5 things to consider in financial planning M&A

In recent years, many financial planning firms have struggled to meet their business goals. Things like changes in legislation, increasing costs and the global pandemic have put extra strain on practices everywhere. Because of this, some business owners feel stressed and explore their options. One thing some consider is merging their business with other like-minded practices.

This is a massive decision for both businesses. It is important to consider all the pros and cons of merging your practice, and ensure the merger is in the best interests of all parties affected.

Here are five things to consider if you are thinking about merging your financial planning practice with someone else’s:

1. Understand what your long-term objectives are (and make sure they align)

Even though a merger might make sense in the short term, you need to consider your long-term outlook for your business. You might find that you and your potential business partner don’t agree on the same long-term goals. This could be detrimental to your business as well as theirs.

2. Make sure it is a good cultural fit

Don’t just agree on broad ideals and principles. You must take time to get familiar with each other’s business practices and understand any differences and similarities. Your values should closely align, but you should also make sure that both businesses fit together culturally as well. If you’re going to be working side-by-side so you should make sure key parties get along.

3. Consider what this will do to both your clients and team members

While it’s obvious that you commit to your clients, you commit to your team members as well. What is going to be the potential fallout if you decide to go through with the merger? Change can often be good for businesses. You will just need to ensure that everyone from your clients to your team members are on board with the move.

4. Look for economies of scale and synergy

Can you share overhead? Consider things like paraplanning staff, administrative & HR functions, office space, software subscriptions, website & marketing, and business processes. As you merge, your business’s current clientele might also complement the merging practice. This can create more business opportunities as you move forward.

5. Always have an agreed-upon exit strategy

Even though you’re committing your business to merge with another, it can be best for both businesses to have an agreed-upon exit strategy, providing them the option to split the business again or to separately sell their interests at some point. This is an in-depth topic that should be discussed and documented in detail before the merger. It can also help put your clients and workers’ minds at ease.

Merging your business is one of the biggest decisions that you’ll make for your business. It requires careful consideration, plenty of meetings, and hours of due diligence to make sure that the decision to merge benefits all parties involved as much as possible. If you’re still unsure, try finding and reaching out to other business owners who have been where you’re at. You can get a better picture of what they learned through the process and decide if merging practices with another business owner is right for you.

Whatever you decide, Mutual Paraplanning Services can help you to tackle all the foundation advice documents, choose a suitable financial planning software, and build a more efficient paraplanning process.