Managing Your Practice

Managing Your Practice is a podcast series from Dimensional Fund Advisors that delivers insights based on our history of industry-leading financial advisor benchmark studies and client surveys. We help advisors leverage those insights when making the critical business decisions successful firms face every day. This series is dedicated to providing financial professionals with best practices in key areas such as driving growth, business efficiency, and the client experience.

Listen and Subscribe:
Apple | Spotify | Google Podcast | Stitcher

Latest Episode

Episode 3 - Five Actions Advisors Can Take Today to Position Their Firms for a Successful Merger, Acquisition, or Sale

Episode 3 - Five Actions Advisors Can Take Today to Position Their Firms for a Successful Merger, Acquisition, or Sale

A discussion around M&A trends and best practices in the industry.

Despite the challenges of 2020, the year closed with M&A activity at a record-setting pace and no signs of slowing going into 2021. Whether advisors are interested in selling all or a portion of their businesses, there are important steps they can begin to take today to help maximize their valuation in the future and ensure they find the right partner. Catherine Williams, Dimensional’s Head of Practice Management, is joined by Scott Slater of Fidelity Institutional to discuss M&A trends and best practices in the industry.

You can also listen to Fidelity’s podcast, Future Ready through M&A, hosted by Scott Slater here.


Download as PDF


Catherine Williams: [00:00:35] Hi, everyone, and thanks for joining us. Today, we're going to talk about developing and deploying an M&A strategy for your business. Whether you're looking at acquiring or selling, understanding the industry landscape and how it's evolving rapidly is key. Joining me for our discussion is someone who really focuses in on the M&A space and has great perspective across the industry in general: Scott Slater of Fidelity. Hi, Scott. It's great to have you with us today.

Scott Slater: [00:01:02] Well, great to be here, Catherine.

Catherine Williams: [00:01:04] I want to give the audience just a little bit of background on you and your role with Fidelity to sort of level set our conversation today. For those of you that are not familiar with Scott and his work, he is Vice President of Practice Management and Consulting at Fidelity, works really closely with advisors around the United States helping them identify and address strategic challenges critical to growth, driving value, all the things we're going to talk about today, and certainly how mergers and acquisitions could fit into that strategy. Scott's a frequent speaker on practice management issues at industry conferences. And, he leads Fidelity’s M&A Leaders Forum, as well as hosts a Fidelity podcast series titled, “Future Ready Through M&A.” So, with that, great to have Scott on board. I'm going to add that he's particularly close to our hearts, and that he also earned his MBA from the University of Chicago's Booth School of Management. So, we really appreciate that nice connection there. So, Scott, let's get under way. I'd love to start with sort of the why. Why think about M&A for your business if you're an advisor listening to this today?

Scott Slater: [00:02:14] Well, Catherine, again, it's great to be here, and I think that's a great question to start on. What I find is a lot of times when I when I talk to firms about M&A, they come to me because they received a phone call from someone who is interested in buying their practice or they have an opportunity to buy a book of business or a firm. And they were more interested in the how. How do I get it done? What's the process? Who do I need to talk to? And what are the mechanics? And I very quickly, for years, my bigger question is, well, what are you trying to create? What's the outcome that you're looking for as an enterprise, and why are you doing it personally? And what do you want for your employees and your colleagues as well as particularly for your clients? Because ultimately this is really a strategic business decision, and I would say is a means to an end. And this is, frankly, why Fidelity invested in this several years ago and asked me to help lead this initiative, is that it is such a strategic issue for our industry when we're at a highly fragmented environment, particularly in the RIA space, and we're seeing a lot of activity going. But getting more specific to your question, I would say that too often advisors and firms tend to, as I said, approach this issue reactively and opportunistically, which frankly, that's not any different than any other industry. And I think it's helpful to step back and understand why you're doing it. So, let's look at it from two perspectives. First, from a buyer's perspective, why are buyers so interested in this now? It's not just the capitals there.

Scott Slater: [00:03:48] That's the means to making this happen. They're really looking for scale on the one hand. And in an industry that's a personal services industry. And what do we mean by scale? Well, ultimately, it's going to be about functional specialization, being able to deliver how people specialize in certain areas of, say, estate planning or certain types of investment management, or certain types of planning. I would say, secondly, from service capabilities, frankly, they may just find that certain clients need certain things. We have talked for years at Fidelity about the advice value stack, which is modeled after Maslow's hierarchy, meaning that the investment management and managing the money is at the bottom. And then you go up to achieving goals, which is really financial planning at the next level. But then you start, as you move up the hierarchy of needs, you really start to get into more behavioral finance type issues, more specialized issues. So a lot of times M&A allows the firm to be able to achieve that by enhancing service capabilities. Another major reason why buyers are doing this is, frankly, to acquire talent They're looking for good advisors and good leadership. And that is a competitive dynamic right now. And M&A is often a means to make that happen. And then finally, I would say just frankly, brand and market share are becoming increasingly important. It doesn't mean you have to be a national player, but you need to have more of a presence and a collective ability to deliver that.

Scott Slater: [00:05:17] From a seller's perspective, there are several key reasons, some of which are probably kind of obvious to many of our listeners. One would be it's just in a time of what seems to be peak valuation. It's a great opportunity for a seller to de-risk what's probably one of their most valuable assets, which is their business. Take some chips off the table. Some or all of it, create a liquidity event. And there is a lot of buyer demand right now, and that's why the sellers are thinking about it. But there are also reasons that many sellers, and I think we've just seen this happen regardless of the pandemic we've experienced and everything else this year, is that sellers also realize that they want to get back to the part that they do best. They don't really want to be running the business or handling the operations, or they also know that they need a stronger operating and technology platform. It's getting more complicated with all the fintech to bring that together. So they're wrestling with those challenges and the integration and they feel like they're getting away from what they started doing and would like to get back to that and get to a better platform. And then I'd say the last reason for sellers, it's just succession. They need a plan to where's the firm going to go. And frankly, this is often the best option. And maybe not doing it internally is the reason. So there are a lot of reasons that are driving it to give you a sense of that.

Catherine Williams: [00:06:38] And Scott, on that succession piece, if you could sort of wave a magic wand and every firm that that you engage with that needs to solve for succession, talk a little bit about an ideal timeline. And I realize that's a kind of a tricky question. But this idea of when should you start thinking about your succession plan? Do you have a sense of sort of an ideal runway, so to speak, whether you're looking to do something internally or externally? We get that question a lot. And unfortunately, we're often asked when someone really only has a year or two in their mind left in the business, which is essentially a little bit of a fire sale. So how do you answer that question in terms of all things being equal? When should someone really be thinking about that succession plan?

Scott Slater: [00:07:22] You know, you raise a good point, Catherine. Human nature is pretty consistent, I would say, for many of our listeners that are deeply involved in planning. How many times I'd ask you have you had clients come in, say they want to retire within the next two years? And in part of the process, you can do something for them, but you say, you know, if only you'd come in three years ago. There’re so many more things we could do from a tax and a planning standpoint that we just don't have the time for now. We would have made different decisions. Well, I would say take that same approach as you consider your own business. What I have found for the 14 plus years that I've worked with RIAs, let's just say there are three partners together. And they may have worked together at a wirehouse and then started their business. And they've been 15 years out there. And now they're at the point where they've got three different ideas of what they want to do, but they've never talked about it. And I'm the one that comes in and asks the question, well, where are you going to be in three to five years? And one person wants out altogether. The other person is perfectly happy at the pace they're going, but doesn't want to accelerate it.

Scott Slater: [00:08:28] And another has a vision for wanting to really build it. But they've never shared that together. So more specific to when do you start on succession, I would say the sooner the better. I think it's even doing things like listening to this podcast and getting educated, and going to conferences, such as the events that you hosted, and the things that we do at Fidelity. Those are great ways and many others. Those are great ways to at least get engaged with what's going on. And what does this all mean so that you're getting ahead of it. The other thing I would say is a lot of times it's interesting if you look at the benchmarking data that's been out there for years, 90 percent of firms that have traditionally said I'd like to consider internal succession, well, that's the one that takes the most time and still has quite a bit of risk to it. So if you're really serious about that, you've got to decide, do I have someone that could lead this firm? Do they want to lead this firm? Are they willing to take the risk to buy it? Do I have a plan to kind of transition the equity, which that's not, like you said, that doesn't happen in two years.

Catherine Williams: [00:09:31] Can you talk for just a little bit more on that, and then I definitely want to pivot to out to sort of if you are thinking you might be more on the acquisition side, what that can look like. But this idea of even an advisor potentially listening today that is thinking, I really do want to do an internal succession. That could still require, if you will, or create opportunity for an external partner of some kind to help with that, whether it's on the financing side or to help position the organization so that up and coming talent, maybe they need a little bit more time to evolve. Do you see that in place? Sort of almost a hybrid, if you will. It's not this idea that if I'm going to do the internal succession, I must do it alone, so to speak. But it's a completely internal endeavor versus there are some partners out there that could help me again, either on the financing, the planning, or scale side. Is that something that you see out there and can speak a little bit about?

Scott Slater: [00:10:28] So you're speaking more about the M&A ecosystem to use the business buzz word of the decade here?

Catherine Williams: [00:10:35] Yeah. Exactly. And so even if you're an advisor who's sitting here thinking today, you know, I really do ultimately want an internal succession. You talked a moment ago about acquiring talent, which could sort of feed that pipeline, so to speak, of an internal succession. That could be one path. But just this idea that you still may need an external partner or want an external partner to help bring some of that to fruition.

Scott Slater: [00:10:59] Well, first of all, for most of us, we haven't done these transactions. You've been building a business and it's not something you've had experience with. So working with people that see these deals, see the pitfalls of something that's likely for many people listening to this, the most important transaction they've done in their career, really, in terms of their impact for themselves and their business. I think it really behooves them to talk to people and engage people who are experienced with this. I think one statistic I find interesting, I think this is probably still pretty accurate, but the vast majority of sellers, and I'm talking maybe smaller enterprises here, they really only consider a couple of buyers, and they don't really explore it and they aren't really necessarily looking at are we a good fit together or is it just because I know somebody and I've been approached. And this really opens up the door to a better focus on who is a better fit. And I think the term I would use here is around alignment of interests between parties. What is the buyer looking for? What are those most important things? And if you're considering selling, maybe you don't want to get out yet. You want a partner that you want to be around for five or 10 more years. But what kind of partner do you want and how does that work? Or is it just simply I want to be out in the next two to three years, and I want to transition the business as fast as possible, so I don't want to take on a managerial role. I think it's getting aligned around what do you want? And I think a third party can do a lot. A banker, transition consultant can do a lot to really help you plan that more effectively.

