Integrating Culture in Successful RIA Mergers and Acquisitions: The Guide for Financial Advisors 3030624439, 9783030624439

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Integrating Culture in Successful RIA Mergers and Acquisitions The Guide for Financial Advisors

Greg Friedman Cynthia Greenfield

Integrating Culture in Successful RIA Mergers and Acquisitions

Greg Friedman • Cynthia Greenfield

Integrating Culture in Successful RIA Mergers and Acquisitions The Guide for Financial Advisors

Greg Friedman Private Ocean San Rafael, CA, USA

Cynthia Greenfield Private Ocean San Rafael, CA, USA

ISBN 978-3-030-62443-9    ISBN 978-3-030-62444-6 (eBook) https://doi.org/10.1007/978-3-030-62444-6 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Foreword

I have known Greg Friedman for many years, and I have known him through at least three dimensions: financial advisor, technologist and friend. I listed financial advisor first, because it was his role as an advisor that eventually led him to his role as a technologist. It was through his role as a technologist that I met him, and that is how we originally came to be friends. To be clear, I have always thought of Greg as an advisor first and a technologist second. I do not mean to imply that he is any less of a technologist than he is an advisor. It is that I believe Greg came to technology out of his desire to better serve his advisory clients. He had a vision about what a great CRM application for advisors should be able to do. He could not identify such a product in the marketplace, so he decided to build one himself. Little did he know the journey he was about to embark upon… I believe it was about 20 years ago that I first reviewed Junxure CRM. I heard about this advisor, Greg Friedman, who had collaborated with Ken Golding to build a CRM program called BAM for his own advisory firm. At the time, Greg told me that there was no initial thought of selling the program to other planners; however, as he discussed his ideas with colleagues at various Institute for Certified Financial Planners (ICFP) functions (the ICFP was a predecessor to the Financial Planning Association (FPA)), a small number of them inquired about the possibility of purchasing BAM for use in their own practices. Eventually Greg agreed, and BAM was made available to a limited number of planners. After overcoming some personal reservations about allowing the program to be distributed on a large scale, a slightly modified version of BAM, re-christened as Junxure, became widely available to RIAs. When I first reviewed Junxure, cloud computing, as we know it today, did not exist. Dial-up connections to the Internet were still common. Many v

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advisors, if they had an email address, had something ending in aol.com. If my memory is correct, the minimum recommended requirements to use Junxure on a single PC were 400  MHz Celeron processor, 64  MB RAM, VGA Monitor, CD-ROM, and a printer. Over the years, Greg and I spent a good deal of time discussing advisor technology in general, and Junxure CRM in particular. We debated everything from where fields and tabs should appear on various Junxure screens to how to optimize workflows to if/when Junxure should move to the cloud. We did not always agree, but we listened and learned a lot from each other over the years. Throughout those years, Junxure CRM increased in popularity among independent RIAs and the firm grew rapidly. At the same time, his RIA firm, Friedman and Associates, also experienced substantial growth. Greg’s firm merged in 2009 with Salient Wealth Management to become Private Ocean Wealth Management. Greg is now the CEO. He had gone from managing a relatively small advisory firm and a small technology firm to managing two sizable businesses. While this sounds like a wonderful outcome, and it was, it also presented challenges. How Greg managed to run a wealth management firm full time and at the same time continue to run a technology firm catering to advisors for so many years is still a mystery to me, but I think that the principles that Greg and co-­ author Cynthia Greenfield discuss in this book offer some clues. One of key issues this book deals with is change management. Change here is discussed in the context of M&A, but in technology, change is a constant. In order to run a successful technology firm, Greg and his colleagues had to learn, in real time, how to deal in a world where change was the only constant. As I write this, most advisors and their clients are working from home as a result of the COVID crisis. Almost overnight, everyone was forced to change all of their business practices, but not everyone was equally equipped to do so. Those leaders who were experienced in change management did better at managing the business upheavals than those who did not. It is my belief that COVID accelerated several trends in this industry that were sure to happen anyway. These include remote working, remote advisory meetings, mergers, some cost compression across Wealth Tech and much more. I feel equally confident that there is no going back. The genie, so to speak, is out of the bottle. Even after we have a vaccine for COVID, the world as we knew it and the business as we knew it will look different. The pace of change will not decelerate, it will accelerate. So, whether you are looking to acquire or be acquired, or not, change management will be a skill that every principal at every firm will need to master. It is likely that when you interview

