Industry leaders from Solve Partners: Dave Mason, Gilly Green and Donald Reid reveal why mergers and acquisitions often suppress organic growth in wealth management. They share practical insights on advisor engagement, cultural integration, and the hidden pitfalls that derail growth post-deal. If you’re considering consolidation or navigating integration, this conversation offers actionable strategies to protect client relationships and accelerate success.

Download their white paper here: https://solvetogether.co.uk/insights/consolidation-whitepaper/

Hello and welcome to the Growth Workshop podcast with your host

me, Matt Best and Jonny Adams.

We're thrilled today to have three fantastic guests, from the world of Wealth

Management, Solve and SBR, we've been working together now for a little over

a year, and really as a thought leader in this wealth management space it's

fantastic to have you, you join us today.

And just a quick introduction, So Dave and Donald, co-founders

of the business and now executive leaders, of course, of Solve.

And then Gilly.

as part of your other responsibilities on other boards, advising in this space or on

the Board of advisers for Solve as well, and, Gilly and Donald co-authors of the

Consolidation In Wealth management report.

So we're thrilled to be unpacking that with you today.

I wonder if it might be helpful for the audience, Donald, maybe just to give

us a bit of insight into how the report was crafted, what your objectives were

for the report before we get started.

Yeah, so the background to the report was about a year ago.

We did a piece of work, which was sponsored by SEI, looking at productivity,

within the wealth sector and that highlighted a number of, pain points,

one of which was consolidation.

And rather than focus on that in the detail of the

productivity report, we decided.

The topic was so big.

Let's do a, another review specifically around consolidation.

And that was the genesis of this, review, which resulted in the white paper that

was published, earlier this summer.

Fantastic.

And obviously at Solve, Donald part of, part of how you help your clients through

a combination of services around advisery.

M&A of course is a big part of the conversation today, transformation

change and then more in the sort of technology side as well around systems.

And proposition.

You've got a wealth of experience in your team, in wealth management,

and in how you help your clients.

And obviously we're gonna unpack that a little bit more today.

So some of those key notes that we wanna hit from the report that

particularly stood out for Jonny and I as we were going through it were, what?

Why M&A kills organic growth potentially, and that's quite a dramatic statement,

of course, which we can, which we can dive into in a little bit more detail.

But thinking about AUM as being one of the core reasons, or AUM growth, asset

under management growth being one of the core reasons why mergers or why merger

and acquisition is in this market.

We're then gonna unpack a little bit about, who's buying in this space?

So private equity, some of the, some of the US advisery firms eyeing up

some of that, some of the UK sector for expansion and then some of the changes

that have happened in the, in that space over recent months and years.

And then the final topic that we're gonna get into today is around technology.

And technology is at the forefront of everyone's thoughts at the moment.

With the, with AI really taking a hold over lots of markets.

How does that impact wealth management?

How can that help but also maybe isn't helping at the rate that it should be?

Across some of these, this merger and acquisition activity.

So that's what we'd love to, to, get into today.

And if I could maybe start with, that first theme.

So Gilly I'm gonna come to you as we think about, some of those, some of

the consolidation reports, findings when it comes to M&A activity, and

actually how that's significantly constraining organic growth.

So in your view, why does organic growth become such a challenge

during consolidation and what are the factors at play there?

It's a great question, and actually this is one thing that came up in

pretty much every interview that we did.

I don't think there was anybody who contradicted us when we

were asking this question.

So I think there's three things that really detract from organic growth

while you're doing consolidations.

The very first, probably the key one is the advisers.

So the incoming advisers from your acquisition, they don't

know your new proposition.

They're focused on what's gonna happen with their incentives,

so those going to change.

They're learning new processes and they're trying to talk to their

clients in a sensible way about the acquisition at the same time.

Almost the last thing they're gonna do is go out and do new

business development to talk about something they're unfamiliar with.

So absolutely key for the acquiring company is to really

sell the new proposition.

I mean sell, because it's actually about convincing them

that it's a good thing to do.

And talking them in detail about the suitability for their existing clients.

'cause there's no doubt they'll be moving platforms.

They might be making, new investments into a new NPS or other, investment process.

So I think those things are really important.

The, the next thing is the clients themselves.

I think it's really key to understand that in most firms, 60% of new

business comes from client referrals.