Catherine Williams: [00:12:36] Well, and certainly we saw at the M&A workshop we did last year in Charlotte, we'll be doing a virtual one in February, upcoming in 2021, but also through our advisor benchmark study and the M&A module in particular, we do see that there's a strong appetite, but also hear from advisors that maybe they even embark on a strategy that puts them in a position of acquiring. But in the end, they realize, wow, I'm actually probably a seller. How might I go about that? How do I, as you said, how do I make sure that it's great for my clients? It's also great for my existing team. But that realization, and you can really only get there by getting yourself out there, talking to others, really understanding the landscape and kind of having sort of honest conversations with yourself about what that what your appetite really is for a M&A strategy.

Scott Slater: [00:13:33] Well, you know, what I would say to that, too, is we started out by at the beginning of this conversation, talking about how so often people react to opportunities: A, they don't understand what the process is going to look like here.

Catherine Williams: [00:13:47] Right.

Scott Slater: [00:13:47] And, B, they just don't really know what they want to do. In fact, just this the summer we created a tool for to help advisors who haven't figured this out that we call “Control Your Destiny.” And it's really trying to take a look at three tracks of: Am I a buyer? You must match this. Am I a buyer, or am I a seller, or am I neither? Am I what we would call a sustainer, and within that they're really 8 possible paths. And frankly, those are really the all the strategy options that are available to you. But it's weighing what does it take to be successful as a buyer? And if I'm a buyer, am I a serial acquirer, which means I'm going to need a lot of capital and people dedicated to this and a post deal integration strategy. And this is where I'm spending my time, or am I more of an opportunistic buyer? Where I'm prepared, I know how I'm going to get the deal done, but I'm just going to do a few that are more selective because I'm filling in some gaps, or I'm trying to create some market share, things like that going forward. On a seller’s standpoint, a lot of times where I end up these conversations with advisors, they're happy doing what they're doing. So you know what Scott, I'm going to sell three, five years down the road. And what I want to help firms understand, it's like, well, would you be better off selling today not to leave the business, but maybe you need a better platform. Maybe you're going to maximize the valuation that you get out of your firm.

Scott Slater: [00:15:15] And what are the tradeoffs if you don't sell for three to five years? The market's not waiting for you. The market is changing all around us. And we've seen that. Look at the consolidation in the independent broker dealer space. It's much more concentrated now after a series of acquisitions. Or do I need a partner? And that's frankly, I'm not leaving at all. But I need a better platform like I talked about earlier. Or do I want to do internal succession? So really, it's sell now, sell later, sell internally, or sell to a partner in some form so I can have a better operating platform. Each of those dynamics asks you what matters to you most. And I guess the way I'd summarize it is, I think it's important for everyone to understand what are your top three biggest priorities? Is it really about getting the most value for your firm financially? And that may be fine. Is it really that I want to find a better technology platform? I need other skill sets. I need more talent. What is it that you're looking for? And really be clear and be willing to give up on the things that maybe I don't run the firm anymore, but I have a clear role for this region. I mean, it's getting clarity around what matters to you most. And I think that's what this tool “Control Your Destiny,” which you can find in the Fidelity website on our M&A resources, is that is a great way to get started.

Catherine Williams: [00:16:36] What's one area that advisors in doing that assessment, if you will, they kind of get hung up on? Is it the idea of giving up control? Is it where they're spending their time in the business? Any particular areas that as you work with advisors around the country, that tends to be the place where they kind of get a little stuck in that analysis?

Scott Slater: [00:16:57] I think the easy answer is for a lot of advisors haven't really thought it all through yet. They want it all. They want to be able to get the liquidity. They still want to be able to make the decisions when they either have a majority or a minority investor in the business who's got a seat at the table, and they haven't really figured out what is it that they want out of. And they don't realize that doing a transaction does imply that there will be change. Now, understanding what those changes are, and that's why I say getting aligned around what does each party want, I think helps you kind of address that challenge. But I think that's the key thing. And I think what's built this industry, independence and autonomy, and I think it's coming to terms with what does that really mean? Which has been a theme of mine for the last couple of years. What does it really mean to give up direct controlling decision making and what decisions do I make? Maybe I'm even part of the new management team and maybe this is going to accelerate what I'm able to do at a better level for my clients off a better platform. But I've got to redefine what my role is and what I want to do. And I think that's very personal for each individual and for each business. But I think it's also not engaging on it is by itself a decision. I think it's important to engage on these topics.

Catherine Williams: [00:18:21] Going to ask you to put yourself in the shoes of what we often refer to as a serial acquirer, a strategic acquirer, and they, as you and I both know, they certainly run that national gauntlet, but there is also some regional acquirers as well. For those folks, what are they looking for when they pick up the phone, they get an advisor engaged in a potential conversation. In your opinion, what are they most looking for, at least initially looking for when they talk to those firms?

Scott Slater: [00:18:53] Well, you know, I just updated a report that we've had for a number of years, I think is helpful on this, that we call “Maximizing the Value of Your Firm,” and it talks through eight value drivers. Most of these acquirers are looking for, first of all, a profitable business. And we did an analysis on kind of valuation and deal structure last year and the firms that are growing organically are much more attractive to buyers than firms that aren't. And likewise, they're looking for firms that have a diversity of a client base in terms of the mix. So it's not concentrated that 40 percent of the revenue is tied to 10 clients. That's much riskier. They are looking for talent too, they're looking for and often it's advisor talent, next generation talent. And even if the principals are planning to leave or they're looking at what's behind that because they're not just buying the way 10 years ago, they might have a book of business. Particularly in the RIA space, they are buying talent that's going to be able to bring these relationships and continue to lead these relationships. So they want to find people who have a vision for where they would like to be and maybe what their what's the problem that the seller is trying to solve for what aren't they able to do? And the clearer the seller can be about that. And talking to the buyer, what are you looking for? What am I solving for? Buyer and seller have a better chance to start to move in that direction. They're not just looking for assets. They're not just looking for revenue by any means. They are looking for individuals and firms that fit and they're trying to build a well-integrated enterprise. That's what I see with the serial acquirers out there.

Catherine Williams: [00:20:35] But I think you touched on something that's really important. I'm reminded of a webcast we did recently, and I had an opportunity to talk to Jim Hurd of True Wealth, who sold a large Atlanta RIA to Creative Planning. They were a highly desirable firm, for many acquirers. But ultimately, one thing that was important to Jim and his team is this idea of what can Creative Planning add to the client experience, the services we deliver, what can help differentiate? And part of that is so that you can also have something that you can sort of speak in a tangible way about with clients. Right. When you're explaining to them why you've done this deal, how their lives or if you will, are going to be better, but also internally helping their teams get on board with this idea of selling the organization. As you talked about, there's tons of change that comes with that. And he talked about that being very important.

Scott Slater: [00:22:13] Without question, I think one of the things that in a competitive market where it's arguably a seller's market right now, buyers have to set themselves apart. How is my life going to be different and better if I join your organization? And by the way, that's another good reason if you're trying to be a buyer, why you should use a third party to help you, because they see all that. They know where you can fit within the competitive set and they can challenge you when you really aren’t setting yourself apart. But, Catherine, I would I'd like to put it on the other side, too, because I hear this from buyers all the time, sellers, because they have been a little bit of the catbird seat right now, aren't generally doing a very good job of articulating what do they bring to the table to a buyer. And for those listening, I really think that's an important element to get clear on. That I think sometimes very, very well capitalized smart sellers don't get a feel for what am I getting with this firm? What are you going to bring to it? Why do you want to be part of this organization? And frankly, if you want to enhance your perceived value and very tangibly, I think this is an important step that you're paying attention to that and that ties back to that theme I said before about alignment of interests. What is it that you bring to the table? How are you going to help the larger enterprise grow more aggressively? Really will set you apart..

Catherine Williams: [00:23:37] It's such an excellent point and one worth reinforcing, you talked a few minutes ago about essentially kind of those deal breakers, which is not seven or 10 or 12 things. Right. It's really those top few things that you most care about that you're sort of that hill you're willing to die on, if you will, relative to doing any kind of a transaction. And so it's spot on. And I would agree with you. It's an area that when I ask advisors on both sides, but certainly on that selling side, they sometimes, either they haven't fully thought about it or to the alignment comment there is a multi-partner environment, and they're out of alignment.

Scott Slater: [00:24:34] Well, one of the things, Catherine, that everybody in this industry talks about, and they're right, that cultural alignment and fit is really important, but I would challenge people to put that down on paper. So a lot of times, if you've done strategic planning, you've articulated what are our core values, what are the non-negotiable behaviors that are expected in this firm, whether they're spoken or unspoken, get them on paper. The likewise, I would say what are the three to five or six characteristics or behaviors or qualities that are critical to you that you do not want to lose, that you want to retain? And that's the way to start looking for the kind of partner that you will fit with. And that works on both sides. Buyer and seller.

Catherine Williams: [00:25:18] Absolutely, in our 2020 advisors study, we saw among our fastest growing firms in the study, which are firms that on average grew about 22 to 23 percent, we see very consistently characteristics around solid mission vision and values in place. They've gotten their house in order, so to speak. They can speak with clarity about not only their value prop, but how the business is run, their org structure. Everyone in the organization has great real clarity. So I often say to advisors, whether you think you'll actually execute on M&A or not, those are all things that are characteristics of faster growing firms in our study that you should shore up, that they will absolutely serve you in your conversations and in some ways may help illuminate those deal breakers. Right. When you're getting your house in order. Things around technology, the client experience, that cultural fit is really key. We know in our study that the top two reasons why deals either do not happen, or even worse, fall apart on the other side, is that lack of cultural alignment and lack of investment philosophy alignment, which of course introduces a lot of risk conversations and different things like that.

Catherine Williams: [00:26:43] So really appreciate you reinforcing that because we definitely see that in our study. Well, let's pivot a little bit and look at the environment that we've been operating in over the last, we’ll even say, 12 months and heading into a new year. I think you and I both saw a brief period of time in early 2020 when folks were understandably and rightly so, focused on retaining clients, shoring up their people, making sure their businesses were still operating. But absolutely the activity has resumed. And there's lots of interesting things happening around just the M&A landscape in general. So lots of things there to unpack, if you will. Being mindful of as we're sitting here in late 2020, this will likely be a podcast we will share in early 2021. What are some of your as you sort of reflect, and think about these last 12 months, what sticks out for you and then, absolutely, we'd love to get your perspective on kind of going forward what that might look like.

