If evaluating a potential new firm was like shopping for a new car, the process would be a lot easier but unlikely to guarantee a better — or even acceptable — outcome.
Just like individuals embarking upon any decision-making process, advisers considering a move often start with a checklist of everything they want to replicate from their current business model. While this is an important step in any due diligence process, evaluating another firm and envisioning what makes an opportunity ideal requires more than checking a series of boxes.
The reality is that advisers who stay hyper-focused solely on the granular detail — items like the technology stack, third-party managers, and operational processes — risk missing out on an opportunity that has the potential to add the most value and propel the business forward.
So how do you strike the right balance between satisfying specific, objective criteria that may meet immediate needs while rising above the minutiae to think about longer-term goals and values?
Consider these five key areas to serve as your guide:
Advisers sometimes surprise themselves with the outcome of their due diligence. They enter the process with a strong sense of which direction they should take — yet despite what may look exactly right on paper, they end up going in an unexpected direction.
Put another way, an opportunity may be more compelling when you add up all of its individual features, and the unlikely choice based on one’s list at the start of due diligence may end up being precisely what the business needs.
A shared vision of the business and the world, a strong cultural fit and a synergy with leadership about the future — all can end up overshadowing the importance of matching more objective criteria.
Creating a checklist is a valuable tool, but only if it helps the adviser ask the right questions and doesn’t become the solution itself.
Thinking beyond the checklist of individual items allows you to ask the bigger (and better) questions. That is, to consider what’s possible and uncover the true potential of any move means taking a big-picture look and asking whether the new opportunity will:
Regardless of what regulatory standard of care applies, quality advisers universally believe in avoiding any downside to clients in a move — being sensitive to such things as tax implications, client fees, loan rates and structure, and even office location.
But looking to do no harm doesn’t necessarily mean having to keep everything the same. Minimizing the disruption to clients and reducing the number of adjustments they must make when introduced to a new firm are understandable objectives. Yet preserving the status quo can sometimes mean perpetuating the imperfect or inferior.
So long as you believe in the importance of change — and can explain it to clients in terms of what’s in it for them — you can be more confident about introducing change to accomplish the greater good.
If the goal is to stay close to what you have now, you risk not going far enough.
Familiarity provides a sense of security and comfort — but preserving the status quo may fail to move the needle enough and make it harder to justify the hassle of a move.
Top advisers have become more long-term focused when making decisions about what’s best for clients as well as the overall business. Choosing a firm that meets current needs and “feels safe” can result in landing at a firm you’re likely to outgrow within a few years — necessitating a second move too soon and risking client and team fatigue.
Finding a way to solve for enough in one move — even though it means going through more meaningful change in the short term — may ultimately be more prudent in the long run.
Over the past few years, as the industry landscape has strengthened and expanded, advisers have been able to give more thought to being happy — and finding renewed joy and satisfaction in their work.
With platforms more of a commodity and greater confidence that almost any business can be well supported by almost any firm, an adviser can factor more subjective criteria, such as being happy, into their thought process.
And the good news is clients don’t begrudge their adviser’s happiness. Being with the right firm is reenergizing, fostering stronger productivity, a more positive experience for both clients and the team, and ensuring greater longevity for the business. Especially now that advisers have so many more legitimate options, including building for themselves what may not exist, they are that much closer to finding their definition of utopia.
It’s tempting to fall back on the specifics and over-focus on replicating your current business model. But performing due diligence is an opportunity to test the status quo and reset goals and priorities based on new information and an updated understanding of the landscape — rather than getting mired in the minutiae. Top advisers these days must be forward-thinking, anticipating longer term what their clients and a changing industry environment will demand as well as what will create their best business life. The most compelling opportunity may not be the one right in front of you. But if you dare to look ahead, the view can be inspiring.
Barbara Herman is senior vice president at Diamond Consultants.
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