I know that as a an NED of a wealth firm, it is an absolutely true statistic.

So if your clients stop referring, annual growth is definitely gonna

stagnate and clients won't recommend.

Something if they don't know what the new world is gonna look like.

It's a very disconcerting process being acquired by another firm.

And I think the third aspect is the management themselves.

And they're detract, distracted by integration, by going out,

doing lots of communication.

I think that really understanding that the quicker you can do

your integration, the better.

Therefore, management needs to resource.

Properly, and I don't mean numbers of people on the project.

I mean resourcing with experience, resourcing with people who are

perhaps there all the time.

So some sort of core permanent resource for your integration and M&A work.

so there's a number of things there that is key for management.

And probably the last one of those is really understanding that sponsoring the

integration is key and it needs to come from the CEO, from the communications and

engagement and culture perspective needs to come from the COO in terms of getting

things done in the background, data, mergers and everything else, and even the

CFO because the CFO is usually responsible for monitoring, understanding that, the

growth is probably gonna be suppressed for a while, but targets need to obviously

be appropriate to, to understand that.

So the quicker, and I don't mean too rapid, swiftly, properly doing

your integration is absolutely key.

And just add to that.

So I agree with everything that Gilly's, said but I think at the moment, organic

growth is a challenge across the industry, regardless of whether you've been acquired

or acquiring or whether you are operating in a steady state because the drivers

of organic growth, when a growth surges, that tends to be where you have a high

level of corporate activity and you've got smaller business owners that are

setting out their, seeing a windfall from setting their business, and then

they're looking for somewhere to invest.

That really powers organic growth significantly coupled with being

recommended by clients of existing wealth managers who can then recommend

their friends and the beneficiaries of those corporate deals to the right firm.

I think the, other factor is, some firms are achieving organic growth and

those who are succeeding those firms that was a great example that we had

when we interviewed a firm and they said, when we do an acquisition, then we

change quite often, change the advisers.

We have advisers who wanna retire.

They move on and we bring in younger advisers up through our academy and they

then take on that client relationship.

When that happens and you have a new adviser dealing with a client, that

new adviser invariably finds additional assets, tackle the conversation with the

client in a different way, and they can then identify, let's say pension assets

that the previous adviser wasn't aware of, that then creates an opportunity

to provide some one-off pension advice.

They get a fee from that, and those assets then come into the remit of the firm

and get invested in the firm's models.

So there are firms out there that are doing, better than others

in terms of organic growth.

And generally that is where they are changing their advisers and making sure

there's a proposition, a distinctiveness to the proposition and benefits from

the acquisition strategy, that can be conveyed to the clients and prospects

and they win as a result of that.

Say, just to add to that, one really important factor here as well is most

advisers have to run to even keep up because I think there's something

like 10% of assets go out the door per year at the moment, and it can be

to do with deaths of the client, but actually in recent times there's been

high interest rates, massive money, amounts of money went out the industry

to pay off mortgages at that point.

We've got lots and lots of things going on around IHT, up and coming in the next

budget, who knows what's coming there.

There's been so many rumors.

So just to keep up, I think, you need to grow at 10%.

So I also think it's important to say what is growth?

Is growth, the actual assets under management.

'cause you know what, markets have actually been quite kind to us recently.

Or is it numbers of clients or quality clients.

So I think there, there is also a factor there that needs to be

considered when we're looking at that.

Think there's to your definitions of growth, it's also some of the

drivers for these acquisitions, are to enable organic growth going forward.

So looking to make an acquisition to add a proposition to a portfolio

that a business doesn't already have.

for example, an investment manager that may not have a financial

planning team, or vice versa.

So whilst there's the step up in AUM that happens at the point of a integration

or a transaction, you're then building a platform for future organic growth

by being able to ideally cross sell those propositions and offer a richer

and deeper relationship with clients.

That's a big driver too.

Put that into practical terms, if you are an investment management led business.

And you are required, but you're not actually really performing much

by way of, financial planning, then you'll be getting fees on the assets

that you are, providing investment management capability over those fees.

Let's say it might be.

75 basis points, you are then acquired by a firm that has a

large number of financial planners.

What should then happen is that you have targets in terms of how quickly you

can introduce those financial planners to the investment management clients.

And if you're providing the financial planning advice, then you can advise.

Pension transfers, and it goes back to my early point.

