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The Financial Advisor M&A Guidebook: Best Practices, Tools, and Resources for Technology Integration and Beyond 1st ed. Edition Greg Friedman full chapter instant download
The Financial Advisor M&A Guidebook: Best Practices, Tools, and Resources for Technology Integration and Beyond 1st ed. Edition Greg Friedman full chapter instant download
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GREG FRIEDMAN AND SHAUN KAPUSINSKI
Foreword by Mark C. Tibergien
T H E F I N A N C I A L A DV I S O R
M&A GUIDEBOOK
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG,
part of Springer Nature 2018
This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse
of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and
transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or
dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does
not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective
laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this book
are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the
editors give a warranty, express or implied, with respect to the material contained herein or for any errors or
omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in
published maps and institutional affiliations.
This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
This book is dedicated to my Mother, Eleanor Duemling, and to my late Father,
C. Hugh Friedman, from where all of my success flows…
Greg Friedman
To Mariana, Jude, Eden, and Lila.
Shaun Kapusinski
Foreword
I have known Greg Friedman for many years. He is a man of many pas-
sions: his family, his friends and colleagues, music, the great outdoors, and
business. Greg was raised by incredible parents who taught him how to live,
love, and share; to be fully committed to whatever he chooses to do. He has
led an incredibly fulfilled life in all respects. Now, why he would choose to
go through the agony of writing a book for the financial industry makes me
question whether he has learned anything along the way!
For those of us who share his passion for the business of financial advice,
Greg’s affliction is our gain. To create this book he partnered with Shaun
Kapusinski, founder of HIFON (High Impact Financial Operations
Network). Together Greg and Shaun have assembled a deeply-layered, prac-
tical approach to building, managing and operating a financial advisory
business that will survive through transitions and last the next 100 years.
I know from whence I speak, having been in and around financial services
for more than 40 years. I myself have suffered the pain of writing four books
on a range of topics including mergers and acquisitions, strategy, structure,
people, processes, and profits. I began as a reporter for a financial maga-
zine, transitioned to investment management and research, built a success-
ful practice management consulting business at Moss Adams LLP and now
serve as a Managing Director at BNY Mellon Pershing, a significant part of
the largest custodian in the world. Over my career, I have consulted with
thousands of financial services firms throughout the USA, Europe, Canada,
Australia, and, to a smaller degree, Asia and the Middle East.
I share my background to assure readers that I approached this book
with a critical and cynical eye. I am pleased to report that I unequivocally
vii
viii Foreword
recommend The Financial Advisor M&A Guidebook. Greg and Shaun’s labor
has delivered a well-formed and constructive explication of practice manage-
ment, business leadership, and mergers and acquisitions in the new financial
services industry.
Our industry has experienced a profound transformation over the last
fifty years. In the 1960s, most RIAs were stock and bond pickers who exe-
cuted trades through institutional brokers in return for research. Most
retail-oriented financial professionals worked as employees of stock broker-
age firms that paid them a commission for their work.
In the 1970s, the business began to shift from an investment-forward
industry to a planning-forward profession, triggered in large part by the
recognition of financial planning as a legitimate discipline. The Certified
Financial Planner (CFP), Chartered Financial Consultant (ChFC) and
Personal Financial Specialist (PFS) became accepted professional designa-
tions. CFP emerged from the investment world, ChFC from the insurance
business and PFS from the accounting profession. Now we see a closer har-
monization of these disciplines as financial professionals attempt to serve
their clients holistically.
Also in the 1970s, Wall Street brokerage firms experienced a fundamental
change in how they made money when the Justice Department and SEC
ruled that fixed commissions were a form of collusion that disadvantaged
investors. This ruling heralded the demise of many old-line firms, gave rise
to the discount brokerage model and set the stage for a new type of broker/
dealer—the independent contractor. This model shifted brokers from a con-
trolled process of selling proprietary products to a supervised independent
structure wherein registered reps have access to an investment marketplace
not solely manufactured by their own firms.
These developments planted the seeds that gave rise to the retail RIA
movement. Financial professionals soon realized that under the Securities
Act of 1940, they could operate under a fiduciary standard rather than a
simpler suitability standard. They could become professional buyers instead
of professional sellers. They could establish their own independent busi-
nesses and purchase services from other providers including custodians,
financial technology companies, and outsourced investment management
firms.
Today, RIA firms account for almost 30% of total retail assets (Cerulli
Associates, 2018). The average size of RIA firms continues to rise and the
rate of consolidation continues to grow. Each year, the industry witnesses
hundreds of mergers and acquisitions, many funded by private equity invest-
ment and others created by strategic combinations of like-minded firms.
