Clients giving feedback on a merger

Acquiring practices more successfully with client advisory boards

Growth through acquisition may be the fastest, most cost-effective way to build your firm. And a specialty client advisory board can maximize your success.

Financial Strategies (not its real name) is a rapidly growing Midwest financial planning firm. Its growth strategy includes acquiring smaller, usually solo-practitioner, firms. Bob’s was one such practice that merged into the firm couple years ago. FS utilized an advisory board strategy to check in with Bob’s clients and assure a smooth transition.

Acquisition strategies have risk. If clients are not integrated into your brand or a consistent client experience, the result can be equivalent to managing a collection of small companies rather than gaining operational and marketing economies of scale. Perhaps the biggest risk is a cultural mismatch that leads to client attrition.

Most acquisitions don’t work out. If you’re lucky, you discover that in the discussion phase. It may turn up during negotiations. Failures after the deal closes can threaten the health of your business. Financial advisors are not unique in this outcome. A KPMG study found that 83% of merger deals among public companies did not boost shareholder returns. Lewis and McKone, writing in the Harvard Business Review, summarized their research by saying that successful acquisition strategies work when the combination provided a “journey edge” – the new firm extended or expanded the client’s journey in a way that provided additional value to clients.

If becoming part of your firm enhances the acquired clients’ journey it can increase your return on investment. Can you get them excited rather than apprehensive about working with you? If so, maybe you can get it to be a topic of conversation with their friends.

Bob’s clients enjoyed receiving his newsletter and appreciated his personal insights into the markets and the economy, and its folksy, conversational tone. They found it preferable to the more complicated technical language of the new firm’s updates. They thought his financial planning “report card” was a good idea but that mistakes periodically popped up in them.

When we organize special client advisory boards for acquisitions, we bring together a dozen or so of the acquired firm’s most important clients twice. First as soon as practical after the transaction is announced for insights into what they most valued about working with the firm, and to uncover concerns or apprehensions about the transition. Then again about six months later to check in on the relationship and get feedback on adjustments made in response to feedback from the first meeting.

Feedback from Bob’s clients revealed that the group events Financial Strategies organized to introduce itself included valuable information but were too large for participants to have any meaningful interaction with the advisory teams they would be moving to. While they learned a lot about the new firm, they had no clear perception of whether there was a transition plan.

With this valuable guidance, Financial Strategies updated their communication with Bob’s clients. They added the opportunity to participate in smaller, more intimate breakfasts and lunches. They formalized the description of the client transition plan that incorporated introducing them to new services Bob did not offer. They redirected some of Bob’s activity (who had continued to distribute his personal observations on the markets and economy to his former clients) to writing his own column in the firm’s newsletter.

Transitions will go more smoothly and generate additional value if the clients have a voice in the process. Short-term client advisory boards are a great way to make sure they do.


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