Scott Slater: [00:27:49] Well, Catherine as a bit of background. Five years ago, I began leading what we call the Fidelity M&A Leaders Forum, and really two things came out of that. The first was tracking of activity, because we want to create more transparency of where that's happening. And the second was around education between buyer and seller. And that we've talked about a number of those elements already about how to close that gap so that both sides are more confident in how they engage. But on that first one, on tracking, we've been tracking now for five years on a monthly basis, all of the RIA M&A activity that's publicly disclosed, majority investments, for, as I said, five years. We also track that larger a lot of the broker dealer, independent broker dealer activity too. This year, it's amazing. It's kind of a little bit of a tale of two cities. So we had a record year at the end of last year with in the RIA space $150 million in, and I think it was 114 transactions, something like that. I don't have that right in front of me, excuse me $150 billion in assets under management transacted last year. So in the beginning of January, February, that activity continued at that same run rate. And then we hit the pandemic. And March, April and May, remember the numbers I just told, $150 billion. March, April and May saw a combined 10 transactions totaling $4.1 billion. That's the lowest three-month period in the five years we've done it. But then June, that immediately turned around. Some of those deals might have been delayed, start happening. But from June through the end of November, the last six months, we have seen an unprecedented level of activity.

Scott Slater: [00:29:31] In fact, November is the largest single month of a transaction activity in the time of doing this, with 115 deals with $45.3 billion in the month of November alone. In the last six months have almost eclipsed all of the record 2019 year, where we see we've seen 112 transactions and $170 billion, $169.7 billion in assets transacted year to date. We still have the rest of December as we record this to complete. So what's that tell you? There's a lot of activity. About two thirds of that approximately is driven by serial acquirers. As a matter of fact, over the last two years, I think the firms that have done, 13 firms have completed four or more deals. That's like 61 percent of the deals in the last two years. And you mentioned Creative Planning. There’s CI Financial, there are a lot of new players that are coming into the space now. So what's that all mean? I think there's going to be continued accelerating activity as we go forward and I think faster as a result of the pandemic, getting people's attention around the value of their firm and not just the valuations, but also what do they need? What do they need from a business and operating standpoint like you've been talking about, and that they really realize for the future I'm better off doing that. So that's why you're seeing, we're also seeing, record numbers of billion dollar plus firms selling. It's really happening much more quickly.

Catherine Williams: [00:31:00] Any trends or anything that you're seeing when it comes to valuation in this landscape or some of the deal structure pieces? It's a loaded question we get every time we do a M&A webcast. Many people want to know what valuations are out there. So I'm not necessarily going to ask for that number, so to speak. But as you look at these deals and how they're being constructed, if you will, which can get a little bit to the motivation, right, why are folks doing the deals? But anything sticks out to you that might even be either cautionary or more of, hey, pay attention to this if you're going to get into the space and be aware of it?

Scott Slater: [00:31:37] Well, I think this is true of any industry, so I'll preface it by that, that every entrepreneur thinks their business is more valuable than maybe it is on the open market. We did a survey of strategic acquirers a year ago where we looked at all the deals of the over the prior two years that were represented, about half the deals in our transaction report. And I would say roughly two thirds of those multiples were between four and eight times. Okay, again, we're talking a wide range of sizes and all that, but four to eight times. But where do those buyers say that sellers are looking for? Seven to nine times. So there's a gap there. And I think an unrealistic gap. And what happens is it's easy to read about a particular multiple that's in the mid to high teens for one transaction. That is a strategic specialty transaction, a specialized transaction. And they want that multiple and yet they are a $200 million firm. And I think it's just trying to get a realistic understanding. The other thing, buyers will tell you this all the time too, a lot of unsophisticated first-time sellers, pay attention to multiples and valuation. And I get why, because that’s what their firm’s worth, but they don't pay attention to deal structure, but they're both related. So in other words, how much are you getting up front? In what form? What's required for the earn out period? How long is that earn out period? So deal structure, which is where buyers manage their risk, is just as important as what the valuation is. And it's important to look at both sides as an integrated package of what that looks like. And one last thing I'd point out, you mentioned trends that I think is an interesting one..

Scott Slater: [00:33:17] There's been a growing level of, with all the capital flowing into the independent wealth management space, to an awful lot of minority investment transactions. So that allows some well-run firms that may not be ready to sell out the firm. They still want to lead it, but they know they need capital to execute on maybe their own inorganic strategy, but have a partner to help them do that and be a better run firm. There's a lot more of that, both from a financial standpoint and private equity, as well as a strategic and operating standpoint. And that's a trend that we've been seeing accelerate on a very significant basis over the last number of years. So it all means that, again, coming back to the very beginning of this, it's really important to understand with clarity what do I really want? Because it's like walking into, I use this analogy sometimes, Home Depot on a Saturday with a vague idea that I like all the stuff in here and then start buying tools and things that are on the end aisle display because I might use that cordless drill, but I don't have a plan for what I want to build. So don't just start talking transactions, start thinking about what do I want, and then I can think about the different business models and how I might achieve that. And frankly, there are some brilliant people out there across this industry who are building some very creative and very different models and solutions. So I think everyone can find right now what they're looking for.

Catherine Williams: [00:34:40] Well, you remind me I had the opportunity to participate in an industry leading M&A conference and many of the strategic acquirers that we're referencing here today were a part of that. And I think a couple of things that really that stood out to me in their comments. Number one, they can pretty much spot if someone has sort of scrubbed the business or adjusted it for a short period of time to sort of drive up that operating profit, for example, or something like that, that they to your comment earlier, they really do want to see sustained ongoing organic growth. They definitely want to see the business has been operating in a certain manner, if you will, and they can pretty much sniff that out pretty quickly. And then the question of, okay, so if there is sort of this range of valuations that we hear about, as you said often, that's the highest ones that hit the news. Some of those hit essentially premium level. And what does it take if I really do believe that my firm is worth at the highest premium? What is that? And they were very candid. Like obviously from a buyer standpoint, they're going to have a certain perspective around that, but that it is hard to really think about your business being so much more valuable than many others out there. But, ah, and maybe this is a question for you in terms of if you really want to get a premium for your business, are there a couple of things to really look at that could at least help drive the conversation? Whether it'll actually happen or not might be a different conversation. But how do you think about that? Because certainly this idea of maximizing the value of this business that you have built from scratch is really important for advisors. So when you think about that premium piece, anything in particular come to mind?

Scott Slater: [00:36:29] Well, I mentioned earlier we've had a paper that I think is a very valuable one to frame it called “Maximizing the Value of your Firm,” and it really talks about this. But what would you really ask? What are buyers most interested in? And it is an artful mix of a number of things. First of all, it does depend on what kind of market are you in and do they want that market? And are you dealing with a strategic or an operating buyer? An operating buyer may very well want to be in Memphis because they're not there, as an example. They might be in Chicago or the mid-Atlantic and they're trying to get to that market for some reason. So that might be one thing. Number two is they are looking for the mix of your client base. If your clients, let's just say the rule of thumb I tend to use is if more than 30 percent of your clients are over age 70, essentially you have, to be a little extreme, but a wasting asset, I mean, because people are drawing down on those assets. Are you bringing in younger clients? And third, are you growing organically or are you at least showing a desire to grow organically but are struggling with it? And this is a firm that may be able to solve it for it.

Scott Slater: [00:37:42] Third and fourth is probably really looking at the talent you have. Do you have advisors that are kind of mid-career motivated, want to become, have the energy and drive to build it to the next level, but they're already pretty established, knowledgeable? Do you have talent that could be on the professional services side of the organization, the leadership side excuse me, the C-level? They're looking for that kind of talent, too. And then maybe you have a specialization. I would say that's further down the list, but maybe you have a particular specialization that a particular firm needs. But that's more of a niche opportunity. But I really think it's, are you profitable now? Have you been consistently? Are you able to grow organically? And is it dependent on more than just the principal of the firm or others driving that growth? You have a business development process. What's the mix of your client base look like? Is there something unique about your offer? Do you have talent?

Catherine Williams: [00:38:40] And that client piece, I'm so glad you mentioned that, I mean, we know from our study that over 50 percent when it comes to that, the demographics of the clients advisors are working with that. They are in that 60 plus range. They are aging clients and advisors in our study this year, which we had nearly a thousand advisors globally, they reported about 33 percent of their clients are decumulating. And likewise, when we look at these faster growing firms and including some of the M&A activity, they're capturing the accumulators, they're offsetting that. They're going after those younger clients. They're figuring out a business model that makes those profitable so that one day when they are that ideal target client, sort of the traditional client, and may be shifting toward decumulating, it's still a profitable business for them. So I appreciate you mentioning that. That's a real headwind for a lot of the advisors we work with.

Scott Slater: [00:39:52] You know, one other thing I'd add, and maybe you've talked about this on some of your other episodes, but how you do your marketing is increasingly something that they're starting to really investigate and look to. In other words, in you know, I'm in the baby boomer crowd. We're very much into the relationship and the network and all that stuff. And that's worked very effectively. But that model is not what's going to get the next generation. So how digital are you in terms of your ability to attract and retain clients and build and to get new clients, build connections with centers of influence? Because the investors of tomorrow, the ones who are now valuable today, are doing it in a very different way. And they look at advice, they value it in a different way. And I think it's important to figure that one out.

Catherine Williams: [00:40:37] Absolutely, and we have done a couple of podcasts already that we really get into that growth piece and then we'll be doing some more in the new year for sure as well. So, yeah, great point there. Well, let's pivot a little bit and let's do a little forward looking, if you will. When you think about the next 12 to 18 months, what does that environment look like? It's still a seller's environment. Are there new entrants into the space that maybe we're not seeing just yet? What comes to mind when I ask you that question?

Scott Slater: [00:41:11] Well, you know, I think our human nature, again, is that the way the pattern is will always be the same. So I'm going to enter that with a little bit of humility and trepidation. But I would say all the fundamental forces suggest that we're going to see a continued acceleration in that activity. And more and more sellers or potential sellers are realizing both from their valuation and for what they need to run the business in terms of better platform and the available capital that's there. And that's all going to drive in an increasing level of activity. I frankly think the pandemic forced people. A trigger event like that forces people to consider their options more carefully, and I think more firms are engaged in that.

Catherine Williams: [00:42:52] Absolutely. So, Scott, if you're an advisor listening today and you're ready to go or at least you want to start developing a plan around this, talk about some key next steps, whether you're a buyer or seller in the space. Maybe that's it. Maybe there's two answers there.