Foreword ix
xi
xii Preface
our processes, our operations, our technology, and our people. We consid-
ered it a marriage—one that would go the distance and evolve with inten-
tion. As an outspoken advocate for technology, we even took a closer look at
how both firms used their systems and how they would need to adapt over
time.
But there was no guide, no checklist, no warnings or red flags, and no
“right” way to pull off the technology integration that turned into an enor-
mous part of our merger. Despite our best efforts to find materials on this,
there simply wasn’t anything available at the time. Frankly, we assumed that
given the lack of information available, this process must not be that diffi-
cult—and did we underestimate the challenges!
Which brings me to the purpose of this book. To say technology is at the
heart of what we do is an understatement. A huge one. On the surface, it
seems secondary to our relationships and our focus on clients and people
and what really matters. But it is the central vehicle that we all use to accom-
plish our goals, stay competitive, and scale upward. Our goal with this book
is to help firms avoid costly mistakes that can have lasting, damaging effects
on a firm’s future.
When I started talking to Shaun Kapusinski, an operations specialist and
fellow fintech-aficionado, we had already met a few times at industry confer-
ences over the years, exchanging stories and lessons learned about integrating
technology within merged firms. On one occasion at an advanced leadership
conference, we sat outside and had drinks and talked shop, realizing quickly
that we had a mutual passion in moving our industry forward through
shared information and experiences. Those conversations turned into ideas
that we thought would be helpful for other firms in our position. I felt con-
fident that he was the perfect partner to help write this book, as he is both
of the “new-guard,” and brings the right combination of forward-thinking
process with hands-on experience helping firms navigate all of the aspects
of integration. I know I would have benefitted having him as an advisor in
some of my M&A dealings.
As for what you can expect in the chapters ahead, we’ve broken down
the book to mirror the cycle of how you would naturally approach technol-
ogy integration before and after a merger or acquisition. We will walk you
through the steps of strategy, timing, assessment, implementation, adoption,
and growth, all while considering how to best inspire and galvanize a firm’s
most valuable asset—its people. I will share my own personal experiences
and tips as I have applied them in my firm’s M&A activities, and Shaun will
provide a more operational, hands-on perspective to help you proactively
plan, assess and execute.
Preface xiii
This guide is obviously suitable for firms in the midst of an M&A event.
However, we’ve intentionally designed this guide to offer all advisors a
glimpse into what lies ahead for them, something tangible to digest before
you enter into a merger or acquisition. Maybe you’ve only started to crack
the surface of what M&A looks like for you. Maybe it’s not even on your
radar now. This book may help you understand what’s involved and help
shape your approach.
And while we do want this book to serve as a technology integration
guide for firms preparing for, considering or in the middle of M&A activity,
we will certainly touch upon other key components as so many factors tend
to overlap. Along the way, we’ll include opinions and insights from some of
our partners, intermediaries, and colleagues.
We hope you find this guide useful, practical, and easy to apply to your
situation. We are honored to be able to share our stories from the trenches
of a number of M&A transitions and offer you honest, candid insight into
what really happens before and after you sign on the dotted line from a tech-
nology perspective.
xv
xvi Acknowledgements
Greg Friedman
There are many people who have been on the proverbial sidelines, cheering
me on, leading up to and throughout the process of writing of this book. To
each of you, I would like to share my gratitude.
To Tom Haught, Gerry Knotek, and Trevor Chuna for the opportunities
I’ve had, under your guidance, with the Sequoia team to help grow our firm.
I’m grateful for the experience and confidence our many acquisitions have
given me, which allowed me to be in a position to write this book.
To Greg Friedman, who had a vision for this book and a drive to pur-
sue it. Though initially encouraging me to write on my own, I’m grateful he
decided we should do this together. It’s a privilege to write alongside him.
To Ann Massey, John Convery, Angela Wright, Maria Hinton, and Rob
Siegmann, who were willing to start a small study group with me back in
2010, it’s because of this group that HIFON has become what it is today.
Thank you for starting this journey with me.
To my entire network through HIFON. I am grateful you are here. A spe-
cial recognition to those members who provided stories, experiences, and
lessons to share throughout this book.
To Lisa Crafford, who started her small study group back in 2012 and
then told Bob Veres all about it. And to Bob and his wife, Jean Sinclair,
for inviting Lisa and me to his practice management conference to speak
about our groups; and then later, for involving me in the operations track of
Insider’s Forum. It was at this conference where Greg and I met. I couldn’t
be more grateful for that introduction.
