From the Desk of Jim Eccleston at Eccleston Law Offices:
Acquisition is a popular way to grow an advisory business, especially for young advisors facing challenges of gaining a critical mass of clients and increasing their assets under management.
For example, Karsten Advisors, a Fort Worth, Texas-based firm with four financial advisers, all under the age of 40, has acquired nine advisory practices in the last 13 years to reach a total of $250 million in client AUM. In fact, a quarter of advisory firms with $100 million to $1 billion in AUM actively are seeking to acquire other firms, according to a 2013 RIA benchmarking study by The Charles Schwab Corp.
Despite their popularity, acquisitions are much more challenging to complete than most advisers think. The criterion for a successful acquisition is culture fit similar investment philosophies and similar work-flow processes. In addition, advisors who acquire firmsshould have sufficient staffing and technology to handle the additional clients.
In the absence of those similarities, internal growth, particularly through client referrals, may be a better way to go.
The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.