Scott Slater: [00:43:10] Sure. Well, as I said at the outset, I think the vast majority of us tend to operate either reactively to an opportunity that presents itself or there's just inertia where we don't do it at all until that trigger event happens. So here are five things your listeners could consider. First, I encourage people just like you're listening to this podcast, become a student of M&A to put yourself in a better position. I mentioned Control Your Destiny, which you can find it out on the Fidelity institutional site to define what is your clearly preferred option and then determine whether you have the necessary resources to execute on that option. Second, Catherine mentioned the transaction reports. We do have a monthly transaction report available at the Fidelity site. Look at that to see who is selling, who is buying, what are the trends, and how do you see it? Third, listen to podcasts just like this one, or the one I hosted for Fidelity called “Future Ready through M&A” that you can find on iTunes or the Fidelity site, and listen to how different experienced acquirers and ecosystem players approach the different challenges. Fourth, look at your own business and assess how you're doing today. Regardless of what your M&A plan is, you'll end up in a better place if you pay attention to the things that Catherine brought up that drive high valuations. Growth, strong talent which is being developed, client engagement and retention, investing in your technology and your service platform, and moving your service model up that value stack we talked about towards those stickier behavioral finance type of concerns. So running your business. And then finally, I think this is a good way to force you to do this a little more, get a professional valuation by an enterprise that understands independent wealth management. That's a great place to start to assess where you are now and what your options really are. I think if you do some of those things, you'll be a long way ahead of the vast majority of the other interested parties out there and put you in a better position for what you want.

Catherine Williams: [00:45:11] I couldn't agree more, and that is the perfect sort of punch list, if you will, to end our time today, great actions there that advisors can take in their business to move forward. Scott, thank you so much for joining us today. I look forward to connecting with you later in 2021, and we'll see how the landscape continues to evolve and some of the activity that we see going on. And absolutely for those listening today, I would check out the resources that Scott has mentioned. Fidelity is an industry thought leader around the space. So great tools and resources to access there. You can certainly find Scott on LinkedIn as well. I want to thank everyone for listening to our podcast today, and we'll catch you on the next one.

Thank you for joining us today for Dimensional Fund Advisors’ Managing Your Practice Podcast. For more information, please visit

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

All expressions of opinion are subject to change. This podcast is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Please consult with qualified legal or tax professionals regarding your individual circumstances.

Investing involves risks. Risks include loss of principal and fluctuating value.

More Episodes

Episode 2 - Keeping Employees Happy and Engaged in a Virtual Environment

Episode 2 - Keeping Employees Happy and Engaged in a Virtual Environment

A discussion around employee engagement and morale and how this impacts the overall client experience.


Download as PDF


Catherine Williams: [00:00:00] Hi, everyone, and thank you for joining us today. I’m Catherine Williams, Head of Practice Management for Dimensional Fund Advisors. You know, here in 2020 more than ever, leaders have had to really pivot and think differently about how they develop their employees, how they give and receive feedback, and certainly how they maintain high employee morale. Whether having virtual or remote employees is new for your organization or you’re part of a firm where that’s very much been in play for quite some time, I think you'll come away from our discussion today with some new ideas, recognizing that in this virtual environment, all the things that I just mentioned have taken on a slightly different form and function even. So we’re going to share some, I think, some ideas, some perspective on how you can think about engaging with your employees, continue their development even in this virtual environment. So to join me in this discussion, it is my pleasure to welcome Shannon O'Toole of Shannon O’Toole Coaching. Shannon, it’s great to have you with us today.

Shannon O'Toole: [00:01:00] Thank you so much, Catherine, I’m happy to be with you.

Catherine Williams: [00:01:03] I’d love to start, if you don't mind, sharing a little bit about your background and where you focus in your coaching business with advisors. You have a really interesting, long tenured background in this industry. And then, as I mentioned, we’ll dive into some of our topics. So with that, can you tell us a little bit about yourself?

Shannon O'Toole: [00:01:25] Yeah, happy to share, so for the last 16 years, I’ve been in the wealth management space and I’ve spent about 20 years in recruiting in talent management. For the last 12 years, I’ve actually served as a board member and the leader of talent in human resources for a large St. Louis based RIA by the name of Buckingham Wealth Partners. I started at Buckingham 12 years ago, and we had about 75 people in our headquarters office here in St. Louis and a human resources team of just two of us. When I departed from Buckingham earlier this year, we had done over 40 mergers and acquisitions, which took us to right around probably 500 people in 40 different offices across the United States. So by the time of early 2020, that human resources team had grown from two people to 10 people. And I had had the opportunity to work with many smaller RIAs, where I definitely realized that there is a big need for owners and advisors with help in engaging their people. Any time when you’re managing people, there’s a need to engage them and certainly retain them to their teams. And I think certainly what happens with a lot of advisors is that they get into the business because they love working with their clients.

Shannon O'Toole: [00:02:50] They want to help their clients reach their financial dreams. And as they get larger, they need a staff to help them to leverage their time, to allow them to me to work with more clients. And what comes with a staff and hiring of people, but people management challenges and the need for things such as feedback programs and team building initiatives and talent alignment and all of the many things that come with having a team of colleagues. And so what I have been doing for the last couple of months in Shannon O’ Toole Coaching is really serving as a talent strategy coach to help move those advisors and owners into the results that they’re looking for when it comes to engagement and retention strategies and really working to have successful teams. Because at the end of the day, we all know successful teams really make successful firms. So I’ve been part of this DFA community for the last 12 years, and I have made some great friends and had some amazing education opportunities. And I am just really honored to be a part of this podcast. So, thank you, Catherine.

Catherine Williams: [00:04:02] You're welcome. It’s great to have you with us, and as I mentioned with your- particularly with your background of experience, you have seen what this can look like or does look like in what would be by in this industry’s standards, a behemoth firm, but also how it plays out in smaller firms, whether including teams that may only be three or four people at the very most. And so I’m really looking forward to diving in around that and recognizing that. I think for a lot of our listeners today, they’re probably sitting one of those camps, if you will, one of those buckets, but that the idea of how you engage your people, even if it's just a couple of folks on your team, how important that can be. And with so many firms still having folks that are working from home either 100 percent of the time, depending on where you might be geographically or even still part of the time. And quite honestly, even from our covid-19 survey that we conducted in July, the many firms are absolutely considering and working to continue to offer work from home flexibility. So in some element of that, in the business, that all creates, I think, some unique challenges and opportunities around employee engagement. Why is it important to keep that high and the morale that comes around with that, that there's a business element to that, but there's also just this element of making sure that your people are really optimized and working at the highest level. But let's start with just a question. So when you think about employee engagement in your experience, why is this important to pay attention to regardless of the size of your organization?

Shannon O'Toole: [00:05:51] Yeah, I think that's such a great place to start, because I think it's easy to just underestimate the importance of engagement. And it is interesting if you just look at research, I mean, you're going to see that the organizations that have high employee engagement, they have higher level of retention, they have higher level of those people in higher likelihood of those people staying around their firm, which is incredibly important. Specifically in the wealth management business right now with potentially some talent transition, as we have a great number of our advisors are baby boomers and looking for retirement options. And so making sure that your employees want to stay and stay working for you is incredibly important. They also see that with higher engagement, you're going to have better outcomes. They are more likely to treat your clients better and attract new ones. It's just that positive spirit that is magnetic and brings people and keeps them and then they're healthier. You want people who are healthy, who are lower stress, who are not burnt out on their jobs. And so I think it's incredibly important. I mean, we have seen this year that employee stress is up and their well-being is probably not as high as it's been in years past. But the interesting thing about people who have engaging work is it's almost serving as a distraction and a constant. Something that is consistent in terms of a little bit of what's going on in the world around them. It's actually serving as a great buffer. And so we're still seeing a high level as it relates to how employees are engaged in the work that they do and in their teams.

Catherine Williams: [00:07:37] So you touched on this on the fact people are getting their jobs done. In fact, a lot of the firms that I talk with, they say, look, are people are busier than ever and things are going OK. We were able to pivot into this technology from a technology standpoint, a workflow standpoint, into this remote environment. But are they engaged in the firm, the mission, why we're here each day? What causes us to show up, if you will? What are you seeing or hearing around this? Even as we recognize there might be someone listening to this is wondering why people are getting their job done, right? Isn't that enough?

Shannon O'Toole: [00:08:17] Absolutely, and it's certainly important and we want them to continue getting their jobs done and working at a high level, but I think it's also important to make sure that they are still feeling that connection with the greater firm and certainly with the firm's mission. I've talked with a lot of leaders at firms who have been very honest with me and saying, listen, I don't even really know what to do. I've never navigated anything like this before. And now I have a whole team of people who are looking to me for guidance. And, honestly, I'm not really sure if this is going to work out or how this is going to work out. And I think there's comfort in the fact that we're all in the same situation, that there is a lot of newness and change going on. But what I've coached those leaders is that it goes really far with your people, to just be honest with them, acknowledge, yeah, this is new for all of us and we are going to have to try some things out and see what works and the things that don't work we'll have to move past. But I think that acknowledgment and that honesty really shows the employees, yes, they're dialed in. They're not just acting like the world is rapidly changing around us. I think it's important to- I love the analogy of the flight attendant. I think your people always look to you to see, like, OK, are you calm? Like, there's bumps. 

Catherine Williams: [00:09:48] Turbulence.

Shannon O'Toole: [00:09:51] There's turbulence

Catherine Williams: [00:09:52] It's been so long since anybody's been on an airplane

Shannon O'Toole: [00:09:55] See, that's the problem. So there's turbulence. But I'm going to look at the flight attendant and, you know, if he or she is calm, then I'm going to feel better. And I think that's the key. You might not have the answers. You might not know exactly what the next year is going to look like. But if you can remain calm and show them that you are all in this together and that, yes, your puppy might be barking in the background during a Zoom call or your kids might come running through the background. But I think if the leader can show calmness and to show some grace as it relates to things just aren't normal right now, that gives your people so much peace also and helps keep them feeling like I'm in the right place. I'm in a company that cares about its clients but also really cares about me and is really dialed into that.

Catherine Williams: [00:10:46] And so with that, if an advisor listening today is thinking, how can I increase individual engagement? We're going to talk about the team in a moment. But I'd love to get your perspective on what are some things that you're seeing advisors do that you recommend they do to really check in and drive that individual engagement?

Shannon O'Toole: [00:11:37] Yeah, I mean, I think it's really simple, but it does have to be purposefully done and it's the mere fact that your people are going to feel more engaged in their jobs if they feel truly needed and that they truly feel like the talents that they offer are being utilized by you as the adviser, by your clients, by the firm. And sometimes if you're not purposeful in taking the time to acknowledge those things, it can completely get lost in translation. And so I think it really can be just as simple as setting up check-ins. Make sure that on your calendar you have some dedicated time with each of your team members just to say how are you? Or has anything changed in the past two weeks or months that is making it more difficult for you to do your job from home? And I would really recommend that that check-in and those questions not be sandwiched in the midst of the 50 things that have to be done for clients that week. But really, really focus time on how is that person doing. And there's going to be things that they respond with that you aren't necessarily going to be able to fix.