To Ian Crafford, Andrew Bodjanac, Aden Pavkov, and Michael
Humphrey, thank you for your advice to pursue this book and your encour-
agement when I didn’t think it was something I could do.
Thank you to the many friends and family members who played a role as
both HIFON, and later this book, became a reality: Adam Rissmiller, Geoff
Acknowledgements xvii
Moore, Levi Welling, Alan Moore, Michael Kitces, Steve Stelkic, and Chris
Spillmann.
To the awesome writing team of Angela Giombetti, Cynthia Greenfield,
and Sonya Spillmann. For Angela’s superb skill at weaving two authors
together; Cynthia’s experience with Greg and Private Ocean; and for Sonya,
my sister, who took my thoughts, made sense of them, and wrote them out
on the page.
To Jude, Eden, and Lila, you are my world. To Mariana, without you, all
of this would be nothing. Most importantly, I am grateful for the love and
grace of Jesus Christ, my Lord and Savior. None of this would have been
possible on my own.
Shaun Kapusinski
Disclosures
The views and opinions expressed in this book by the authors are their own
and do not necessarily reflect the view of any former, current, or future
employers.
xix
Contents
xxi
xxii Contents
References 123
Index 125
About the Authors
xxiii
List of Tables
xxv
1
The M&A Landscape and Technology’s Role
1ECHELON Partners (2017) 2017 RIA M&A Deal Report. Echelon-Partners.com. Accessed 8 July
2018.
And now ensued days wherein Sir John seemingly idled, the
Corporal took mysterious journeys both a-horse and afoot, and my
Lady Herminia busied herself upon Sir Hector’s comfort; for, having
visited his cottage and being horrified by his ideas of “homeliness,”
she prepared for immediate action—that is to say, with lovely head
tied up in a kerchief (laced cap, ringlets and all) against such
accidentals as spiders, cobwebs and dust, she armed herself with a
mop and Mr. William Thompson with soap, water and scrubbing-
brush, and forthwith set about cleansing the Augean Stables.
Accoutred thus, she was directing the floor-washing operations of
Mr. Thompson in the small, tiled kitchen when Sir Hector ventured to
open the door, whereupon Mr. Thompson, hitherto awed to dumb
submission by my lady’s imperious presence, cast down his
scrubbing-brush and lifted his voice in wailing protest:
“Sir ’Ector—O Sir ’Ector, will ’ee look at oi! She’s ’ad me ’ere on
me knees, a-scrubbin’ an’ a-sloshin’, this hower an’ more, she ’ave!
On me marrer-bones, sir! Crool it be! Sir ’Ector, if you ’ave an ’eart,
say a word for oi!”
“William Thompson,” quoth my lady, “William Thompson—scrub.”
“Sir ’Ector—say a word!”
“Losh, Wully man, whaur’ll be the use? Ye ken vera weel ’tis no
fau’t o’ mine. Ye ken vera weel I lo’e tae be hamely——”
“Sir Hector—silence!” commanded my lady.
“Eh, but, Rose, puir Wully an’ me are no used tae sic awfu’——”
“Enough, sir!”
“But, O lassie, ye’re fair washin’ me oot o’ hoose an’ hame——”
“Then begone, sir, and leave us to finish.”
“But Guid save us a’, d’ye no——”
“Sir Hector,” cried my lady, with a flourish of her mop, “go!”
Sir Hector went. Being in his small parlour, he glanced yearningly
upon the unwashed crockery littering the table, from this to the dusty
riding-boots upon the mantel-shelf and, sweeping a heterogeneous
collection of small oddments from the elbow-chair to the floor, sat
down with his feet among the long-dead ashes that cumbered the
hearth, sighing for that spirit of homely comfort that was, even then,
being washed and swept out of his ken.
And thus Sir John found him, a desolate soul, huddled
disconsolately over a cheerless hearth, his peruke over one mournful
eye, the very picture of woe.
“Hark till her, John!” quoth he dolefully. “O man, ’tis fair
heartrendin’! Hark till yon brushin’ an’ scrubbin’!”
“Ah, so you have a woman to clean the place for you at last,
Hector!”
“A wumman, d’ye say? Man, she’s no’ an ordinary wumman....
Wull ye hark till her!”
“William Thompson,” cried a sweet, albeit stern voice, “this corner
is not even wetted ... scrub it!”
“Rose!” exclaimed Sir John.
