To Merge or to Stay Independent?

Small firms and not so small firms are becoming partners with larger organizations, which begs the questions, why and why now?


These days there is a flurry of mergers and acquisitions in all industries, but particularly so in the financial services arena. Hardly a day goes by that an independent investment firm does not announce a deal to merge with a bigger company.

Small firms and not so small firms are becoming partners with larger organizations for a myriad of reasons, which begs the questions, why and why now?

Evolving Operations

Owning any business can be complicated, but some of the operational issues involved in running a firm in the financial sector can be especially challenging.

Cybersecurity is a big factor. With what seems like daily news of massive cyberattacks, smaller financial firms are particularly vulnerable. A breach of security involving client data can be disastrous. Larger firms with more robust IT resources have deeper pockets and are often better equipped to handle any potential theft of private information and the liability associated with such a breach.

Compliance is another important facet of running an investment firm. With audits on the rise, companies need to spend an inordinate amount of time crossing their t’s and dotting their i’s when running their day-to-day business. Centralizing the compliance function in a larger organization makes things more efficient and easier when you can have a dedicated team to handle regulatory compliance. At smaller firms, most chief compliance officers are principals at their firms and must wear many hats, rather than specialize in one major area.

Entrepreneurs are often so busy they don’t have time to manage human resources to the fullest. Like compliance, it becomes a function that often gets added to a firm owner’s already sizeable responsibilities. Yet, recruiting, training, on-boarding and retaining employees is crucial in a field like financial services, which often requires technical skills and the importance of building a healthy office-employee culture to create optimal service experiences for clients. Overseeing that process is something best left to a dedicated human resource manager or team of professionals. Larger firms can afford to have specialists in this important area of the firm.

Rising Demand for New Services

Managing money in an increasingly complex world is difficult at best so being able to offer clients additional services makes a lot of sense. The ability to do estate planning, financial planning, socially responsible investing, and provide exposure to private equity and robust alternative investment opportunities is key for retaining clients and keeping pace with the competition. Being a boutique or niche player in a particular market is great when you are getting started, but once you have matured and grown your business as much as you possibly can, you will need to take things to the next level. To continue growing and helping your clients get the best services, you will need a much bigger and well positioned partner.

Better for Employees

Working for a small firm is great on so many levels-you get to participate in all aspects of helping run the firm, you interact with clients at a very personal level, and if you have good bosses, there are endless mentorship opportunities. But there comes a time when your employees need a bigger runway to prosper and grow. Larger organizations are set up to do this with more educational opportunities and structured career pathing opportunities.

The need for operational support, a desire to expand our services offerings, and provide more growth opportunities for our team of employees recently led me and my partners to merge our practice with a much larger firm, Beacon Pointe Advisors. With our new partner we can get back to what we want to focus on when we launched our firm 26 years ago—working more in depth with our clients and spending more time focused on their financial needs and aspirations-without having our attention pulled away to navigate such a complex and challenging business environment. I have not been this excited about our future or our careers since 1995.

Thumbnail Fred Taylor Headshot Current Fred Taylor is a managing director and partner of Beacon Pointe Advisors’ Denver office. He helps individuals and families build wealth, live off their wealth and leave a legacy for future generations. A former economic advisor to Governor Bill Ritter, Fred has more than 35 years of financial services experience.

Categories: Business Insights, Management & Leadership