Shannon O'Toole: [00:12:51] You can't open up somebody's daycare for their children to go to again. But you can acknowledge the fact that that's something that they're experiencing right now and maybe give some flexibility to talk about prioritization or maybe it is something you can fix. Maybe all of a sudden they're like, you know what? At the office, I print off all of these documents to review them and make sure that they are perfect to go back to you. But I don't have a printer at my house, so I can't do that. I mean, that's something that like, yeah, you can solve for, you can get them a printer and help them do their jobs better. But I really find that if you're not taking the time to ask those questions and be purposeful about them, one, they're going to just assume you don't care. And two, it's not going to give you the opportunity to really engage and potentially help them do their jobs better.

Catherine Williams: [00:13:39] I think you made a really interesting point in terms of carving off time to have this kind of conversation and sort of not sandwiching it in there or doing a part of a phone call around a particular work product of some kind. I think that's really valuable. And it does add more Zoom meetings. And I think we should just acknowledge that. But certainly the nature of those meetings, I think is really important.

Shannon O'Toole: [00:15:00] I would just- I would say the amount of time to replace that person if you don't take the time upfront to make sure that they're engaged. If you think of the hours of sorting through resumes and interviewing and onboarding something, sometimes it's really worth it to take the time to keep the people that you have as long as they're great contributors.

Catherine Williams: [00:15:24] And talent is moving around right now. There's long been a war on talent in this industry, particularly top talent, which so many of the firms listening today have. And that's picked back up, if you will. Firms are interviewing, onboarding, and building clients into the work, their employees into organizations, even in this remote environment. So I think your point is a valid one. It's much more costly if you've got to go find a replacement for that role. 

Shannon O'Toole: [00:16:33] Absolutely.

Catherine Williams: [00:16:34] So we've talked about- we've talked about the individual. But for many of these many of the organizations that you and I both work with, we've got very much that team engagement, which is the team could be the entire organization or it could be an immediate work team. But in the spirit of either one of those, how so? How do you approach engaging, increasing that team engagement piece?

Shannon O'Toole: [00:17:00] Yeah, I think this this is where I've really seen some great creativity this year. I think 2020 has offered us an opportunity to really have to think outside of the box and think creatively, because the ways in the procedures and programs we were doing before just couldn't work in a virtual environment. And so it has forced us to step outside a little bit. And I've just heard some great examples of things people are doing to ensure that their teams still feel connected when they aren't having lunch in the lunchroom or they're not taking their coffee breaks to be able to catch up about the weekend and what's going on. And I think it's interesting because one of the things I've heard from a number of companies is that it feels more efficient to be on Zoom calls because there isn't as much of the chit chat when individuals walk into a meeting room that sometimes can take the first 10 minutes of a meeting just getting caught up. And while that's good, too long going without some of the things that connect us as people can start to lead to people not feeling engaged in their team. And that can be the beginning of a downward spiral to somebody wanting to leave and also to your clients not being served at the level that you want and need them to be.

Shannon O'Toole: [00:18:19] And so a couple, again, like little things that can be done is to schedule virtual coffees or virtual happy hours. And I think it's one thing to put that on the calendar and say, like, this is great, we're all going to be on the Zoom call together and grab your coffee or grab your cocktail. But I really would suggest that you need to have a topic or some type of game. So I've heard people play two truths and one lie or a variation of an apples to apples game, which my kids love. But there's adult versions, too, or even just something as simple as a starter question, like along the lines of, hey, what's everyone watching on Netflix right now? Just so it brings that connection. Typically, those types of conversations or games make people laugh, they make people take a breath and just truly enjoy spending that time together. So that's one easy way. Another thing that I'm a big fan of and it really goes to kind of setting people's mindsets is to either start meetings or have meetings where the only topic of conversation going round robin is to name something you're grateful for. And sometimes people talk about things that they're grateful for in the business and sometimes it's outside of the business.

Shannon O'Toole: [00:19:39] But it really just gives you a sense of what's going on in those employees’ lives and is just a great way to start a meeting or to start a week on a really positive foot, which is proven to if people have a positive mindset, they're going to show up with a more positive spirit. So those are a couple of things. I think if you want to take it to the next step, I have a client right now that has a really fun tokens of appreciation that they used to do in the office with actual wooden tokens that they had branded for their company. But they're now taking it to the virtual platform and they have a fun PowerPoint screen. Every employee gets three tokens for the quarter, and every Monday morning at the meeting, they have the opportunity to give a token to somebody based upon something great that that employee has done. Or maybe they see an employee that's really living the values of the company. And once somebody gets three tokens, they get to turn it in for an Amazon gift card, which everyone is using Amazon right now.

Catherine Williams: [00:20:38] Right.

Shannon O'Toole: [00:20:39] So it's just if you talk to those employees, they say it just means a lot to them. It is public recognition. It's the recognition that they are doing a great job. And again, it just brings connection amongst the team that isn't physically in the same room anymore for those Monday morning meetings. And so those are all simple little things. But I would just keep reiterating they have to be purposeful, and you actually have to schedule them and stick to actually making them happen.

Catherine Williams: [00:21:10] I like that tokens of appreciation idea because it also empowers others on the team. As leaders, we've all we've got a lot going on. And so where you can even share the opportunity out into the team so that they are maybe leading some of these activities. But also it really requires that they think about the team for like those tokens of appreciation. I think that's a great suggestion. I think the one activity that's resonated the most with my team has been the virtual scavenger hunt, which can be really fun when it's that 10th Zoom meeting of the day.

Catherine Williams: [00:21:57] As a facilitator, it's so fun to watch everybody sort of scatter to go get that roll of toilet paper or the adult beverage or the logo item or whatever it is that you might ask for and bring it back to the to the screen, if you will. And again, and we're pretty competitive bunch here. But I think, like you said, at the heart of all this is don't give up on these things. So we've talked about individuals, and then the teams. How can someone listening today who's also thinking about the overall firm and the success of engaging everyone across the organization regardless of that size, what comes to mind when I put that out as a question for you?

Shannon O'Toole: [00:23:21] I think this is where we get to a point where it's important to start talking about the mission, the vision, the values, the goals of the company. What are those overarching things that really keep everyone, for lack of a better term, marching in the same direction? I very much encourage that firms have firm-level yearly goals, and those goals might speak to the amount of new revenue that you're bringing in, maybe the number of new clients that you want to get in that year. Something along the lines of, you know, we have our retention percentage. We want to make sure that we retain this percentage of our current clients, those types of metrics that you really can use of as benchmarks for success, and also that everyone in the organization can see themselves. And it's hard to talk about retention and without everyone in the entire organization saying, I have a piece of making sure that we retain our clients no matter what my role is in the organization. And so when I'm talking with firms about those goals and those overarching goals for the firm, I really, really want to just encourage that. They have to be clear. People have to be able to understand what they mean and how they relate to the business. I would encourage that they get communicated in the beginning as kind of a rollout or an announcement of this is what the goals are.

Shannon O'Toole: [00:24:57] But then I would encourage ongoing communication and updates about those goals. And then certainly another important component to goals is being able to reinforce them, repeat them, and reward them. There has to be celebration at the firm level of reaching those goals. I really believe that the power of winning together and sometimes losing together are some of the things that most bring individuals together and being able to have those benchmarks for success throughout the year. I think that's really important. And another component to that would be linking each of your people to those goals. So certainly if you have wealth managers or wealth advisors that are out there doing business development and they're bringing in new revenue or they're bringing in new clients, really giving them kudos for how they're contributing to those goals and to the overall success of the firm, just like maybe your client service associates are contributing to the retention of clients, that, again, just keeps everyone focused on where are we going and has that higher level of connection to the greater firm and not just their team or their individual job.

Catherine Williams: [00:26:28] I love the idea of reinforce, repeat, reward, right. Following those three “Rs”, if you will, when it comes to your goals and establishing them is really critical, which we absolutely see within our advisor benchmarks study that we run each year, and this year had nearly a thousand advisors from around the globe participate. And we ask some questions about do you have a strategic plan? If you do, how often do you communicate with your team about around it? And when we look at faster-growing firms versus slower-growing firms in our study, we do see some characteristics with those faster-growing firms. They are more likely to have a strategic plan of at least three years, although even if it's only a year out, they've put it down. Right. It is not just running around in someone's head. They really have put pen to paper around that. And they are absolutely, as you just described, not only doing an initial reveal and sharing, if not actually asking folks to help build the plan, but they revisit on a regular basis. And that can run the gamut in our study. I think quarterly was the most common time frame or cadence, if you will. But absolutely, we see organizations that maybe it's a subset or certain area of the plan where they're getting together weekly.

Catherine Williams: [00:27:49] And certainly we see lots of usage around dashboards and within CRMs and all those kinds of things. And I would offer those are all great mechanisms for tracking your pipeline. Did clients refer? Did you lose any clients? But also think about that dashboard as a potential way to demonstrate how many meetings did we have. Is there a spot where we can drop in a comment? If a client sends us a thank you note, we can share that. Just thinking about ways that you're reinforcing and as you said, helping folks, even both as part of a large organization, but also individually, how they can move the goals forward within the organization. And I think you and I would both agree you've got to set goals at every level and every role in the organization, and you have to be very careful to make sure there are goals that they can actually influence. Right, that they can actually complete. They may need to work with colleagues in the large organization to get them done. But there's got to be elements of it that they can really move the needle and have control over so they can kind of see and feel that they are making that impact.

Shannon O'Toole: [00:28:54] Yes, that's the specific, measurable, and attainable when we talk about goals. Those are all very key components, and on the attainable part, if somebody has a goal that at the beginning of the year they already believe they're never going to meet, it's really not serving anyone any good to have that goal. So the specificity, the ability to measure and that ability to be attained are really key and good goal writing.

Catherine Williams: [00:29:20] We're also seeing a little bit more chatter, if you will, with some of the firms that we work with around this idea of client retention and how that can impact or relate to the compensation plan. We're seeing some things around that compensation plans, as you mentioned, are often in terms of incentive pay, are often geared around the new business brought in, which is great. And as you said, you need to pay. If that's the behavior you're looking for, you need to pay for that. You need to reward that when that happens.

Shannon O'Toole: [00:29:52] Absolutely.

Catherine Williams: [00:29:53] That you have so many folks in your organization where, whether directly or maybe one or two removed, it's about retention. It's about delivering the client experience, retaining those assets. You worked really hard to get through the door, maybe even increase your wallet over time. And so one way that we're hearing a few firms are really dialing that up and putting some compensation around it is even as they measure NPS (net promoter scores) with their clients. And if those NPS scores are at a certain level, a certain amount of money becomes available within a pool to recognize the team. So there are lots of ways for sure to provide equal incentive in terms of the mindset may not be the exact dollar amounts. But having that mindset even in those client retention roles, as much as you might have in the prospecting roles.

