Mitigating The Risk of a Bad Move:

The Top 5 Mistakes Advisory Firms Make When Partnering with Another Firm:

Financial advisory firms of all sizes are continuing to engage in an array of transitions, mergers, and acquisitions involving larger and perhaps more operationally mature firms. There are many good reasons to consider partnering with another firm. Those reasons are presented in one of our previous articles, "The Top 5 Reasons Financial Advisors & Firm Owners Should Consider Moving, Merging, or Selling Their Business."

Given the ever-growing competition to acquire or purchase advisory practices, it is becoming more and more important for advisors to understand the potential pitfalls they may encounter when vetting their options. Over the years, our consultants have identified five major mistakes that are commonly made when advisors or firm owners are making a decision to either move, merge, or sell their business.


Mistake #1: Making economics the most important factor.

Economics and compensation are undeniably essential to any successful and healthy partnership. However, it is usually the culture, values, and behaviors of both parties that make or break a partnership. The subjective and qualitative factors involved in a decision of this nature, are far more difficult to identify and are just as likely to ruin a partnership either before or after it has commenced.

To avoid this pitfall, it is not enough to only have a list of quantitative business-related non-negotiables. Their must also be a thorough understanding of the qualitative, cultural, and interpersonal factors that are necessary for the partnership to thrive. Too often these aspects are an afterthought or are addressed subconsciously. Although intuition and one’s “gut reactions” are strong litmus tests for such qualitative factors, a decision of this nature is simply too important and must utilize both logic and intuition to reach the best outcome.


Mistake #2: Not understanding the DNA of their own firm or practice.

Thoroughly understanding the specifics of one’s own culture, behaviors, values, industry position, and all the other components that make up their unique DNA, is the first step to understanding the pathway they should ultimately take. Much akin to a financial planning process, how can someone know which pathway to choose, without first mapping out where and who they are?

Almost every wealth management professional has an understanding of who they are and what their position is in the industry. However, the key is not only to understand all of it, but to map it out holistically. That way, the whole picture can be seen all at once. This is no different than putting together a holistic financial plan for an advisory client. Advisory clients know what their financial situation is. What they need is an opportunity to see all of the puzzle pieces put together. Then they will be able to make the best and most educated decisions.


Mistake #3: Not truly understanding what they want and need in a partnership.

Once an advisor knows where/who they are, they must thoroughly map out what they are looking for. When using GPS technology in a car, two points of reference are needed, where you are and where you desire to go. Without one of these, there are sure to be difficulties and a lack of direction.

Too often, a list of non-negotiables, desires, and preferences, is made up on the fly and after conversations with potential suitors have already begun. If left until these later stages in the process, the creation of such a list can be subject to heavy confirmation bias. After conversations with potential partners have begun, more than likely there will be a front-runner in the advisor’s mind. If there is already a front-runner when a due diligence check list is being created, it will be very easy for the developed criteria to simply be a list that supports what has already been subconsciously decided.


Mistake #4: Taking too long to make a decision.

It is not wise to make a hasty decision. However, most advisors and firm owners tend to err on the side of caution and wait too long to make a decision. This can give rise to a sort of “deal fatigue” for all parties involved.

The interpersonal relationships that are forged during conversations with other firms are vital to a successful partnership. Unfortunately, those relationships are often unintentionally damaged by one party taking too long to make a decision. Pressing pause on a decision for too long can often be perceived as apathy, an insult to an offer, or a disrespect of the other party's time. It is important to be cautious and methodical, while still respecting the fact that time and a decrease in Relational Momentum™ will eventually thwart all hopes for a new partnership.


Mistake #5: Making a decision without proper advice and guidance.

Again, much akin to an advisory client seeking financial advice from a professional, why should it be any different for a financial advisor or firm owner to make this all-important journey with the presence and advice of a qualified expert?

If they were to dedicate enough time to it, many advisory clients are intelligent and capable enough to navigate their finances on their own. However, it would take them years to accomplish on their own what a seasoned financial planner could do relatively quickly. Furthermore, they will never be as qualified as someone who has dedicated their vocational life to financial advice and guidance.


These five are not the only potential pitfalls that may present themselves during the process of finding a new firm or partner. However, regardless of the significant amount of risk, there are ways to mitigate such hazards. A new partnership is not right for everyone and change for change sake is never a good idea. However, if it is clear that a new partnership will greatly improve the client’s experience, the advisor’s experience, and the economics for both parties, the risk will become well worth it.


If you are contemplating a move, a merger, or a sale of your advisory business, reach out to us and talk with one of our qualified experts. For a complimentary and discreet consultation, or to simply learn more, email us at or visit us online at

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