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your next hire, you will also want to make sure that they either possess change management skills or can be taught them. Another key element discussed in this book is culture. I have consulted for hundreds of firms, and each firm in our business has a unique culture. I can spend as little as a day or two within a firm and tell you which ones have a good culture and which ones have a great one. I have worked in several firms that have undergone mergers, and it is easy to spot the ones that still have some work to do. When there is still an “us vs. them” mentality, you know there is still work to be done. Unfortunately, I have seen too many firms that still have some lingering “us vs. them” issues. This book provides the knowledge necessary to ensure that the new culture includes only us. Throughout his journey from the owner of a small RIA and a technology start up to selling a successful, mature CRM firm and managing a large, highly respected RIA firm, Greg has learned a lot of lessons about managing people and businesses the hard way, through trial and error. He has distilled many of these lessons in this book so that you, the reader, can benefit from all he has learned through his trials and tribulations as an entrepreneur. I am humbled that Greg has invited me to write a few words to start you on your journey with him in this book. I feel certain that you will become a better manager as a result of reading this volume. Joel Bruckenstein

Acknowledgments

Greg This book is the product of an enormous team effort, inspired by the enlightening and sometimes challenging personal experiences of a number of M&A transactions over the years. While we recognize that every deal is unique, our hope was that in sharing our experiences, along with others that contributed honestly, we could help guide other advisors down a wiser path to achieving their goals. First off, I’d like to thank Cynthia Greenfield for really being the inspiration for bringing this book to life. More importantly she is the “North Star” in quietly shaping the successful culture at Private Ocean. Her work every day makes a huge impact on the firm, and in her role as Chief Experience Officer she is behind both the great client experience and great employee experience at Private Ocean. As a Certified Life Coach and her own personality and life experience, she brings her light and passion every day—those that know her benefit greatly. I would not be sharing these experiences today if it were not for the many amazing people who I have been privileged to work with—from those at Junxure, Friedman & Associates, Salient Wealth Management, Lakeview Financial, Mosaic Financial Partners, and of course, Private Ocean. In particular, I’d like to thank Angela Giombetti for helping me “find my voice in writing,” her hard work and help with this book, and especially for the opportunity to work closely with her every day. And to all of my colleagues, I am always in awe of everyone’s tremendous willingness to take on challenges in a

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positive way and their creativity in getting things done for the sake of taking great care of clients. There are other leaders in this industry who should be acknowledged for their continued stewardship for advisors, whether to educate on M&A trends or to help shepherd us toward the latest technology. To David Selig, David DeVoe, Dan Seivert, Joel Bruckenstein, Michael Kitces, Bob Veres and so many others, we thank you for your commitment to helping all of us improve. Last but certainly not least, I am so grateful for my family—my wife, Laurie, and my twins, Andrew and Marissa—who keep me grounded and teach me every day.

Cynthia There are too many people to name who have helped me in my journey, and I hope that within this book they see that the wisdom they have so graciously shared over the years has made a difference in many people’s lives (not the least of which is mine). First of all, I have infinite gratitude and respect for Greg, who personifies all of the best qualities that you would want and hope for in a leader, a mentor and a friend. Over the past 11 years that we have worked together, he has continued to set the standard every day for leading with heart, and no matter how busy he might be, his door truly is always open. It was with his encouragement that I decided to put my money where my passion is and become a leadership coach, and I will always be immensely grateful for everything he has done for me. I also need to recognize Susan Dickson, who has taught me so much over these years through patience, empathy and grace about how to lead and how to listen. To Angela Giombetti, thank you for your positivity and your creativity. You inspire people to think outside of the box and reach beyond their comfort zone to accomplish great things. This book would not be possible without everyone—past and present— whom I was honored to work alongside at both Private Ocean and Junxure. Though these people came from different backgrounds and different experiences, they shared a singular commitment to taking care of people with excellence. They have taught me many lessons that continue to be humbling as I grow in my career and as a person.

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The same could be said about my coach, Jeanet Lamoca, and my “pod” team of consulting peers, who impress me every day with their insight and their desire to share that knowledge with others so that we can all succeed. Last but certainly not least, my husband, John, and my kids, Katie and Andrew, have always been 100% supportive of me, offering endless inspiration and encouragement, and for that I am eternally grateful.

