In Part 1 of this series, we covered one key way to look at an acquisition to go beyond the mere benefits of adding some scale. If you’ve followed that approach, you should have a clear view of your own client offering, can readily assess what you would provide alongside what you would charge a cohort of acquired clients, and hopefully be able to see where there is scope for revenue upside.
In this article, we’ll cover the:
- Impact of uncertainty, the importance of putting words to action, and the tip of the iceberg;
- Role of the client experience, some of the ‘big rocks’ you’ll need to tackle, and some quick wins for improving the client experience;
- Power of operational excellence.
With the preliminary groundwork laid, let’s venture further into the labyrinth of acquisitions, aiming to unearth the strategies that amplify combined profitability beyond mere scale.
The uncertainty impact
Acquisitions, by nature, trigger a cascade of changes that echo through the corridors of both client relationships and team dynamics. The tremors of transition create uncertainty, and if bracing that uncertainty is not part of a journey for the better it leads to concern.
“Fear leads to anger. Anger leads to hate. Hate leads to suffering.” – Yoda
Transitioning to a new adviser, aligning with a new brand, and adapting to a new licensee can stir the waters of uncertainty. All too often an underwhelming narrative is told: “We’re combining into a bigger group; the bigger group is bigger and therefore better able to serve you.” If someone is retiring, just add “I’m retiring so I searched for someone to look after you” and you’re at par for the course.
Is that enough? It may enough to keep the average client around to see what happens, but it’s not great. Is that enough to extract the most potential from a book acquisition? Certainly not.
What can you say that’ll make things different? Maybe you’ve got a significantly better CVP, which would be great. Given the information asymmetry in advice, they can’t tell if your licensee is better, if you give better recommendations, or have more compliance checks. They’ll look for signs that things are changing for better or worse.
These may be the tip of the iceberg, but they’re visible and items that can be assessed by any client before they even meet with an adviser:
- Website: Their life savings are in your hands, so they’re going to look up your website. The clearer it is an upgrade, the better.
- Responsiveness: Think of these first few engagements to operate in dog years. Whatever timeframe you might think would ordinarily be reasonable, divide that by seven.
- Structure: Can they sense there is a process at play? Is it just a call for the annual review, is it followed up by a structured email or just a confirmation of the date and time? Will the email acknowledge that there has been a change? Will it just throw in a new adviser’s name without a care for the lack of a relationship? Are there set reminders? Can they expect the meeting to follow an agenda?
- Graphic design: Does your new experience present as being modern? Do your documents and presentations look like they’re 21st century documents? Are you bringing the clients into an experience that matches their experience with their bank, or is it more dated stuff?
- Technology: A great way to demarcate a difference between experiences, leveraging technology into the process can demonstrate modern proficiency.
- Knowing the client: One thing that no new relationship can start with is history, however, taking the time to prepare at every step to ensure the engagement works as well as possible is essential. The more you can demonstrate knowledge of the client that would’ve been in someone’s brain previously, the more trust you can build that this handover will work.
Are these the most important things? Probably not. Is each a clue to a client operating with limited information that this could be a good change or a bad one? Absolutely.
The change doesn’t just impact clients.
The shift in employer can feel like treading on rocky ground, potentially shaking the foundations of established bonds and social contracts that have been essential to arrangements working to date.
Whilst much of this is beyond the scope of this blog, many of the same indicators apply. Is it easier to achieve outcomes? Are we using better tools? Do we have better processes? Is the sense of chaos lesser here? Each stand as a basis of comparison between the old and the new.
Enhancing the value proposition
With structure, organisation, and a strong sense of service, we can ensure that clients feel that they’ve gotten lucky to have had this unsought upgrade.
If you have invested in your culture, your process, and your technology, you’re ready to wow your new clients.
- Adviser Enhancement: The competence and demeanour of advisers are the vanguard of this enhanced value proposition. They should embody and exemplify the improved service paradigm post-acquisition. Ensuring this process is given sufficient gravity at the early stages is paramount. It’s not enough to rock up and get a warm introduction with a smile. What can you do that’s new? What haven’t they seen before? If you’re ready to deliver some new wow factor, you’re going to look prepared and build excitement for what this new generation can bring.
- Process refinement: Remember how we said bigger would be better, so they should be grateful for the acquisition? Have that narrative be evident in the everyday processes, making the promise of better service a lived reality. Taking on an acquisition with the right preparation doesn’t just drive efficiency, it drives client confidence.
