How tuck-ins help advisory firms grow effectively

For advisors who enjoy the freedom of being independent but still seek the support and expertise of a larger practice, a tuck-in may just be the answer. When tucking in, one firm (typically a smaller, independent firm) joins an existing, often larger, firm.

A tuck-in can look different depending on how the two firms decide to proceed. In some cases, the larger firm may absorb the smaller firm’s employees into its practice. Other times, the smaller firm remains fairly independent but gains access to the larger firm’s infrastructure, support staff and resources.

If you’re looking to achieve substantial levels of growth, a tuck-in can help address the challenges and issues that must be resolved in order to scale.

PREPARING YOUR FIRM FOR GROWTH

Your firm will naturally grow over time, but it’s critical to be intentional about how it evolves. The decisions and actions your firm takes should align with your vision for the future. A few of the most common challenges include hiring the right people, identifying the scope of business, and adapting to changes.

As your team expands, think about what roles need to be filled now to effectively address your clients’ needs. If you work with multigenerational families, for example, hire advisors who are prepared to help your current clients, their children and even their grandchildren manage the complexities of family wealth over time. It’s important to incorporate the right people on your team to address the specific challenges your ideal clients will face now and as you grow.

There’s a common phrase, “jack of all trades, master of none.” It speaks to the idea that people who attempt to master many skills often fall short of excelling at any.

Building your client list helps you grow, but keep a keen eye on your firm’s scope of business. Are you focusing your efforts on serving your ideal target client? Or is your scope creeping beyond your means or capabilities? Within your firm, you must have a sense of who you are, who you work with now, who you’d like to work with in the future, and how you can best position yourself to serve those clients.

In short, you need to have the right people, the right plan in place, and the flexibility to take advantage of strategic growth opportunities as they arise. In many cases, a tuck-in can help firms achieve these objectives.

BENEFITS OF TUCKING IN WITH A LARGER FIRM

There are several reasons why you may consider tucking into a larger firm. Tuck-ins are commonly part of an independent advisor’s succession plan. It also offers smaller firms the opportunity to scale quickly and efficiently.

OPERATIONS

One of the primary reasons advisors tuck into another firm is because they want a turnkey solution for operations, compliance and staffing. The work involved in operations is especially difficult (and expensive) for firms with limited resources to establish and maintain.

Your team may be stretched thin trying to handle the minutiae of day-to-day operational tasks, which only tend to increase as you grow. By tucking into a larger firm, your advisors and high-level employees can utilize the support staff and technology stack already in place. Ultimately, it allows your team to spend less time in the weeds and more time focusing on their intended areas of expertise.

DIVERSITY OF KNOWLEDGE

There’s a certain synergy that happens when multiple teams come together and work toward a common goal. Surrounding yourself with other experienced advisors gives you access to a wealth of knowledge in several different areas that you otherwise may not have the personal experience to address. It’s a benefit that can’t be easily replicated elsewhere.

Consider the environments and experiences a larger firm has successfully navigated in the past. They’ve endured previous financial crises, and they’ve helped clients achieve their goals through numerous economic landscapes. By tapping into their experiences, your team can be better positioned to help your clients address future challenges.

SUCCESSION PLANNING

When it comes time to leave the firm for good, you want your clients to have a smooth transition and continue working with people you trust. Pursuing a tuck-in prior to retiring presents an opportunity for advisors to better control where their clients go and how they’re cared for once onboarded with someone new.

WHAT TO LOOK FOR IN A TUCK-IN OPPORTUNITY

While there are many benefits of a tuck-in for firms looking to grow, there are some considerations to make as well.

Take your time finding a firm that fits you, your team, and your clients. Too small, and they may not have the resources or personnel needed to help you scale effectively. Too large, and they may experience high turnover or set restrictive policies in place.

Try to look for firms with an open architecture format, as they allow you to maintain autonomy while still granting your practice access to their robust resources and expertise.

If there are certain growth pains you’re experiencing now, such as compliance, make sure the firm you’re considering has the operations in place to address those specific concerns. While it doesn’t have to be an exact match, finding a firm that shares similar values or ideals can help your team feel more comfortable with the decision to tuck in as well. 

Pursuing a tuck-in is an increasingly appealing option for advisors with various goals in mind, from preparing their clients for a smooth transition to addressing the common pitfalls of independent growth. When considering if a tuck-in is right for you, keep in mind the importance of finding a firm that offers you independence, flexibility, and support.

Greg Heller is founder and CEO of HCR Wealth Advisors, a financial planning and investment management firm based in Los Angeles.