Most Common Questions About M&A, Growth, and Succession for Financial Advisors
Straightforward answers to the top questions firms are asking as they navigate their next chapter
By Rick Kent, Founder and CEO, Merit Financial Advisors
At our recent virtual panel discussion with FP Transitions, we explored the evolving landscape of mergers and acquisitions, growth strategies, and succession planning in the financial advisory industry. The audience came with insightful questions—many of which we didn’t have time to answer live.
This article brings those important questions to the forefront, with real-world answers and advice from experienced leaders who’ve been through it. Whether you’re planning to scale, thinking about equity, or preparing for a future transition, these Q&As are for you.
Q: What are some key pieces of advice for a firm that has mastered organic growth and is now looking to implement an acquisition strategy?
A: Think of M&A as an entirely new business line. It requires a clear strategy, substantial capital, and serious commitment. Ask yourself: Is this a one-time growth move or a long-term strategy?
You’ll need systems to source deals, evaluate fit and value, and handle legal and negotiation complexities. Most importantly, create a plan for integration—getting a deal done is only the beginning. Successful firms build dedicated teams to manage transition and culture alignment post-close.
Q: How can younger firms (5–7 years old) apply these strategies to scale and attract the right talent?
A: Invest in your firm and be bold with your vision. Younger firms don’t always have the same brand recognition or legacy, but they can offer growth, ownership opportunities, and a compelling mission.
Don’t hesitate to pay for exceptional talent. The right hire can accelerate your growth and transform your firm’s culture.
Additionally, make sure you can articulate your long-term plan—people want to know what they’re building.
Q: What milestones do you use to determine when a next-gen leader is ready for equity?
A: We’ve taken inspiration from how law firms approach partnership—by being transparent about what success looks like. We identify specific metrics like AUM and generated revenue, leadership capabilities, cultural fit, and the ability to bring in new business.
This clarity helps next-gen leaders stay focused and grow intentionally. Equity shouldn’t just be a reward—it should reflect ownership mindset.
Q: How does someone who joins your firm eventually exit their equity?
A: Each year, we facilitate a structured internal marketplace—what we call the Merit Marketplace. Shareholders can express interest in buying or selling equity, and we match them accordingly.
Additionally, every 4–5 years, we go through a recapitalization process that offers more formal liquidity events for those with larger holdings.
Q: Does everyone earning equity also receive voting shares, or is there a dual-class structure?
A: We have one class of stock. Everyone with equity is fully aligned, with equal access and influence. We believe shared ownership should also mean shared accountability and opportunity.
Q: Is phantom stock a disadvantage for growing firms?
A: Not at all. Phantom stock can be an excellent interim solution for firms that aren’t ready to offer real equity but want to reward long-term value creation. The key is transparency—make sure your team understands how the plan works, how value is measured, and what the long-term benefit can be.
Q: What is the pricing policy for financial planning services? Are they bundled or billed separately?
A: It varies by advisor and client profile. Some charge a standalone fee for planning, while others include it with asset management. We also have a financial planning department that creates plans delivered either by the advisor or directly to the client.
Some advisors waive planning fees if the client moves forward with investment management, while others charge based on complexity or asset size. The model should align with the value being delivered.
Q: How should firms prepare for leadership succession without losing momentum?
A: Start early. The best transitions happen when there’s time to build trust, transfer knowledge, and align visions. Communicate openly with your team and your clients about your succession plan. Involve next-gen leaders in strategic decisions well before they take the reins. And don’t underestimate the emotional aspect—successful succession is as much about identity as it is about operations.
Q: What are common mistakes firms make when starting an M&A strategy?
A: 1. Lack of clarity: Not knowing whether the goal is scale, geography, talent, or revenue.
2. Underestimating integration: Deals fall apart not because they weren’t good on paper, but because the cultures didn’t blend or the systems didn’t align.
3. Trying to DIY everything: M&A is too complex to be done casually. You’ll need legal, financial, and operational expertise to get it right.
Q: Could you share details on the average number of clients per advisor in HNW vs. non-HNW segments?
A: This depends on the advisor’s service model and the complexity of their clients’ needs. HNW advisors often have fewer clients but spend more time per relationship. Non-HNW advisors may have higher volume due to more standardized planning needs.
Efficiency is the common thread. Review where your time goes. Can someone else on your team deliver parts of the service? Are there opportunities to automate or streamline? Don’t be afraid to reframe how you work with clients to create scale.
Q: Why do some advisors or leaders struggle to follow through on promises?
A: It often comes down to a lack of focus or a failure to prioritize client relationships. In a profession built on trust, follow-through is everything. Advisors who consistently over-promise and under-deliver will struggle to build meaningful, lasting businesses.
This list isn’t exhaustive—but it’s a solid starting point. As the advisory profession continues to evolve, conversations around growth, M&A, equity, and succession will only become more important. We’re glad to be part of that dialogue and hope these answers help you move forward with greater clarity and confidence.
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