If you have the pension transfers coming in, you have one off fees, you increase

your AUM and you're charging a higher ongoing fee because you as a client,

you have the benefit of an investment manager and a financial planner, and

therefore you'll have the ongoing annual financial planning advice fee that may

add another 50 basis points, for example, to that 75 that you're already earning.

There is so much to unpack in a short period of time.

It's like we've delivered a question and, you guys have just perfectly

answered it and, we know that, exams are not always like that, right?

There are some things that we have to really take a step out, but if

you think about the individuals that gonna be listening to this

functionally, that all make sense?

And I'd say, Gilly, thank you.

I can follow that, Donald, I can follow that, Dave can follow that.

From all of the experience that you've had in the industry, without

naming names of course, but this is a trust circle between us all, is that

what are those organisations that you've, seen do this really well?

And, could you bring an example to life, where they have, deployed that and what

about an organisation that hasn't done it so well in the previous years, and

what were those one or two things that didn't go so well and again without?

We've seen in our research a number of examples of good

practice and best practice and a lot of bad practice as well.

So some examples of particularly if you're looking at the front office and how to

get them engaged and do that quickly.

We've seen examples where there's almost like a contract that the

advisers need to sign up to.

This is what you are getting into by coming on board.

Better to do it pre-deal actually but you can only really address the top level of

advisers who are owners at that point.

But as soon as you can, getting into the next level of advisers and talking

through what they're getting into now, all of this is hugely emotional

and you start losing advisers, you're definitely not going to grow.

Not partly because they may take some parts, but even if they don't,

you've lost advisers who are a bit like gold dust at the moment, so

you need to be able to bring them on board as quickly as possible.

So we did we had one firm who literally developed a rather thick

tome that they gave to the incoming advice firm, and literally so they

could see everything that they were.

Have to do and everything that they needed from an information,

call it a manual if you like.

There are others who've just done a really good process of communication and

absolutely thought about what is heard is not always what is understood and what

is said is not always what is heard even.

So I think reiterating those conversations, being open and visiting,

if you've got locations that are a little bit away from head office.

There was one firm that didn't visit them for over a year.

So that's just not on, you're not gonna get engagement, you're not

gonna get things done quickly, and you are, some of these softer things

are actually the things that cause the most issues from a growth perspective.

I also think, and Jonny, this will play to you guys, is that you need to train

people and a lot of financial advisers go into being a financial adviser 'cause

they wanna look after the clients.

They're good at client communication, but they think of sales as a dirty word and

helping people to understand that every client contact is an opportunity just

asking someone if you're doing a good job and if everything's all right and would

you be happy to re recommend someone to me is part of business development.

Giving them the words to say in a script to use to start them off and they will

all develop their own ways of doing it, but making it part of their job.

To absolutely do, and it's like saying the obvious, but a lot of

firms don't do this very well.

So it's definitely one factor that is absolutely key.

The second one is actually giving them the time to do it.

So we mentioned already that, they get tied up in learning new processes

and new systems and everything else.

But one key thing that also sometimes happens with some of

the earlier acquisitions is they said, oh, we've got three advisers.

We've got one adviser to every three admin staff.

Let's cut a few of the admin staff.

if you start cutting admin staff advisers start doing admin.

And in any case, I think the discipline of advisers doing admin is not great.

They all do too much.

And our previous report that Donald referred to on productivity basically

said that advisers in advice led firms tend to spend only 37% of their time as

golden time, which we call client time.

That's not very much given how much you're paying them to be with

clients and to build business.

So you've really got to think hard about taking that admin off the table.

And one of the first things in integration you should do is actually look at that

organisational model, not just your technical stuff that we'll talk about

later, your organisational model and looking at how functions are who's

got responsible for what functions, and that actually what admin you can

completely take off the adviser's table.

Yeah, I agree with all of that.

I think communication is absolutely key.

And the firms that are doing this well are those firms that have got

a very clear communicated strategy in terms of what is their client

segmentation, what is their proposition?

What's their pricing model?

What's their operating model?

And if you are listening to this and you are in a firm and you are thinking

of selling, if your buyer can't articulate that to you, then you are

probably talking to the wrong buyer.

It is absolutely key because if you are selling and you know what's going

to happen after the deal has been done and what the impact is going to be for

your clients and your advisers and how they fit into the new organisation.

