Perhaps you’ve noticed that a number of elite 401k advisors have joined forces lately via mergers and acquisitions. Kathleen Kelly, Jania Stout, Charlie Epstein, just to name a few.
The trend toward aggregation was the topic of a breakout session Tuesday at the Wealth@wor(k)conference in Nashville, which was led by a couple of the more prominent aggregators themselves in Joe DeNoyior, National President of HUB Retirement and Private Wealth, and Vincent Morris of Resources Investment Advisors, a OneDigital Company.
DeNoyior, 401k Specialist’s Top Advisor by Participant Outcomes’ (TAPO) in June 2018 and CEO of Washington Financial Group (WFG), joined HUB when it acquired his firm in September 2019.
The session, titled, “What is Your Firm Worth? Hear From the Aggregators,” covered how advisors can position their firms for sale, what factors lead to a higher valuation, what an acquisition could mean financially and what to expect during the merger process.
While joining a bigger firm isn’t for everyone, the economies of scale it can create are hard to deny.
Among the tips from the session? The firms that are looking to sell aren’t always good targets for aggregators, for a variety of reasons. If the principal of a firm is looking to wind down and sip margaritas on the beach, that firm might not be an attractive target for acquisition. If a firm has stagnant growth—same thing.
“What we’re really looking for is businesses that want to take it to the next level—they want to grow,” Morris said. “We want builders. We want talent.”
“We don’t need to buy revenue; we need to buy organic growth and thought leaders to keep it going,” added DeNoyior.
Aggregators are also looking for firms that have a clear vision of where they are looking to go.
Firms that can tell their story and share the “why” about what drives them and their firm can get a leg up. If key employees beyond the principal are able to tell that story, so much the better.
“I’m very impressed when I see the team tell the story rather than just the principal. It gets us excited to be bringing them in as partners,” DeNoyior said.
They advised principals to do their best in cleaning up any messes they may have in their books, and to deal with any issues they may have with their team. If not, it will all come out during due diligence.
Morris and DeNoyior also discussed typical deal structures while understandably keeping some information and details close to the vest. But deals are typically structured in a way that provides ample motivation for the people in the firm being acquired.
“There has to be many different incentives for you and your team to continue to grow,” DeNoyior said. “The more we can get everybody on the team involved, the better for us.”
Morris and DeNoyior also advised principals not to obsess over a number they may have in mind for any potential detail.
“The numbers work. They have those formulas down, Morris said. “You’re going to make the money—it’s just going to take you longer to do it on your own.”
SEE ALSO:
• Washington Financial Group’s Joe DeNoyior to Run HUB Retirement
• OneDigital Acquires Jania Stout’s Fiduciary Plan Advisors
MORE FROM WEALTH@WOR(K):
• It’s Official! 2021 ‘Top Advisor By Participant Outcomes’ Revealed at Wealth@work
• How to Add In-Plan Guaranteed Income
• Music City Mojo: Wealth@wor(k) Kicks Off in Nashville
• How to Deal with ‘Difficult’ 401k Committee Members
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
