DWN Round Table: Effective Post-M&A Technology Integration for RIA Firms

In a Rapidly Consolidating Industry, Effective Tech Integration Can Mark the Difference Between Successful and Failed Deals


Sky high valuations for RIAs fuel a seemingly unstoppable flow of consolidation within this segment of the wealth management industry. Supported by private equity capital and creative partnership models, there seems to be no end in sight to the massive shift in this space to build larger, more valuable RIAs.

However, as financial advisors affiliated with these firms – and the clients they serve – demand personalized, instant access to data, funds and support, the success of an M&A deal no longer hinges solely on the ability to close the transaction.

As the ink dries on contracts, the real work of consolidation starts, especially as firms work to bring together their technology operations. This can become a source of significant friction if not addressed proactively and strategically.

Digital Wealth News asked three industry experts and RIA segment senior leaders – each of whom is  known for different approaches to M&A and RIA growth – to share their thoughts on the importance of post-deal technology integration for this month’s wealth tech roundtable discussion.

Dan Newhall, Chief Business Development Officer & Managing Partner for M&A, Perigon Wealth Management

Post-deal technology integration should be seamless for combined RIAs or near close to it. There is no excuse for firms to blame technology for choppy transitions. Technology can do almost anything we ask of it to do, and our only barriers to implementing technology solutions are compliance and legal safeguards.

Establishing a core technology stack that allows for open APIs and having a team to develop new protocols to enable legacy systems to continue to function through transition periods should be normal operating procedures for all growth-focused RIAs. Analogy and non-networked systems are the sources of most post-transaction tech integration problems. Everything should be stored in the cloud, backed up and encrypted automatically, and accessed with dual-factor authentication.

Unfortunately, for many in this industry, this approach makes no sense or is considered the responsibility of IT. However, for a firm to be successful in this environment, senior leaders must consider operationalizing these kinds of platforms to maximize growth and stay competitive.

As the industry continues to consolidate and older advisors seek exits, younger professionals will not tolerate working with a firm with a Luddite-like approach to M&A-based growth.

Thomas Goodson, President and Founder, The AmeriFlex Group

Technology is the plumbing of all RIAs. For an RIA integration period to run smoothly, all the pipes must be aligned and flowing in the same direction.

While the pre-deal activities focus on aligning philosophies and values, the post-deal focuses on the nuts and bolts of running a business. And if the transition doesn’t run smoothly, clients will use these disruptions as an excuse to leave. Most clients don’t care who owns their advisor’s business, and they don’t profit when an RIA is acquired. A client’s experience will determine the continued growth or downfall of the combined firm.

So, allocate as much due diligence to the integration period as is applied to the pre-acquisition period. I find it particularly important to focus on a new firm’s CRM and custodian capabilities, as these are mission-critical to an RIA operations.

Finally, overstaff, overtrain, and create as many redundancies as possible between the firm’s human resources and current and new technology. While my view may be different, our firm, staff and clients have profited as much from technology used as they have from the experts who run that technology.

Lou Camacho, President – Stratos Wealth Enterprises and COO – Stratos Wealth Holdings

Once a merger is agreed upon and finalized, both sides tend to share a well-deserved sigh of relief. However, that was the easy part. The real work begins when it’s time to integrate cultures, processes, procedures, and technology.

Effective post-merger integration is key to a successful transaction. No matter how attractive the deal may be, lack of a well thought out integration strategy can lead to stakeholder dissatisfaction long term. Buyers and sellers need to carefully consider IT infrastructure, CRM, Portfolio Accounting/Reporting, Trade order management systems, financial planning software and several other solutions that may be in use.

Thoughtful strategies should take into consideration synergies between any common technologies being utilized. Simply because the acquirer leverages a certain tools, should not eliminate the potential for adopting the seller’s preferred software or systems. Ideally, both parties will consider overall utilization, product development and staffing expertise when making long term decisions.

No matter what decisions are made in terms of adoption and integration, the goal should be to drive cost savings through economies of scale, greater efficiency, and overall productivity gains. Organizations that successfully execute post-acquisition integration, can expect to benefit from additional scale, profitability and overall shareholder, employee, and client satisfaction, as well as accelerated growth and profitability long-term.