“Ch-ch-ch-ch-changes” – Are You Ready?

In local news (Philadelphia) a major private equity firm just announced the purchase of a large regional broker-dealer with $150 Billion in assets. While this transaction will be larger than most, it seems that almost every other day I read about PE-backed firms acquiring RIAs and advisor firms who work through independent broker-dealers. 

In fact, even the IBD firms are changing hands and others are facing controversy with senior management decisions.  While it would be an interesting discussion to look at the question of whether a PE firm with shorter-term horizons and profitability goals can actually act as a fiduciary, we can leave that discussion for another day.  What I want to discuss today is are you prepared?  Do you know your options?  Are you being too complacent?

“Long Strange Trip”

My first job out of college was back in the Stone Age. We wore suits and ties, there was an assigned parking space for the Sr. Executives, and you could tell if the big boss was on the floor because he smoked a pipe and the sweet tobacco smell with enter the room well before he did.  I remember the day the division was shut down.  As we sat in the sales manager’s office drinking from his office bar (yes, he had a bar in the office) we all bemoaned that we would have been lifers at the firm.

My third job out of college was as a wholesaler.  I had a very successful Midwest region placing consistently number 2 in sales out of 7 wholesalers.  Unfortunately, as the businesses contracted, I became (as the sales manager stated) geographically undesirable as the number 1 in sales, who had deeper ties with our largest client, was also in the Midwest.  Again, I never looked around and never answered the call of executive search firms as I felt it was a great gig and was happy enough to stay forever.

Let’s be honest.  I was fat and happy, complacent, and… lazy.  I was unprepared.  But, as luck would have it, each time I moved (forced or not) it ended up being such a positive change for my career, personal life, and my wallet.  It was forced growth, I became better for the changes as they pushed me out of my comfort zone. 

My reason for telling this is to suggest, are you letting change happen to you or are you actively preparing, just in case?  Do you have blinders on to your environment and have you stress-tested your situation?  Do understand the personal, economic, and reputational costs of the way you are doing business and how changes outside your control can be affected?  Could you do better for yourself, your clients, and your wallet too?

“Everybody’s Talkin”

For many, August is the slowest month of the year.  Clients tend to be focused on family vacations, going back to school, and gearing up for a fourth-quarter push.  Not quite the lazy days of summer but my guess is the number of client meetings may be a bit less frequent in August.  To me, it is a great time to take a dive into your business – not what you offer or the tech you use, go bigger.  I think there are a few questions that I would ask to get the conversation started:

1. If I had to start all over again, what would be the optimal business structure for today’s world?  Obviously, there are lots of choices such as a broker, affiliate with an IBD, leverage an insurance-based or Bank rep, RIA?  What business model aligns most closely with my views and how do I perceive the future of the business?
2. What are the future trends in compliance and enforcement that I should be aware of and how do I mitigate my exposure?
3. What are all the fees (both explicit and inexplicit) that my clients and I are paying to support the current model and is there a better way to go forward?
4. What kind of risks do my current business partners add to my business?

I could go all day with questions like these – big picture, no clear answer without doing some research but you get the idea. In fact, I would be happy to help you craft some of these questions, just send me a note or reach out via LinkedIn or email.

The lazy and complacent me, the me that didn’t pay attention to the bigger picture got lucky.  But I didn’t have a business, clients, or staff.  My risk was small and if it didn’t work, you would not have ever missed me.  But your clients and their financial plans will miss you.  Are you prepared for the Ch-ch-ch-ch-changes (kudos to you if you sang it while you read it)

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