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This article is the fourth installment in a multi-part series exploring the issues Jim Whiddon faced as he decided to sell his practice. To access all the articles in this series, please click on “more by the same author” in the left margin.
The months I spent considering whether to sell my successful independent registered investment advisory (RIA) were difficult personally and professionally. But once my decision was made, it felt good to focus on the positive aspects of a merger that would benefit my staff and my clients.
Investment management
In 2005 I wrote a book, Wealth Without Worry, which brought much exposure to my firm. In it, I outlined our enthusiastic commitment to an evidence-based investment philosophy. This was the core of my firm’s approach to investments and at the heart of every client relationship we had. Above everything else, it was critical to find a partner that was aligned with this philosophy.
We were thrilled to find a suitor that had not only a virtually identical approach to investments but also offered size and resources that would benefit my clients in other ways. The firm’s insight on portfolio management, the result of years of internal and industry-wide research, enabled my clients to build more efficient portfolio models. On the bond side, the firm’s desk of 12 team members customized solutions for individual clients in a way I could never have replicated in any reasonable amount of time. Our partnership also provided access to a highly credentialed eight-person investment policy committee that evaluated findings from academic research to form investment strategy recommendations. Due to these added tools a more robust partner could offer our clients, it was not a matter of asking ourselves, “Do we want to do this?” It was a matter of asking, “As fiduciaries for our clients, how can we not pursue this?”
Thought leadership
Our team was excellent but limited by size. I could never have hoped to build such an extensive learning and teaching network as our new partner had done. The firm assembled a phenomenal national thought-leader team to educate the public while providing direct advisor and client support. This group of well-regarded authors such as Larry Swedroe, Carl Richards, Dan Solin and Tim Maurer reached thousands of investors every week through their books and regular blogs on outlets such as the New York Times, CBS News, MSNBC, Forbes, U.S. News & World Report and the Huffington Post. Merging meant they became our colleagues.
In addition, the firm’s bench was deep with experienced advisors and investment specialists who were now just a phone call away. We could find answers to just about any question or circumstance in virtually any area of finance with a single phone call. Furthermore, the firm is a comprehensive service provider for more than 140 independent RIAs throughout the country. The depth of institutional knowledge this network brought was exceptional.
Financial strength
A larger firm enabled us to take the financial risks associated with smaller RIAs off the table. Our partner managed more than $6 billion in assets (as well as servicing back-office needs for an additional $15 billion in its network), which provided financial stability for difficult markets and strengthened the firm for generations to come.
This financial strength also solved my concern about “plateauing.” That is, when breaking through to another level of size – say, $1 billion in assets under management – I needed to commit substantial resources to creating new positions and departments to support the required infrastructure. Adjusting to the changes would eat up the increased revenue – at least for a time. I was not willing to take on this risk, especially considering that another adverse, uncontrollable threat might occur in the midst of this expansion. A merger with a firm that had more financial stability dissolved this worry. I could grow my client base exponentially and know that my efforts would be matched internally.
I also always wondered – yet never really had hoped to ascertain – how many clients never considered our smaller firm because of our size and relatively smaller financial wherewithal. This question has been resolved with this merger.
Expansion of service offerings
Any marketing professor worth his or her salt will tell you that one of the biggest mistakes companies make is line extension: extending a product or service offering without adequate staff support and financial resources to handle it. In an effort to gather as many assets as possible, we had made this mistake in the past. A few years ago, we decided that we were spread too thin and pared back. (The global financial crisis in 2008 led us to this decision.) Now with our larger partner’s resources – both from an institutional-intelligence standpoint and in terms of financial and staff resources – we can offer expanded services and advice in areas including succession planning, account aggregation, 401ks, pensions, foundations, charities and accounts. This fuller array of services for individuals and institutions alike offers value to existing clients and provides business development opportunities.
Tax planning expertise
As a smaller firm, we could not afford to have a certified public accountant (CPA) in-house. Our new partner, having been started by a group of CPAs in 1994, brought a very strong competency and pre-disposition for tax planning, including a highly efficient automated process for tax-loss harvesting that we had largely done manually. We believe tax planning is an area that will only rise in need and importance, especially as new challenges and legislative changes take effect.
I will conclude this series with some of the more personal and intangible emotional aspects of my decision. Additionally, I will address the ongoing process we face as we integrate our two organizations.
James Whiddon, CFP, MSFS is a wealth advisor with Buckingham, an independent member of the BAM ALLIANCE. Buckingham provides wealth management for individuals, businesses, trusts, not-for-profits and retirement plans. He is the author of two books:Wealth Without WorryandThe Investing Revolutionaries.
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