And you know what it is, and that's something that you can sell and

communicate within your firm.

That is a massive advantage.

So that's how to do it, to do it well.

There are examples out there where firms are not doing it well, and as part of

our research we identified that actually about 20% of firms have stopped acquiring

because they actually hadn't brought the businesses together that they'd acquired.

They were still running separate brands, separate propositions,

separate pricing models.

That number has actually gone up to, I think 26%.

So 26% of wealth management firms that are consolidating have had to stop.

Because all they've done so far is aggregate and acquire other businesses,

but they haven't properly integrated and they're now on that integration journey.

It was quite interesting.

We spoke to, we spoke to a small number of firms that had been acquired

as part of this research project.

There was one firm that we spoke to that had been acquired

by a larger consolidator, and they were very open with us.

They said, the only thing that's happened so far is that the finance

function has been integrated.

Nothing else has happened, and we're not sure what, what's gonna happen or when,

which sort of raises the question mark.

What were the, what was the motivation behind sending the

firm in the first instance?

examples, they're bad examples, but communication and clarity of

communication is absolutely key.

And without being to, flippant, provocative, or in that mean, and

I'm thinking about professional services organisations are also going

through similar measures within the UK market and the US market at the

moment where consolidation is rife.

Tax audit, for example, is a really interesting area of focus, which I

think this report, if you were in professional services, you could

also pick it up and see some of the key trends that would be relatable.

But some of those businesses that we know of and work with at SBR, they're

quite happy to acquire and just leave the entity siloed on its own.

Why do businesses in wealth management not take that direction where it's fine

to acquire, take the AUM, but actually keep them as standalone organisations?

Is that not an option and not integrated?

I think there's a challenge there in terms of how you as a firm then demonstrate

your compliance with consumer duty and how you treating clients fairly, because

to my mind, you can't have a client that walks into one office with half a million

and is then given a, proposition and a pricing model and that is then materially

different to a client that walks into a, different office with the same half

million and with the same risk profile or attitude to risk and end up a different

proposition, a different pricing model.

That's very difficult to justify.

I think some firms have been a little bit late in terms of making

sure that the service that they're delivering does actually deliver value

to clients and fairness to clients.

That is absolutely key.

The other reason for moving on this as quickly as possible, going

back to Gilly's early comments at the start of this session.

Is that if you can bring things together, then you bring together under

one culture the firm, and you don't have a series of stove pipe cultures,

stove pipe processes, which can then become very inefficient using different

platforms, so your assets or different operating models that can be incredibly

inefficient to deliver a experience to clients, it means that your support

teams need to learn and become proficient working with different platforms.

So the sooner you can standardise and bring things together under one

culture, that is the way that you then start to deliver enterprise

value, which of course is what the investors should be looking for.

Yeah, I, I'd agree with that.

Just, I think I'd, just add a few things.

There's a great question it terms what's, who do, who does it well

and get asked that all the time.

I think lots of firms do bits of the process and when you put 'em all together,

there is a good way of doing things.

I think what I would pick up from the themes of having some of the discussions

is it's very easy to become very internally focused on M&A activity.

Everyone gets very excited about the deal and doing the transaction.

And if you think about it in their day job, these people are really

good at looking after clients.

I think it's important in that process not to forget.

That's the main reason.

So almost thinking in the same way.

You might spend a lot of time and energy thinking about what's the

client experience when they use us as a wealth manager, really think about

what's the client experience going through that process of integration

and what are they going to see, feel, receive before, during, and after.

Because if you have that in mind, then the advisers and relationship

managers will be thinking of that top of mind and that will should inform

the best way to do that integration.

Can I just come back to the culture thing for a moment?

Because we all know culture eats strategy for breakfast,

and actually it really does.

I think we, talk about it.

People say, oh, we've got a really good match of cultures.

What does that actually mean?

Lots of times people in due diligence are comparing the values that are on the

wall that isn't the culture of a firm.

And a lot of people don't understand how to assess it.

And yes, if you've got lots and lots of meetings with people, you can get

an idea, but actually you're still only meeting the top level of the

firm until you've done the deal.

People ask me, what should we look at?

And some of the things to look at are things like incentives, drive,

behaviors, and you can guarantee that if the incentives are not right, you'll

get some strange undesired behaviors from people, particularly around

the sales process, the relationship management, ownership, things like that.

