The wealth management space is served by a lot of technology, but very little of it has been dedicated to the most impactful source of growth for businesses today: mergers and acquisitions.
Practifi has recently stepped into the void, launching a Business Development app, to easily manage the full acquisition lifecycle within a single unified platform.
“We found within our customer base a large swath of growing RIAs with M&A activity who were trying to manage their deal flow in our core Practifi platform,” said Tom Westhoff, vice president of global sales at Practifi. “If you think about it, though, the sales function in Practifi is largely designed for financial advisors and their sales process with clients. It’s a financial advisor sales process pipeline, not a b2b function, there wasn’t a lot of flexibility when you think about the needs of someone in a business development function at an RIA or independent broker-dealer.”
“Many firms use a CRM, technology originally designed as a sort of interactive, integrated Rolodex of client information, to track potential deals,” said Westhoff, “but business development people need to be able to look at different information than financial advisors and client-service staff, and often in different contexts. M&A involves its own set of financial metrics and legal and compliance factors.”
“Even worse, some firms have still been tracking their deal-making on conventional spreadsheets or pieces of paper,” continued Westhoff.
Firm transactions are being driven both by the aging demographics of financial advisors and the growing complexities of running a financial services practice. As more clients want more wealth management and financial services packaged under a single relationship, service, or brand, advisors need to either grow to offer those additional services or partner with an acquirer who is already able to offer them.
Westhoff said that over the past three years, Practifi has seen an “explosion” in the wealth management M&A space driven largely by serial acquirers and roll-up firms. A set of very large, very active RIAs and independent broker-dealers have accelerated the pace of their dealmaking, requiring a systematized process for finding, negotiating, tracking and closing deals.
Practifi recognizes that taking a practice management perspective on business development and M&A dealmaking has become increasingly important to RIAs and independent broker-dealers, Westhoff explained.
“This also leads to a more competitive landscape,” said Westhoff. “Firms need to make sure they’re conducting their diligence in their sales process effectively, or they could end up making a bad deal decision. Or perhaps they miss the opportunity to represent themselves and why their firm is a better firm than the eventual acquirer. RIAs are often getting more than one term sheet, and we want to give our clients the best opportunity to win business, or not make a term sheet for a business because it’s the wrong fit.”
“Practifi allows firms to track hard financial metrics around softer data involving cultural or regulatory fitness,” said Westhoff. “Business development staff and firm leaders can then weigh all of these criteria and calculate whether a deal is worth it or not.”
“Inorganic growth is also a means to organic growth,” elaborated Westhoff. “We understand that a transaction is not just because of the financial benefit it can bring, as there are a lot of other factors. You may be looking to onboard firms with a certain type of client or a firm that, on the back end, helps expand your service offering to provide a new channel to start growing and expanding your business. We want to ensure all of that information and all of those types of questions are built into our technology so that when our partners are making an acquisition, it’s the right one.”
Same Practifi, With More
“With the new app, the look and feel of Practifi isn’t changing,” said Westhoff. “The platform is just adding functionality. Now business development personnel will be able to access useful, interactive and actionable insights when logging in. The user will see an agenda of upcoming tasks, like the need to check in with compliance at some point in a process, and events, like meeting with the partner of an RIA or the representatives of a legal team to check off the things that need to get done to win a potential deal.”
Within the new app, list pages include a selection of lists that can be accessed via the menu to view information and actions that have happened throughout the deal cycle.
Alerts can also be customized—so if a compliance check is needed in certain circumstances or if a time-sensitive action needs to take place, the user will be advised of them by the platform.
“From a pipeline perspective, they will be able to go in and see how many deals are in progress, what associated potential revenues are associated with those deals, the likelihood of them closing, what stage they are in, and all the representatives involved in the deals,” said Westhoff. “We’re also going to have roll-up functionality, so a partner, chief development officer, or supervisor can go into the business development function and see all of the deals enterprise-wide, where they are in the pipeline, what stage they are in due diligence and the likelihood of their closing.”
Users can also customize their experience depending on what information they want to look at. They can input their own calculations to decide whether a deal makes sense and what type of multiple it will offer.
“All of the data captured by Practifi can also be integrated into processes—so a deal can move from consideration by business development personnel, to due diligence by compliance, to contention by a firm’s executives, and to onboarding seamlessly,” explained Westhoff.
“We want to help firms keep an eye out for what’s next, so we’re offering three-to-five reports in the dashboard that make it easy for them to quantify team pipeline performance,” said Westhoff. “We want to help firms move a lot faster, eliminate risk and operate with more consistency from a practice management standpoint on engaging and what their sales process looks like.”
From deal prospecting and pipeline management to onboarding and integrating new firms and advisors, the Business Development app provides an end-to-end transition management experience for RIAs, IBDs and networks that are actively acquiring.