an acquirer that offers a robust advisor recruitment / development capability appeals to so many RIA leaders. It helps take one major “headache” of their plates and positions them, and their clients, for long-term success.

Contact us to learn more about finding the “Goldilocks” partner for your firm.