Shannon O'Toole: [00:30:43] I agree with that, and I would I would add often I hear I don't know how to measure the goals. It's easy with wealth advisors to measure their business development, but what do I do with the rest of my team? And I think that brings up a great point, that there are metrics like retention that are easily tracked, that directly relate to those individuals goals and make them feel included in those metrics that are so important on a yearly and monthly basis to the firm.

Catherine Williams: [00:31:10] Great point, that's a great point. So let's pivot just a little bit and think and talk a little bit more around your team members. And again, even if you're a small organization, helping your employees see themselves long term in your business is so critical. And I'm really excited to talk a little bit about this with you today as sort of this career pathing question. because as if anything, we are also seeing in our benchmark study that really for the first time when it came to this question of if you lost clients, why did you lose clients? And death is definitely one of the top reasons. We do have an aging client base out there that that's definitely showing up in a lot of organizations. But the loss of clients because they lost an advisor or certainly if that client went to a competitor. but that loss of an advisor who then, as you can do the math, subsequently took clients with them, I mean, talk about hitting your bottom line. It's painful enough to lose that talent. But then when they take revenue with them or after they leave, that is really challenging. And so we're having lots of conversations with advisors, right. With the firms right now to say look carefully and where you can as much as you can think about career pathing. And so as someone who spends a lot of time working with advisors, developing career paths, even in a small team, maybe a little bit of the why question of from your perspective, is it is it important to have a formal career path plan, in your opinion?

Shannon O'Toole: [00:32:46] I think it's important to not necessarily have a document that shows like in one to three years, you're going to do this in three to five years, you're going to do this. But what is important is that there needs to be a conversation, a consistent, ongoing conversation about expectations. And those expectations have to be those of the owner of the firm, the wealth advisors, and of the employees. Because what we're seeing happening and if you ask a lot of more junior advisors like, well, why did you leave your firm? The reason they're leaving the firm is because they're not seeing a future for themselves in that firm. They see somebody maybe who is the lead wealth advisor who has talked about retirement, but isn't having any of the behaviors or the actions that look like that that person might be retiring and having the more junior advisors step into that role. And so sooner or later, the junior advisor just thinks, OK, well, this isn't going to happen. And so my career’s stalling out and it really just takes one phone call from a great recruiter to get that person to potentially walk out your door and go take another opportunity. And what could have solved for that is something just as simple as an expectation setting conversation to say, you know what, this is my plan as it relates to either my personal retirement or my transition out of the business, or this is what I'm thinking in terms of your growth and your career development. And I think people shy away from those conversations because they can't guarantee that everything is in stone. Right. It's like, oh, I don't really want to have that conversation because I might say that it's going to be in three years, but then I don't do it for six years. I would say let go of the concerns about the black and white logistics and still have the conversation because there's just you know, people make up stories, they make up what they think is going to happen in the void of information. And so the only way to keep that from occurring is to provide information and to have some of those discussions. 

The other part, Catherine, I would probably add to that, is also just the commitment to people's development. That is also something that I think especially some of our younger generations are looking for, is an organization that not only commits to them in terms of their professional development, but also their personal development and being able to be with an organization that maybe is putting resources, whether that's money, time, people power behind things like paying for getting CFPs or offering time to study for your CFP or getting them an outside coach. And maybe that coach is focused on helping with business development or sales coaching, or maybe that coach is helping that junior advisor with some behaviors that need to be a little bit tailored or altered to make them a better player or better manager within the organization. I think firms that are willing to put up the resources to continue that development of their associates are the ones that are going to really hold on and retain the talent that they need.

Catherine Williams: [00:36:32] I think this is a really important point as well for firms that are also thinking about the future leadership of their organization talent so that they're there when the time comes, whether it's an outright succession or just needing to have folks step up in a more leadership way. But the building a path, building those skill sets and you know, you mentioned a couple of really great ways, whether it's for advisory skills or just developing personal development on ways to go about that. It's really important. There's lots of great programs out there. Even I think about the G2 Leadership Institute, things like that, that are absolutely designed to help develop the next generation for the potential of actually leading or being in a leadership role in the future. So it's not just to help them move through their current role or their current path. Maybe they're an associate advisor, and they want to become a lead advisor. But really, that long term vision of your organization, I know this is really coming to the forefront for a lot of firms right now. So you make a really good point around that. So part of this, as you mentioned, it's about having conversations and conversations, as we all know, is feedback.

Catherine Williams: [00:37:54]. One of the questions that is often presented is this idea of, well, I want to do that. And I, I have people that are anxious to get feedback from me. Aren't these really time consuming? Like how do I think about a process, a program of feedback that maybe it doesn't feel as labor intensive as we often think about when we do think about a more formal feedback process?

Shannon O'Toole: [00:39:03] I think one of my favorite comments from a leader that I've heard so many times in my career is, well, they're just not meeting my expectations. And my first comment back whenever I hear that is, well, did you clearly state your expectations? Because it's really hard for someone to meet them if they don't know what they are. And I will tell you 90 percent of the time, the answer is maybe I didn't clearly state them and I need to go back and do that. And so that is where it all starts. The simplicity of expectations and goals and having conversation is the key. I mean, just like we all talk about communication is the key to any relationship that is very much the same when it comes to the people that work for you. And so oftentimes I hear, well, we don't do a feedback process or we don't do a performance review process because it's just so time consuming. And I don't even know where to start with that. I don't want to have to build the whole process in a system. And my response often to that is that it doesn't have to be labor intensive. It doesn't have to be something that is, again, the most perfect and pretty form and program out there. But what it does have to be is it needs to be dedicated time that is set aside to just have a conversation about how your employees talents are valued in the organization and potentially what else you'd like to see them to do in the future with those talents. And I think the best feedback meetings are the ones where your employees are talking about their strengths, the highlights of the things that have gone really well for them, and then also about the things that they want to improve in and the areas that they want to develop in.

Shannon O'Toole: [00:40:58] And then you're able to also share your insights and feedback on those topics. And it really becomes a conversation and that it's not this scary meeting where someone's going to find out something about themselves or they're going to get a rating that they weren't expecting. And so they spend their whole time worrying in the meeting as opposed to just actually listening and feeling like someone is their advocate and helping them to continue to get better and use their talents for the good of the clients and good of the firm. So it can be just as simple as a few questions along the lines of the topics that I just talked about with strengths and areas of opportunity. But at the end of a feedback meeting or the goal of a feedback meeting is for that employee to know that you really value the talents that you're sharing with the clients and with the firm. And that has really never been, at least in my lifetime, as important as it is right now. People want to feel connected. They want to feel like they have purpose driven jobs. And ultimately that is engagement. That is what keeps associates, employees in your firm. Is the idea that, like I am cared about, I am needed and I'm going to show up here to do my best, my best job for clients on a daily basis.

Catherine Williams: [00:42:27] It's interesting, you've essentially described a feedback initiative that we've been implementing here at Dimensional very much as you just described Shannon, sort of this quick, fast, real time feedback. It's very concise.
But the idea is that very quickly, after a client meeting, an internal meeting, whatever the engagement might be, you can share some feedback. You can get a sense of first and foremost, the great thing you did and where you might do something differently. Of course, if that feedback becomes recurring or someone really adamantly disagrees with that and you, that can become a slightly different conversation. But the framework that as I think very much as you just described, it's quick, it's fast, it's real time. And it's definitely been interesting, it's been a game changer here, I would say, at Dimensional. 

Shannon O'Toole: [00:44:51] What I love about that, Catherine, is that those are the types of things that start to build a culture of feedback. The best organizations are ones that honestly they don't even really have to have a performance review or feedback process because their culture is one that is just so rich in feedback and people are continuously telling their co-workers what's one thing they did well and what's one thing they should do different. That's what starts to build that out. My feeling is that that always needs to start at the top and that the best leaders are the ones that are offering feedback on an ongoing basis about what their team has done really well and what they want to continue to get better in, and who are also sharing that information about themselves and able to say, that team meeting we just had, I wasn't as prepared as I would have liked to have been. But next time I'm going to be more prepared and have an agenda for it. But, gosh, it really was nice that we spent 10 minutes of the time together talking about what we're grateful for. And that worked really well. I mean, though, if you're constantly in an environment where feedback is a part of it, then it really just gets to that ideal place of essentially 360 feedback happening all the time. And where people truly are feeling like feedback is a gift and it's a gift that I'm excited to receive because that makes me realize that that person cares about me getting better and growing as a person in a professional.

Catherine Williams: [00:46:27] Such a great point, excellent perspective, and as leaders, particularly this year, we've often found ourselves focused on preserving revenue and making sure the lights are on and that you mentioned this earlier, what equipment do folks need to get their jobs done. And those are all really important. Obviously, if you don't have clients, you don't have revenue. You're probably struggling to have a business. But taking the time and setting the example as a leader is, I think, a really critical component. And to your point, being able to not only give feedback, but receive that feedback and sort of demonstrate that behavior, I think can be really powerful. I really want to thank you for joining us today. And it's been a great conversation. I think hopefully our listeners today have come away with a few ideas about how they can, if not get started, maybe refine some of their processes to date. So thank you so much for coming and sharing your expertise with us.

Shannon O'Toole: [00:47:27] Thank you so much, Catherine. It was a pleasure to be with you all today.

Catherine Williams: [00:47:31] Definitely look up Shannon O’Toole Coaching online. You can find Shannon on LinkedIn as well. And for those of you listening today that would like more information about Dimensional and how we work with advisors and investment professionals, check us out at And with that, we'll catch you on the next podcast.

Thank you for joining us today for Dimensional Fund Advisors’ Managing Your Practice Podcast. For more information, please visit

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

All expressions of opinion are subject to change. This podcast is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Please consult with qualified legal or tax professionals regarding your individual circumstances.

Investing involves risks. Risks include loss of principal and fluctuating value.

Episode 1 - Buying, Selling or Merging: Advisors’ Perspectives on Mergers and Acquisitions

Episode 1 - Buying, Selling or Merging: Advisors’ Perspectives on Mergers and Acquisitions

A conversation about finding the right external partner for the future of your firm.

Whether you’re seeking an external partner for the purpose of retirement, succession planning, or taking your business to the next level, the merger and acquisition (M&A) process can be daunting for any advisory firm. How do you find the right partner? How do you ensure a good cultural fit for your staff and your clients? What does integration entail post transaction? Catherine Williams, Dimensional’s Head of Practice Management, is joined by Susan Strasbaugh of Buckingham Strategic Wealth and Karen Keatley of Modera Wealth Management as they discuss successful M&A experiences at their firms.