“Hersel’!” sighed Sir Hector. “Can ye no reason wi’ her, John, if ’tis
only for the sake o’ puir Wully Tamson?”
“Not for worlds, Hector!”
“Then what’ll I dae, Johnnie?”
“Come a-walking.”
“Na, na; I’ve no’ the sperrit, John.”
“But you’ve the legs, Hector.” So saying, Sir John straightened his
old friend’s wig, reached him his hat and, taking his arm, led him out
into the sunshine.
“Whaur awa’, Johnnie?”
“Well, I promised to visit Mr. Pym, the painter.”
“Aye, I ken him fine; wi’ rod or gun there’s nane to equal him.”
They found Mr. Pym busied in his garden, who, perceiving his
visitors, laid by his spade and hastened to make them welcome; the
better to perform which, he brought them into the house and
vanished to find the wherewithal to refresh them, only to return
empty-handed and disconsolate:
“Sirs,” quoth he, “the devil is in it for my brandy is out!” And, being
at a loss, he sought the aid of his daughter. “Elsie!” he called. “Elsie!”
A jingle of keys, a light step and Mistress Pym appeared, her
dainty, print gown girt about slender middle by a cincture whence
hung reticule and housewifely keys, her face framed in snowy mob-
cap and remarkable for a pair of handsome eyes.
“Girl,” exclaimed the painter, “my brandy’s out!”
Mistress Pym faced the so grave situation entirely undismayed:
“I told you ’twas so, days agone, sir,” she answered serenely.
“We’ve naught left in the house save my ginger wine.”
“Then that must serve,” quoth her sire. “Bring it, a heaven’s name!”
Lightly she went and lightly she was back and, steady of hand,
filled the three glasses. Sir John eyed the liquor a little askance but
tasted it bravely, and glanced at his young hostess.
“Your own making, Mistress Pym?” he inquired.
“Yes, sir,” she nodded. “’Twould be better were it older, but father
never lets it keep long enough.”
“And small wonder!” answered Sir John, bowing. “Mistress Pym, I
drink to your eyes, for sure there be few to match ’em in the South
Country.” So saying, he drank and wished his glass had been larger.
Thereupon Mistress Pym curtsied to them and jingled away about
her multifarious duties.
“Yon’s a braw wife for some lucky man, I’m thinkin’!” quoth Sir
Hector. “There’s looks till her, an’, O man, but she’s a bonny cook
whateffer! ’Tis a graund thing when a lass can appeal tae a man’s
heid, an’ heart, an’ stomach, y’ ken.”
“Mr. Pym,” said Sir John as, the ginger wine having made a duly
deliberate end, they rose to depart, “you mentioned, I mind, the first
time we met, the murder of a man on Windover.”
“I did, sir; the cruel assassination of Roger Hobden—a black
business that was never cleared up and never will be.”
“Had you any suspicions at the time?”
“Suspicions, sir? Remembering Lord Sayle and the unholy doings
in that solitary house of his, I suspected every one beneath its roof,
from Lord Sayle down.”
“Losh, man!” exclaimed Sir Hector, “ye’ve a graund gift o’
suspeecioning.”
“And suppose I have, sir?” demanded the painter argumentatively.
“There is little of good in ’Friston Manor, and evil begetteth evil. And
Sayle is a law unto himself, with bullies at hand to work his wicked
purposes.”
“Whisht, man!” exclaimed Sir Hector. “Ye’ll no be suggestin’——”
“And why not, sir? Doth the man’s rank place him above
suspicion?”
“Never heed father, Sir Hector,” said Mistress Pym at this moment,
leaning in at the open door; “he doth but seek an argument——”
“Mistress,” quoth the painter, “mind your business!” Whereat
Mistress Pym laughed and jingled away again.
“Pym—man,” said Sir Hector, “his lordship is no’ juist an archangel
nor yet a seraphim, but ye’ll no’ be suspectin’ a man o’ his quality
wad stoop tae murder a country lad o’ no condition.”
“On the contrary, Sir Hector, I say he would stoop to anything.”
“There was never any incriminating evidence found, I believe, sir?”
inquired Sir John. “No clue of any kind discovered?”
“None of importance. Though I did find a thing on the footpath that
runs above the ‘Long Man,’ near where the crime was committed—a
thing I felt it my duty to show to the law officers and was laughed at
for my pains.... I have it here somewhere.” And the painter turned to
a small, carved press in a corner where stood two or three fishing-
rods in company with a musket and a birding-piece.