- Experience enrichment: Every touchpoint, from the handover, first review meeting, presentation tools, reporting provided, and more should echo the ethos of an elevated service experience. Upgrade, upgrade, upgrade.
These are big rocks that both deliver significant value and require significant effort. They are important however, a sidegrade does not engender loyalty or create better opportunities for value creation. Each element that you can do better, engenders trust.
If it’s too late in your journey to get all the fundamentals in place, there might be a quick win you can take advantage of.
- Harnessing client feedback: Acquiring a new clientele often presents a ripe opportunity to introduce a structured feedback mechanism, which demonstrates that you care about how they’re feeling and can offer valuable insights. This could be a simple post-review survey run through your website or Survey Monkey.
- Cybersecurity leadership: In many acquisitions, the realm of cybersecurity may have been a neglected territory by the vendor, presenting an opportunity for you to showcase the new firm’s maturity and diligence in safeguarding client interests. This could mean requiring multiple contact methods to confirm requests such as withdrawals or using a tool for secure client communications and file transfers.
- Client portal introduction: If, and I mean IF you have a client portal sufficiently set up to create additional value that clients will enjoy, it’s a great opportunity to introduce something they’ve not had before.
Preparing for multiplicative gains
In Part 1, we helped identify how much revenue uplift you might gain from incorporating additional clients into a well-structured and priced delivery program.
In Part 2, we’ve focused on the importance of excellent service delivery through operational excellence. Through operational excellence, we can ensure clients get a great new experience and deliver it at a reduced cost to serve.
It’s important to consider the impact on team members whose role will change. A team member who loves having a chinwag with clients might not excel in a highly systemised practice with automated workflows or a strong achiever in a solo context may not play as well with others. Check out our blog on Introducing Total Cost to Serve to learn more.
Now we’re looking at very significant gains. So, what are we looking for in an acquisition?
If you can find a book that:
- Has been underserviced;
- Lacks operational excellence; and
- May have been appropriately charged for what was provided but hasn’t been fully charged for the experience advice should be.
You have the opportunity to:
- Look past existing EBIT figures of the book for sale;
- Increase service to acquired clients;
- Deliver that additional service at the same or less expense due to operational excellence;
- Charge clients fully for an excellent client experience; and
- Have (most) clients feel that they’ve been lucky to experience the change.
Coming back to where we started in Part 1, this goes far beyond a bit of scale, some shared office space, some shared services, or reduced licenses.
For a basic acquisition, we’ll look at an existing firm and see something like:
Existing business +
(Purchased revenue * Retention rate) –
(Cost to Serve purchased clients * Retention rate) +
Basic gains from scale
If you have operational excellence in place, you’ll not just run your current business more effectively. You then become able to turn an acquisition from added revenue to multiplicative gains. That looks something like:
Existing business +
(Purchased revenue * Diminished retention rate * Enhanced revenue upside) –
(Cost to serve purchased clients * Diminished retention rate * Improvement in Operational Effectiveness) +
Basic gains from scale
The key difference between these two is that we now have multipliers in play. The combined businesses aren’t creating value that’s additive; the operationally excellent firm can multiply the value of the book purchased.
Don’t lose the magic
If this is so powerful, how come it doesn’t scale ad infinitum? Well, in some cases it does. The major institutions have acquired business after business, book after book, and still enjoyed enhanced profitability despite anecdote after anecdote of terrible service.
That said, these things can break down in other ways very easily. Operational excellence can too often be confused with mindless efficiency gains, which it shouldn’t be. Misguided approaches can cause problems such as a focus on the bottom line, a disconnect with the real client lives that benefit from the work we do, or just losing the ability to pick up the phone and speak to someone whose voice I recognise and recognises me. All these things are valuable, and without careful attention don’t appear on any process maps or cost to serve calculations.
If these things aren’t recognised, and are dismissed out of hand, no website will be pretty enough, no process swift enough, no adviser influential enough, to bridge that essential gap.
The trick is to save the magic as you go.
Are you ready?
Acquisitions have the opportunity to go beyond mere adding of revenue and scale for the operationally excellent. The quest is to morph the acquisition from a mere addition into a value-multiplier, which amounts to better outcomes for the business and clients alike.