Pinpointing a Legacy Firm in an M&A World

By 2034, the industry could face a shortage of 90,000 to 110,000 advisors — roughly 30% to 37% of current headcount — at current productivity levels, according to McKinsey. McKinsey also estimates that the number of advised relationships will grow at least 28% over the next decade, from 53 million today to at least 67 million by 2034. Meanwhile, Cerulli Associates projects that $84.4 trillion in wealth will transfer across generations through 2045, with $72.6 trillion going directly to heirs.

But the much-discussed advisor talent shortage isn’t a supply problem; plenty of capable, motivated people want to build careers in this industry. The gap is in development.

Experienced advisors aren’t building environments that foster next-gen talent, and that’s a missed opportunity.

The demand curve is steep and rising, while the curve heads in the opposite direction. The advisors best positioned to capitalize on the impending chasm are the ones preparing to exit. Many of them have 30 or 40 years of experience, strong books of business, and hard-won knowledge that took decades to accumulate. If that knowledge walks out the door with them, no amount of recruiting will make up for it.

Why Firms That Want to Win Can’t Wait

Most advisors hire reactively, waiting until they’re stretched thin and then searching for a unicorn employee who can contribute immediately. But as experienced advisors continue to exit, waiting is no longer a viable option.

Younger advisors need time to learn the work. They need to observe client conversations before they lead them and make mistakes in low-stakes situations before they’re trusted with complex ones. The kind of growth required to excel in our profession doesn’t happen within a six-month runway. It builds over years, and only when a senior advisor makes an intentional commitment to teach.

Hiring early is also a retention strategy. Research consistently shows that client attrition spikes sharply when a practice changes hands without built-in continuity. A client who has met your junior advisor, worked with them on smaller matters, and trusts them is less likely to walk away when leadership eventually transitions.

What to Look for in a Next-Gen Candidate

Resist the urge to hire a finished product. This goal is to find someone who can learn, not someone who already knows everything.

The traits that characterize advisory success in this role are less technical than you might expect: curiosity, communication skills, coachability, work ethic, and comfort discussing difficult or sensitive matters with clients.

Test for these things directly. Ask candidates to explain a financial concept to you as if you’re a first-time investor. Have them sit in on a client meeting and debrief afterward. Give them a real scenario, not a theoretical one, and see how they approach it. What you’re evaluating is more about judgment and the willingness to grow than knowledge parroted back from a course or textbook.

Invest in Development

Even advisors with the best mentoring and career development intentions can get sidetracked by the week-to-week demands of running a practice. But that leaves a junior advisor adrift, uncertain, and more likely to leave the profession entirely.

Build mentorship into a structured schedule with dedicated weekly touchpoints, gradual client exposure marked by clear milestones, and a defined progression of responsibility, so the junior advisor always knows what they’re working toward.

One advisor recently shared a set of leads he’d ignored for nearly a decade with a younger colleague on his team, who had the knowledge and confidence to start working them. Now the senior advisor is more engaged in his own business than he’s been in years, and referrals have started flowing again. The mentorship benefited the senior advisor, the junior colleague, the leads who are now being advised, and the firm itself.

The Business Impact of Cultivating the Next Generation

Nearly 38% of today’s advisors are expected to retire within the next decade. Advisors who invest in developing younger talent will be able to capture the demand from the impending exit wave while retaining existing clients.

Hiring a junior advisor isn’t a favor to the industry; it’s a strategic decision that expands your capacity, deepens your client relationships, and increases the long-term value of what you’ve built. Every experienced advisor who commits to developing one person creates a multiplier effect that the industry desperately needs.

According to Wealthmanagement.com’s recently released 2023 M&A Outlook, advisory firm activity was on fire in 2022. Seventy percent of respondents to a survey conducted by Wealthmanagement.com and Informa Engage indicated that their firm had explored an acquisition, sale or merger in 2022, while 44% said their firm had actually executed an M&A deal.

Those numbers underscore the torrid pace of M&A activity over the past few years. In a Family Wealth Report article, veteran M&A investment banker and partner at Republic Capital Group, Peter Nesvold, explained that, “Wealth management M&A has passed the point of no return. There are more than a dozen professional acquirers in the industry. They are in the business of buying RIAs.”

But what about the financial professionals impacted by our industry’s increasing ardor for M&A? Most of the financial professionals we speak to are, quite frankly, sick of losing the culture and business model they love to become cogs in the wheel of a giant aggregator.

Their job satisfaction and their clients’ experience become collateral damage as smaller practices are gobbled up and the very characteristics that made them unique – that made them home – are bulldozed by massive firms with one-size-fits-all mindsets.

The truth is, most financial professionals got into this industry because they wanted to make a positive impact on people’s lives. But when their firms’ leadership is swayed elsewhere, with a focus on building to sell instead of building to serve, it’s easy to lose sight of the passion that compelled them to pursue this career path in the first place.

Former Merrill advisor and Advisory Council to Management Chair Kelly Milligan put it this way: “Merrill’s principles started with clients first. Then, after the merger [with Bank of America], there was a new set of principles that did not start with clients first. The environment shifted from being one of ‘let’s make sure that we are accomplishing things for our clients’ to ‘let’s make sure we are minimizing, and even better yet, eliminating risk in the business.’ And one of the best ways to eliminate risk is to not approve anything, not do anything. Easiest to say no, and then there’s no risk in that decision.”

To the financial professionals who have experienced this upheaval, we say: Isn’t it time to rediscover your purpose?

Not every firm is caught up in the M&A madness. Some are in the business of building legacies, generational firms that withstand the test of time precisely because their focus is on helping their financial professionals do the work they love.

How can you tell which is which? If you’re evaluating potential new practices, here are five indicators that a firm’s focus is on a long-term legacy, not a short-term sale.

Longevity. If the firm has been around for a significant amount of time under the same leadership (or passed down to younger family members), it’s likely their roots are firm.

An ongoing investment in technology and service. Firms that prioritize investing in their financial professionals do so because they believe in building a future together. At Silver Oak, we’re dedicated to empowering our reps with everything they need to do their best work for their clients, including constantly improving our proprietary technology platform, offering comprehensive compliance and marketing support, and ensuring our service team is always readily accessible.

Leadership with a distinct point of view. Is it easy to tell what the firm’s leadership team believes in? Are they vocal about the way they see the industry evolving, and what their firm’s position is? Strong leaders with passionate, distinct viewpoints about their firms aren’t likely to be swayed by the wave of M&A activity, particularly if doing so would mean giving up what makes them unique. (Speaking of a distinct point of view, do you follow our CEO and founder, Billy Hopkins, on LinkedIn?)

Firm culture. Firms with strong cultures built around community tend to be focused on the long term. Regular events, ongoing education opportunities, training resources, networking channels and milestone celebrations all speak to a culture focused on creating an incredible experience for financial professionals.

The happiness of current reps. Finally, perhaps the best way to learn about a firm’s ultimate intention is through its financial professionals. What do they say about their experience? At Silver Oak, we’re happy to let our financial professionals do the talking for us:

“Connecting with Silver Oak Securities has been one of the best decisions I’ve made in my years in this industry. The team is experienced enough to provide counsel and nimble enough to adapt so that we can stay on top of client service, technology, marketing and compliance related matters as our firm continues to grow and evolve.” – Andy Wallace, CFP, Comprehensive Financial Strategies, LLC

Are you ready to rediscover your purpose at a firm that’s building a legacy? Learn more about joining Silver Oak Securities!