The Partnership Resource, founded by Lisette Smith and Tanya Rapacz, published a report entitled “Best Practices in Investment Advisory Partnerships.” The report, completed by both Smith and Rapacz, is geared towards increasing the success rate of succession plans and mergers by providing concrete steps that prospective partners can take to better assess matches and have better outcomes. Some of the major points discussed into the report are outlined below.

Many advisors recognize how critical the “cultural” elements of partnership fit can be but until now they have not had a process to assess fit and learn to communicate and make decisions as a partnership. The failure rate for mergers in the wider business world is 70%, including mergers that close but fail over the short term. This is a colossal waste of resources, especially for small to mid sized firms.

Smith and Rapacz interviewed many successful partners in investment advisory firms to dig into what made them work so well. They studied what differentiated firms that were able to get the full benefits of partnership, both monetarily and personally, when compared with those who struggled to meet their potential or broke up. Their report contains a process geared towards stronger communication and making better decisions as a partnership.

The most critical message in the report is that there are small, relatively inexpensive, practices that can strengthen partnerships. The Partnership Resource seeks to make it easier for those involved in transitions to perform “due diligence” on the cultural elements of the match.

How do successful advisors achieve and maintain their well run, successful partnerships? Through research and discussion, The Partnership Resource was able to identify the following behaviors and practices as ones that lead to exceptional partnerships.

  1. Fully assess your goals and motivations. Why are you getting into a partnership? What do you hope to get out of it? What benefits do you have now that you might lose in a partnership arrangement? What, specifically, do you want to retain, and what are you willing to give up?

  2. A merger is a longterm solution; do not use it to solve a shortterm problem.

  3. Work together first.

  4. Use assessment tools to drill down on behavior, values and approaches to conflict.

  5. Communicate early, often and inperson.

  6. Have a process for decisionmaking.

  7. Engage consultants who display objectivity and offer a strong process.

  8. Speak to others who know your prospective partner.

  9. Creatively develop a “partnership constitution” together.

  10. Cast a wide net for prospective partners.

There are countless incidents of merger and succession plans that have failed for what were, in retrospect, very preventable reasons. It is great to be optimistic, but don’t let the optimism of the “numbers” in an acquisition blind you to potential hazards of culture clash. Be sure that due diligence includes the cultural elements, not just the numbers and operational elements to have a sustainable transition plan.

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