Jim Cahn, Chief Investment and Business Development Officer at Wealth Enhancement Group, joined Keith Black, Managing Director of RIA Channel, to discuss the types of acquirers of financial planning firms.
Cahn notes that there are three types of buyers of financial planning firms. Advisors have a choice of which type of firm they partner with. The first type of buyer is financial only. This acquirer will write the advisor a check and remain uninvolved in the business. The second type of buyer is an integrated platform, where the advisor becomes a product distributor and sees a reduction in their operations and investment teams.
Wealth Enhancement Group is the third type of buyer which explicitly helps advisors scale their business. Partnering with Wealth Enhancement Group provides the benefits of scale to an advisor by taking care of accounting, technology, compliance, HR, and back-office tasks. This can save advisors 20% to 40% of their time, which can be used to find more clients, better serve existing clients, or take some needed time off to golf or travel.
Wealth Enhancement Group has undertaken acquisitions of advisors with between $150 million and $5 billion in AUM. There are three keys to determining a fit for an acquisition. First, does the advisor pass the “mom test,” where clients would be comfortable referring family members to the advisor? Second, does the advisor have a strong financial planning business? Third, does the advisor truly want to grow their business? Three-quarters of all advisory firms have negative net asset flows, so it is not a given that all advisors are focused on growth.
Once a match is made, Wealth Enhancement Group can take over the operational tasks and provide assistance in accelerating advisor growth. The firm provides lead generation with a strategic referral program from insurance companies and custody partners. Advisors can access marketing specialists who can provide seminar kits, email campaigns, and web-based tools. Many advisors increase net asset flows by 3% to 6% within 36 months of joining Wealth Enhancement Group. Over $9 billion in new assets were added to the advisory group in 2023.
Finally, Wealth Enhancement Group can provide the full family office experience within the comfort of a wealth manager. Advisors benefit from a roundtable of 27 specialists on the planning team, including CFP professionals, attorneys, and accountants. This team advises on estates, insurance, and tax planning and files over 6,000 tax returns annually. The firm also offers services from a South Dakota-based trust company.
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