Download as PDF


Catherine Williams: Hi, everyone, and thank you for joining us today. I'm Catherine Williams, head of practice management for Dimensional Fund Advisors. And today I want to talk about the idea of seeking external partners to help you either consider your succession planning or if, in fact, you're looking to continue to grow how an external partner might be a resource for you. We know from our advisor benchmark study that only about forty four percent of firms and it is good to see that number does continue to go up each year. But still only about forty four percent of firms indicate they have a succession plan in place. Likewise, for many advisors we work with they’re in a place in their business where they're needing to make really crucial decisions about how they get to that next level of growth. And do they build it? Do they buy it? Do they partner with someone to help them achieve the next five, 10, 15 years of growth that they'd like to see in their own business? So it's in the spirit of really both of those veins, if you will, that the idea of engaging with an external partner, what that could look like being in that seller seat, if you will, which it certainly has been a sellers environment for a lot the last few years. What does that look like? What does that process look like? And what are some of the decisions that may need to be made along the way. To help me with this discussion, I'm really excited and looking forward to hearing the unique perspective of Susan Strasbaugh of Buckingham Strategic Wealth and Karen Keatley of Modera. Susan and Karen, it's great to have you with us today.


Susan Strasbaugh: Thanks, Catherine. It's great to be here.


Karen Keatley: Thank you.


Catherine Williams: So I'd love to start by giving our audience just an understanding of your background, a little bit about what your business look like prior to joining Buckingham and Modera and really how you think about engaging with clients. I think that tells a lot about an organization. And so as we sort of level set for each of you, Susan, I'd love to start with you, if you could, just to give us a of sense on your background and what the businesses look like.


Susan Strasbaugh: Sure, happy to do that, so I started my business in 1998. Got my CFP and my husband and I decided to make a lifestyle change, moved to Colorado to raise our daughter. At that point there weren't a lot of fee only firms around, so I decided to launch a firm from scratch not knowing any better. I just leaped in with both feet, didn't know any people in the area and just really got out in the community, got to know people. And I was fortunate enough to get connected with Dimensional. Being in Colorado Springs, we have quite a large military presence here. And so I fell into a niche working with retired officers, retired colonels primarily, who were launching a second career in their late forties, early fifties and had significant cash flow for the first time of their lives, have been good savers and built up a nest egg. So helping them through those years leading up to retirement. Also, it's a natural fit for me to be working with women. So we have a lot of women clients, both widows and executive women, breadwinner women. So those were kind of the niches we worked with. After I'd been in business for five years, we were growing really well. And so my husband left his corporate job and came and joined the business and he took care of everything behind the scenes, H.R., technology, compliance, everything, so that I could really focus on being client facing. And that worked really well for us as we built until 2018 when we entered into the merger agreement with Buckingham.


Catherine Williams: I feel like we could probably do a whole podcast on working with spouses and family members. It's not for the for the faint of heart and can be a really wonderful thing.


Susan Strasbaugh: Absolutely.


Catherine Williams: Yeah, that’s great.


Susan Strasbaugh: Yes, all of that is absolutely true.


Catherine Williams: Karen, tell us about your path and your background prior to joining Modera.


Karen Keatley: So it's a similar story maybe to Susan's my career started in institutional portfolio management in the New York City and then in the New York area, and I moved to Charlotte and took some time off to be home with my kids. During that period of time, my father passed away and my mother needed a financial adviser. So having an MBA and a CFA and knowing a little bit about finance, I dove in to be her quasi financial adviser. And through that process, I gained an understanding of what some people like her need and also the awareness that it really didn't exist, at least not very much of it exists in the marketplace, though. This was in the 90s and the financial advisory world was still dominated pretty much by brokerage firms, certainly in the Charlotte area it was. So at some point I decided that this was the path I wanted to go down. So I took a CFP and got started with my firm and we grew organically. I think much in the way that Susan's did. We really started in 2007. In 2012, I hired an employee, I’d been working out of my house, sort of taking clients when they came. And if I didn't have time to take a new client, I would refer them to one of my competitors. But in 2012, we hired an employee and then we moved into office space and that's when 2013 the growth really started. So from 2013 to the end of 2019, we grew very, very quickly. At the end of 2019, which was when Keatley Wealth Management merged with Modera, we were three full time and two part time people, all women, and we were managing about $200 million in AUM, for about 100 clients. During that time I did sell a 10 percent ownership to my first employee who had been very instrumental in driving some of that growth.


Catherine Williams: Terrific. Susan, I meant to ask where it tell us a little bit about where your AUM was at just prior to Buckingham.


Susan Strasbaugh: Sure, I believe we were right about $160 million with 110 clients when we merged. And if it's helpful to know we're now at about $240 million. So we've grown pretty significantly in those two and a half years.


Catherine Williams: So, Karen, I'd love to start with you. Take us back to that, you'd grown the business to about 200 million. You know, I'm assuming you have some great clients as well. What triggered beginning to think about an external partner? What were some of the reasons or some of the things may be going on in the business that caused you to begin considering that as an option?


Karen Keatley: Started thinking about this a couple of years ago when I was sort of overwhelmed with the burdens of running the business rather than working in the business. There are things that I think I like to do and things I don't like to do. And my strategy for hiring people had always been to hire people to do things I didn't want to do. But I think there's a limit to that. I didn't like being where the buck stopped always. So as you know the compliance burden in our industry has gotten more and more onerous. The other piece of it was I had the back of my mind that I wanted to retire someday, I didn't know when that was going to be, but I needed a pathway to make retirement a possibility for me.


Catherine Williams: We hear that a lot from advisors that are have grown their businesses nicely that are about your size and are beginning to wrestle with those things. Susan, how about for you?


Susan Strasbaugh: As I mentioned before, I had the benefit of my husband being in the business and taking care of all of those administrative duties and compliance. And we were talking more about what our future looks like. And he said, you know, I'm 50. I don't really want to end my career here. I've done this. It's been great for our family. But I want to get back to some of the things I love. I like to joke that if compliance was his passion, I probably wouldn't have been married to him. We really wanted to find the right place for our team and really allow our team more career advancement opportunities and better benefits packages and things like that that a larger firm could do and also find the right fit for our clients. I really wanted to make sure the clients were taken care of in case there was some kind of unplanned transition as the euphemism goes. In my case, if I'm hit by the beer truck, that somebody steps in and is able to really seamlessly transition the clients. And so that's what kind of started us down the path of looking at those options.


Catherine Williams: And where did you start? I mean, the landscape is certainly broadened significantly over the last 10 years. There are lots of different options out there and understanding those options, much less understanding your own strategy. And we're going to talk a little bit with both of you about what was your ultimate strategy, your goals, your deal breakers, as we often talk about. But where did you start in terms of examining your options out there?


Susan Strasbaugh: We had a built in continuity plan that we had put in place in 2014. We've done some looking at different firms at that point and decided on Buckingham. I had gotten to know Buckingham over the years, different conferences and things. And so they were a natural place to start from a continuity plan, meaning they'd be the backup if something unexpected happened. And so we flew to St. Louis to visit in early 2017 and again, our really non-negotiables were we wanted to make sure that our team was taken care of and our clients were taken care of and then it had to make financial sense for us. I wanted to stay involved afterwards and I wanted to make sure the clients and the team were in a good place.


Susan Strasbaugh: We came away, just blown away on quite honestly and thought, what? What are we missing? So I got on the phone and started talking to advisors that had merged with Buckingham and, you know, continually heard just really glowing reviews. And I wanted to ask, OK, what were the problems? Where are the issues? And time and time again, I would hear, well, you know, the profit checks aren't all mine anymore. That's one of the downsides, of course. But I will say choosing a partner is so important and making sure there's a good cultural fit, which we felt when we saw the Midwestern values. And then also just having someone that where when things aren't going right, that you can just say, hey, this doesn't feel right. This isn't working for me. And immediately they said, you're absolutely right, let's change it.


Catherine Williams: That's great, Karen, for you, relative to looking at Modera and examining your options, if you will tell us a little bit about what that process looked like for you.


Karen Keatley: In terms of considering other options, we did consider internal succession and I had sold a 10 percent ownership stake to my first employee, who I mentioned had been very instrumental in helping to grow our business. But as far as bringing in other partners, it takes a long time to find those other partners and to figure out a wonderful employee doesn't necessarily make a great owner. And we needed to figure out who those people would be. And I knew it would take too long. And then while you're taking that time to figure out who your other owners are going to be, the value of the firm is growing quickly and getting more and more expensive. So it just takes more and more financial wherewithal to start buying slices of firms like ours that are growing in value so quickly.


Catherine Williams: So how did you come across Modera and what did that look like when you determined that an internal succession was not likely to be a solution? I'm guessing at that point became critical to think about your own strategy or what was going to be most important for you and then beginning to take a look at the landscape out there, if you will. How did that part look like for you?


Karen Keatley: Well, we had informal conversations and really over the years, I would say I dated a few other firms to see if there was a good fit and just sort of figuring it out as we went. But really, the cultural fit is really important as well as the alignment of goals, alignment of my time frame and their time frame. And so Modera was a firm that I knew through their reputation. I also knew a few of the partners, although I didn't know any of them real well, and reached out to them to kind of start a conversation, not really knowing where it would go, but it seemed like the right organization, the right kind of organization in terms of what I was looking for in a partner.


Karen Keatley: We did our deal before the world of covid. So I think if we'd been in the covid world, it would've been very hard to accomplish what we did because I think that the cultural fit is incredibly important. And for us, having a sense of the integrity and just simply the niceness of the people that we are going to be working with, and there's no substitute for face to face. There's no substitute for being in one another's offices. And it was important for me, but it was also important for them. And they had to determine that I wasn't going to be a bad influence on their culture as well. We have a culture to protect and I have a culture to protect. So I think we really have to be in each other's offices to do that. An important litmus test for me in finding a partner was with this firm that I would take my mother to. I sort of started my firm years ago out of my experience, helping my mother. And I wanted to create the kind of firm that was a place of integrity, a place of kindness, a place of quality planning centric advice. And so my litmus test was, did they check those boxes? Could I leave my mother here in the hands of these people? And ultimately, the answer was yes. And one more thing I guess I would add to that is when I made this transition, I really knew I needed to be able to look at my clients in the eye and our employees in the eye and tell each one of them that their situations were going to be improved as a result of the merger.


Catherine Williams: Talk a little bit about that in terms of that client reaction, I'd love to hear from both of you. What was the conversation? What were some of the ways that you approach helping clients get comfortable? And did all clients get comfortable or some challenges with talking with clients about that? I'll start with Karen. And then Susan would love to get your perspective as well.