So those things have got to be looked at.

Another thing to look at is perhaps the decision making process.

Who's authorised to make decisions, how do they happen?

Is there some autonomy?

What happens if you take it away during the acquisition.

So those things are important.

And on that subject, actually, a really good example of good practice

was one firm created a forum, which was called the Founders Forum.

So everybody who they'd acquired who was staying and not retiring,

they brought into a forum where they could have a say, 'cause ultimately

they're not an exec anymore.

So trying to bring them on board in that way was really helpful.

It's also a good culture carrier when you've got people from

the originating business in it.

If you're doing it really badly, it can just become, be careful.

I think another example of really great practice that we saw was a firm

who was actually acquiring, adviser led firms with younger advisers in

them, and they also had in their own house a number of retiring advisers.

So immediately they brought that company on board.

Literally in the first week, they would start giving clients from

the retiring adviser to the younger advisers to fill up their books.

And that really, engages people.

It means they've even gotta use the same processes because

they've immediately got to use the systems that those clients are on.

And this company, by the way, had a target of two or three days to combine the data.

So they'd obviously done a lot of pre-work and analysis, but they were

quite slick at getting the data on board, particularly into their CRM systems.

So there's some great ideas and things out there, but I think culture is one

of those things that people make a lot of mistakes over and they don't

really look at it in the right way.

You've gotta look at the outputs of culture 'cause it's really hard

to understand what it is if you just take it from a conversation.

And, I, it's a, one of those questions there, Gilly, but the,

there might be some obvious answers, but who, owns that in organisations

like wealth management firms.

And I know the response is not the leaders.

The leaders need to role model that, but what we typically find is that

to your point, leaders are absorbed with what's in it for them or what's

going on for them within the deal.

That actually, that isn't always the front of mind piece.

How would you describe the best way of owning that culture?

Because culture typically takes three plus years to evolve.

It's not a month.

Absolutely.

And the board owns it full stop.

They have to drive it, they have to make sure it's looking like what they

expect it to look like, but I think the CEO has a real responsibility on making

sure that culture is really rolled out in terms of, the communications.

And if you don't see the CEO ever, if the CEO isn't out there doing

the communications, getting in front of the key people, then you're not

doing the right things, actually.

Yeah.

And of course, by definition, sorry by definition, in that process there's two

CEOs in, M&A, so it's really important that they join up very quickly.

Absolutely, I agree with you.

It's about sustained effort and about that timeline of

three years to build a culture.

Again, don't focus on the transaction.

It takes a long time to keep that culture embedded and moving forward and not flip

back into the kind of fief of, we used to do it this way and examples of firms

we've been talking to is quite often you'll speak to a firm that has grown

over many years and many acquisitions and still people will identify as I work

for X but of course I used to work for Y, we were bought by them a few years ago.

I'm part of that crew.

So it really takes a long time to to embed a new culture.

Yeah, I think Dave has a really good point there as well.

Sorry, Jonny, Dave has a really good point about the two CEOs because you need

to decide pre-deal what's gonna happen there so that when the deal is announced,

everybody is on the same page, moving forwards, not looking back and fighting

in between who's gonna be the CEO and who's gonna be what, whatever role.

And one of the key things I think we saw.

On one of our best practice examples was they talked about

everything beforehand, and it was two bigger firms coming together.

They knew exactly who was gonna be the CEO, they knew exactly

who was gonna be the COO head of change, all of those key roles.

But they literally talked about everything.

They talked about the fact that their incentives were different and they would

have to align somehow they, they didn't necessarily do the work to align them

beforehand, but they knew it was gonna happen so they could preempt it with

messaging, with people as they went along.

So it, the more preparation you can do pre-deal and really hit the ground

running, the better on that one.

I think there's some really fascinating insights just shared there in terms

of what and, practical things that, to Donald's point, if you are, if you're

listening to this podcast and thinking about selling your business, things

you need to consider and clearly, a lot of this stuff we do find out after

the fact, but due diligence is such an important factor in this to make

sure that you're across all of that.

Gilly.

you mentioned an example of where they got, they had two days to do the

the technical integration, and they could only possibly have done that

had they done enough preparation.

I think that's a key thing, right?

And a key lesson in this market, but in other markets as well.

Until next time, keep up that forward thinking mindset.

Goodbye.