“What kind o’ thing, Pym?” inquired Sir Hector.
“A snuff-box,” answered the painter, opening a drawer and turning
over a collection of small fossils, flint arrow-heads, and the like.
“A gowd snuff-box, Pym?”
“Nay, ’twas of horn—a poor thing! Ah, here ’tis!” And he held out a
clumsy horn snuff-box of battered and villainous appearance. Sir
John took it, turned it this way and that, opened and sniffed
delicately at its empty interior, and finally carrying it to the light, fell to
studying it anew.
“Now, Pym man,” said Sir Hector, “if yon had been gold or enamel,
or even siller, it might perchance justify your suspeecions; but
whaur’s the man o’ quality would carry a thing the like o’ that?”
“There, sir,” answered the painter dogmatically, “there I take issue
with ye. If that box be evidence, which I deny, mark ye—’tis precisely
the kind o’ thing your man o’ quality would purposefully leave that its
very poverty might set inquiring minds on a false scent. I further
maintain, sir, that——”
“Nay, Sir Hector,” laughed Mistress Pym, leaning in at the open
lattice at this moment, her hands full of fresh-gathered flowers, “do
but take father’s side o’ the question and he will immediately take
yours to keep the argument a-going.”
“Child,” quoth the painter, sternly grim, “I smell your bread a-
burning!”
“Sir,” she answered, throwing a flower at him, “thou’rt mighty
sharp-nosed this morning, for ’tis not yet in the oven!”
“An’ there’s for ye, man!” chuckled Sir Hector as she jingled away
once more.
“Mr. Pym, would you pray lend me this box for a few days?”
inquired Sir John.
“Nay, take it, sir,” answered the painter, “if the sorry thing hath any
interest for you, take it and welcome.”
Murmuring his thanks, Sir John slipped it into his pocket; and
shortly after, bidding Mr. Pym adieu, they left him to his gardening.
“Yon Pym-lassie,” quoth Sir Hector as they walked, “is like a
bagpipes——”
“Never in the world, Hector!”
“Aye, John; she’s sweet as a bagpipes, whilk, as a’ the warld kens,
is the sweetest and maist soothin’ of a’ instruments! ’Tis a muckle
woefu’ wight Pym’ll be if ever she marries, I’m thinkin’! But, Johnnie,
why for did ye want yon snuff-box?”
“Because I think I can find the man who lost it.”
“Losh, man! An’ suppose ye can, what then?”
“Why then, Hector, I think my Lord Sayle will cease from hunting
smugglers.”
“Eh? Sayle? Man, what d’ye mean?”
“Time will show——”
“Aye, but meanwhile, John, d’ye mean to say ye think——”
“That a mug of Mr. Bunkle’s gumboo will go very happily with
Mistress Pym’s excellent wine, so——”
“Umph-humph!” exclaimed Sir Hector; and together they entered
the hospitable portal of the ‘Market Cross Inn,’ where they were met
by the cheery Mr. Bunkle, who ushered them as honoured guests
into his five-doored holy of holies.
“Do you gin’men ’appen to ha’ seed the bill as they’ve printed an’
posted arl-on-account-o’ pore Jarge Potter? What—no, sirs? Then
bide a minute an’ I’ll show ye one o’ they bills.” Saying which, Mr.
Bunkle put aside snowy apron and from vasty pocket drew forth such
incongruous articles as: a whip lash, a fragment of tobacco, a
nutmeg, a small pistol, and finally, after laborious groping, a folded
paper which, having carefully smoothed out, he held up against the
wall and they read as follows:
“Save’s a’!” exclaimed Sir Hector, “the man Sayle is unco’ serious
an’ damnably determined.... A hundred pounds! Losh, man, ’twill be
an awfu’ temptation tae the avereecious. How think ye, Peter?”
“Why, I think, sir, as that theer hundred pound will go a-
beggin’——”
“But ... a hundred pounds, man——!”
“Aye,” nodded Mr. Bunkle as he refolded the bill, “’tis a sight o’
money, I rackon; Jarge ought to be a proud man this day! ’Twill be
the gumboo as usual, sirs?”
Now when their glasses were empty and Sir Hector had fared
unwillingly homewards, Sir John, being alone, took out the battered
snuff-box to view it once again in keen-eyed scrutiny, more
especially the lid; for there, scratched faintly on the horn, were these
two initials:
J. S.
CHAPTER XXXIV
CONCERNS ITSELF WITH ONE OF THE MANY
MYSTERIES OF THE ‘MARKET CROSS INN’