Karen Keatley: So the question is, how did the clients react? I think that they reacted really well. I had the expectation that they wouldn't, but I was pleasantly surprised in the opposite direction. No one likes change. I think people don't want change, especially when they don't believe that they're going to benefit from it. So I was prepared for pushback, frankly, but I would say ninety nine percent of our clients were incredibly supportive and positive. They've been asking me for years Karen what happens when you retire? And I had answers, but the answers were not great because I didn't have a great retirement plan in place yet. But when we made the announcement, everybody was really positive and generally excited. I think the only clients that had misgivings or maybe one that had joined us in the months preceding the announcement of the merger, it was a relatively new relationship for us, but I think we were able to get them comfortable. There were other things about our culture that that they were going to miss. They want to know they're still going to get chocolate at the holidays. And I think we've worked that out. I think Modera is going to send out chocolate this year. So it's all been good.


Catherine Williams: Chocolate is critical, we know that from our investor feedback survey. Beer and chocolate. So, Susan, how did it go with your clients having that conversation and introducing this new partner to the relationship?


Susan Strasbaugh: Overall, very well, extremely well, so we had a client advisory board that had been in place for several years and we met with them first. We have an annual wine tasting in January. So those were the first people that we told and got their feedback about how to relay the information to other clients. All of them expressed a little bit of, oh, you know, we've so enjoyed this small boutique firm and we're a little concerned that we're going to lose that. And I reassured them that the goal was to not have that sort of thing change, but that we could bring much more operational strength and teams behind us and, you know, an investment team that was top notch and just really talk to them about what that allowed us to do and to have better resources for our team. That whole thing about better benefits and better career path within the company and telling that story like Karen. Ninety nine percent of the clients were on board very quickly. We did have pushback from a few. One in particular was not happy, said we are here specifically because we didn't want a big national firm.


Susan Strasbaugh: He expressed that his experience with mergers had never been good. It's always good for the owners, but it's not good for the team members and it's not good for the clients. And I listened and said, I hear you. Your experience hasn't been good when you've been an employee in a firm that's merged. And so what I would like to do is just keep this conversation going and especially let's have a specific meeting in a year to talk about what's changed. And if you'll give us a year, let's just see how it's going. And in a year when I ask for that meeting and brought it up, he said, oh, I had completely forgotten about that. The only thing that's changed is the name on the door when we walked in.


Catherine Williams: What a fantastic suggestion as a way to counter that barrier, that resistance to say let's keep this conversation going, let's continue to talk about it, sit down in a very specified period of time. I think that's a fantastic idea to help overcome some of that resistance because change is hard, right. As we've already talked about today. Karen, how long did the total process take for you?


Karen Keatley: We had our first conversation in June of 2018, and we just agreed to talk. We tried to flesh out early, but what the deal breakers might be, but we just talked. Folks from Modera came and visited us at our offices and met with every member of our team individually to really get to know us. And my partner and I were able to travel to a number of different Modera offices and spend time. And we spent time with people in all different parts of the organization from the top to the bottom and all sides. So we really felt that we were able to get a good read on one another. So the conversation started June of 2018. We had a letter of intent, I think, by the end of September of 2019, and then we closed at the end of 2019.


Catherine Williams: When you look back, was there anything that you originally thought this is going to be really, really critical or would at least was high on the list that in the end didn't necessarily factor in, so to speak, did anything change about your what you were looking at or your criteria?


Karen Keatley: You know, I don't think so, I think some of the things that we really liked about our culture we didn't want to let go of. So I think of a pleasant surprise for all of us was how willing Modera was to sort of embrace our culture and embrace our ideas. They told us they would be. But you always think, well, everybody sort of says that. But is that really going to happen? Modera certainly every possibility of saying, why should we listen to you? You all were this little firm. You were a tenth the size of Modera. What could you all possibly bring to the table? But that has not been our experience. I was invited to sit on the Modera board of directors and to be part of two other important committees. And my partner is part of two other important decision making committees. So we've really had a voice in helping set the direction of Modera in a number of different ways. I think I had concerns about some of that. But it's turned out better than my concerns and really been quite fun.


Catherine Williams: Well, I think you make a really interesting point in an area that we know for many advisers there, it is top of mind, and that is in a post transaction environment. How much influence may I have? I may not have even been a medium sized fish, so to speak, coming into the pond. So building confidence and having confidence that you'll still be a place, if you will, in terms of having input, being part of the strategic planning of the organization. So I think that's a really interesting point. And I would say it's one where for advisers to think about how important that is as they began looking at their different options, because in some situations that may not be the case, they may become more of an employee. They're running their book of clients, so to speak. And that's the extent. Whereas in other situations, much like yours, there's a seat at the leadership table in some fashion. Susan, what has been the impact on you and your business since choosing an external partner?


Susan Strasbaugh: Well, some of the big things I would point out, and this was a surprise early on in the first year after we joined Buckingham, my two key employees, our associate, well I had two associate wealth advisors, support advisors on the team. Each one got pregnant. Luckily, not exactly at the same time. So one was out for three months and then she came back in about two weeks later the other was out for three months. That would have been really rough for me as a small firm. And so having the backup and the help from Buckingham, we were able to plug in another associate wealth adviser that was kind of a floater for the firm and was able to plug right in and actually really helped us get up to speed on a lot of the Buckingham systems, too, since she was already so adept in those. And then she was a part time team member for us for those six months. And also merging with a larger firm. I didn't think about this ahead of time, but there was an integration team who was on the ground taking care of everything, helping get our systems set up. We closed on a Thursday evening and were open on Monday morning with everything rolled over and brand new phones.


Susan Strasbaugh: And just also in terms of just helping us get set up on software and everything else, I don't think it would have been possible to do something like that with a merger of equals. And the impact now is I feel like myself and my team really just get to focus on the clients and high client care. And so that's really what I was hoping for. And that's happened that I could focus on the part of the business that I really love. I'm also getting the opportunity to take more of a leadership role in terms of mentoring younger advisors.


Catherine Williams: As you think about any additional perspectives or insights, particularly for an adviser that might be listening today and thinking about looking at external partners to solve for succession or to help them achieve that next level of growth, anything in particular come to mind?


Susan Strasbaugh: Yeah, I think it's really important to conduct a self-examination like Karen talked about and figure out what your non-negotiables are. So mine, where is this going to negatively impact my client experience or my team's experience? And so I really focused on that as things came up, because there's going to be a lot of things that come up. And you know, this was my baby. I built this company over 20 years. And so you have to be willing to let go of some control, especially in a merger with a larger firm. And so when the little things came up, I would just examine them and let them go. If it was something that was going to negatively impact the client experience. For instance, Buckingham suggested a change in software. They used a different software than we did for retirement planning. And we got under the hood and looked at it and just said, this doesn't do what we need it to do. And they came back and said, that's fine, stick with what you have for a year and we'll re-evaluate. Well, in the course of that year, they ended up moving to the software we were using. So having a partner who is really willing to listen and be open to suggestions about how to do things better, I found that just very refreshing. And again, there's going to be just the myriad little things that came up that I had to give up control over.


Susan Strasbaugh: But having that top of mind to say, OK, is this going to affect my non-negotiables? And if the answer was no, then I let it go. And so I think that's really key. And to be self reflective and know that it's going to be different, you're not going to be the one making every decision. And there are challenges with that at times. We lost a key team member recently. She's hopefully coming back before too long, but she's on an unexpected medical leave and has been out for about two months now. And so in the past, I would have just immediately hired a temp to take care of the admin work. Well, that's more complex when you're dealing with a larger firm. You can't immediately do that. Plus, we're in the midst of covid. So that complicates things. But I have a partner willing to work with us and we've figured out other solutions. We've got people with capacity because of working from home. And so we've plugged in a few different people to handle different parts of her position. So just knowing that it's going to be different, but it can be better than ever if you find the right partner.


Catherine Williams: And you make an interesting point. We see this in our advisor benchmarks study when we ask about deal breakers, the strategy for pursuing in what is, in essence, the M&A. Right. Some sort of merger activity behavior. The majority of firms do not have a defined strategy about that. And I think you and I would both agree there is an opportunistic nature to M&A. But when you're really thinking about a true partner and what is most important for you, you make such a great point in terms of absolutely identify that. Be willing to use that as the filter through which decisions are made is absolutely characteristic for firms that are successful, either on the sell or the buy side. They've really built that up. So I really appreciate you commenting on that. We see that loud and clear in our study. We also see that the top two reasons why a deal either doesn't succeed or fails on the other side, lack of investment philosophy alignment and lack of cultural fit. And I would say the culture also even gets to experience your clients are having. So we it's absolutely key areas. And to your point, identify what you need that to look like, what needs to stay the same, what needs to get enhanced and use those as your guideposts when you're making your decisions. Those are excellent points on your part.


Susan Strasbaugh: You bring up a couple of other really good points. I mean, we went in knowing the investment philosophy had to be the same, and Buckingham shared our investment philosophy, working with Dimensional and belief in evidence based investing and then the cultural fit. That's what we really nailed down, I think, when we were able to visit the office in St. Louis. And to Karen's point, it is more difficult right now in the midst of covid, you can't show up somewhere and just walk around and talk to people. And so it may be the process is going to take longer. You're going to be doing a lot of Zoom meetings and talking to individuals and gathering information, but I think it still can go forward in the midst of these challenging times we find ourselves in. It's just going to take a different approach.


Catherine Williams: Agree, and in fact, we are absolutely seeing activity happening on both the buy on the sell side in this environment and it's absolutely been critical for organizations to pivot and where they can't get together face to face, break bread, meet people, all those things that help you identify that they're finding other ways to do it. And you're right, it's a little bit longer process. Lots of Zoom calls, but also getting creative and finding ways to get to know not just the leadership of an organization, but the folks that you would be engaging with day to day. We're definitely seeing organizations figure that out in this covid environment for sure.


Well, Susan and Karen, I want to thank you for joining us today. Really appreciate your very unique perspectives around what an external partner can provide in terms of succession planning, in terms of resources to allow you to focus on the areas of the business that you most want to be engaged around to help you achieve the growth and value you're looking for. Just really appreciate your time. And I would encourage our audience. They can find both Susan and Karen on LinkedIn if they'd like to reach out for any follow up questions. And of course, welcome to reach out to Dimensional as well. Thank you, everyone.



Thank you for joining us today for Dimensional Fund Advisors Practice Management Podcast. For more information, please visit


Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.


All expressions of opinion are subject to change. This podcast is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Please consult with qualified legal or tax professionals regarding your individual circumstances. Investing involves risks. Risks include loss of principal and fluctuating value. Dimensional Fund Advisors LP receives compensation in the form of investment management fees from clients who invest in Dimensional funds recommended or offered by Buckingham and Modera.

Have a topic or a potential series you'd like us to cover? Email us at