How One RIA Unlocked Growth by Outsourcing Investment Management

Frankly, about five or six years ago, I was having trouble sleeping at night, just thinking about the fact that we were responsible for serving over 600 households. I had confidence in our approach, but sometimes I would lie away and just be thinking, are we really doing everything we can with their investments?

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Are we using the right ETFs for efficiency? Are we picking the correct individual stocks or mutual funds? Is there more we should be doing in terms of managing these increasingly complex portfolios in a dynamic and evolving market? It was causing me genuine anxiety.

Eventually, I decided it was time for a change, so I met with the Commonwealth team that was running the PPS outsourcing platform at one of our national conferences. I told them about my issues, and we started to realize that PPS Select would be a great thing for my practice.

It was the best decision I ever made in my business. I don’t have those sleepless nights anymore.

You mentioned starting on the retirement plan side relatively recently. What was the thinking behind that?

So, early on, I had gained some experience setting up small retirement plans for business owners, but it was relatively informal. More recently, we had an acquisition opportunity come along, and part of that acquisition was a well-developed retirement plan business.

I spoke to some other advisers at Commonwealth who had already gone the direction of having both wealth management and retirement, and after hearing about their positive experience, I felt comfortable and we made the acquisition.

I like to credit myself for being savvy about using technology and protecting our operational efficiencies, and that’s helped us to make the two sides of the business work well together so far.

It’s a great synergy from a business perspective. We aren’t cross selling aggressively, but it’s just a natural thing. When you work with a business owner and you are their trusted wealth manager, you can provide a lot of additional value by helping them set up a high-quality retirement plan — especially considering all the new state mandates for retirement plans.

Do you have any insights about making acquisitions and integrating firms?

It’s been an interesting journey. So far, we’ve done six acquisitions, and the largest was $200 million. Our “standard” deal has been, say, between $20 million and $60 million, so they aren’t gigantic or transformative deals. It’s been more strategic. For example, we have one teed up now for another $100 million.

What I can say is that it’s a competitive space. You hear these statistics about how many buyers are out there for how many sellers and it’s kind of a bit ridiculous. It’s easily eight to ten buyers for every seller.

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We are able to have success, however, because we are offering a win-win-win for us as the buyer, for the seller and ultimately for the client.

For any deal to be successful, the handoff needs to be as smooth as possible. That often requires both parties sitting down and meeting with the largest clients. And we do things like send out client letters that explain that this is going to be a slow transition out for the existing advisor.

Our experience so far is that people don’t really want to move around. So, if there’s a strong endorsement from the retiring advisor telling his clients that this is a good path forward, that’s usually enough.

And then my team can explain that we are going to be delivering our advice through a more robust platform and a much more efficient system.

Thus far, our client retention is well north of 95%, and that’s simply because the value proposition is more than just managing money. It’s financial planning; it’s wealth management.

It’s teaching the most effective way to give to charity. It’s a generational wealth transfer. It’s estate planning and more. They’re getting so much more from us.

Pictured: Michael Manning