Contents

1 Understanding and Succeeding at Change Management  1 Greg’s Perspective…   1 Communicating Change   2 Cynthia’s Perspective…   4 Seven Steps to Succeeding at Change During and After an M&A Event   4 Understanding the Psychology of Change    5 Greg’s Final Word: Evolving Culture While Preserving Core Values    8 Case Study—A Tale of Two RIAs    9 The Deal   9 Profiles   9 Background   9 Cultural Challenges  10 Solution  12 Conclusion  13 References  14 2 Self-Assessment and Five Steps to Identifying Your Ideal Work Culture 15 Greg’s Perspective…  15 Identifying Your Culture—And Your Priorities   16 Your Professional Culture Vs. Your Social Culture   17 Five Exercises to Assess Your Cultural Values   18 Greg’s Final Word: Your Cultural Identity as a Calling Card   24

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Case Study—A Cultural Match, an Operational Divide   24 The Deal  24 Profiles  25 Background  25 Cultural Challenges  26 Solution  27 Conclusion  29 Reference  29 3 First Impressions—Initial Discovery 31 Greg’s Perspective…  31 Cynthia’s Perspective…  32 A Guide to Introductory Meetings   32 Driving the Conversation—Your Presentation or Mine?   36 The Debrief—Sharing Notes   39 Greg’s Final Word: First Impressions Count on Both Ends   40 4 Coming Face to Face: Expanding the Circle 41 Greg’s Perspective…  41 Taking the Right Steps Forward   41 Cynthia’s Perspective…  43 Protecting Your Cultural Values   43 Lessons Learned  45 Greg’s Final Word  47 Case Study: Adapting to Rapid Growth   47 The Deal(s)  47 Profile  48 Background  48 Cultural Challenges  49 Solutions  50 Conclusion  51 5 Bringing It Together—Kicking Off Cultural Integration 53 Cynthia’s Perspective…  53 Setting the Course from the Top   54 Onboarding New Teammates  56 Gathering the Team  60 Resolving Ongoing People Issues as It Relates to Culture   65 Greg’s Final Word  65

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Case Study: Matching Values, Two Interpretations   67 The Deal  67 Profiles  67 Background  67 Cultural Challenges  69 Solutions  70 Conclusion  71 References  72 6 Timelines and Blueprints: Nurturing Your Integrated Culture 73 Cynthia’s Perspective…  73 The Blueprint: Seven Impact Areas to Continue Nurturing Your Firm’s Culture  76 Greg’s Final Word  90 Case Study: Cultivating a Team Environment—One Region at a Time  91 The Deal(s)  91 Profile  91 Background  91 Cultural Integration Strategy   92 Why Location Matters   93 Fundamentals of Integration   93 Conclusion  95 References  95 7 Repeating the Cycle, and Applying Lessons Learned 97 Greg’s Perspective…  97 Lessons Learned (That Are Easily Repeatable)   98 Cynthia’s Perspective…  100 Worksheets and Activities: Where to Go from Here  100 Individual Discovery Worksheet  100 Celebrating Achievements in Cultural Integration  101 Greg’s Final Word  101 References 103 8 Preserving Culture During Extraordinary Times105 Greg’s Perspective …  105 2008–2009 Lessons Learned  106 2020: A Case Study in Crisis Management  106 Business Continuity: In Full Affect  107

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Going Virtual Overnight  107 Client Communications  108 Internal Operations and Outreach  108 Cynthia’s Perspective…  110 Private Ocean’s Approach to Preserving Culture During the Pandemic 110 Greg’s Perspective…  113 Responding to 2020’s Second (and Third) Acts  113 Greg’s Final Thoughts  115 References 116 Afterword117 Appendix121 References125 Index127

About the Authors

Greg Friedman  is an innovator and advocate for excellent wealth management. He is co-founder and CEO of Private Ocean, one of the West Coast’s leading wealth management firms. He is also the former co-founder of Junxure, an industry leading CRM for advisors. Friedman is widely recognized as one of the nation’s top financial advisors. Investment Advisor Magazine named him as one of its Top 25 most influential financial advisors in 2008, 2009 and 2010. In 2008, Financial Planning Magazine included Friedman in its elite list of financial “Movers and Shakers.” In 2007, Charles Schwab honored him with its prestigious IMPACT Award® for “Best in Tech.” Friedman plays a lead role in the movement toward tighter technology integration in the financial planning industry. Greg was also recognized in InvestmentNews’ 2017 Class of Icons and Innovators for his contribution to the advancement of the financial advice profession and for conceiving new ideas and tools that have propelled the industry forward. In 2018, Greg was named CEO of the Year at the WealthManagement.com Industry Awards. He is the author of two books: Advisory Leadership: Using the Seven Steps of Heart Culture to Create Lasting Success for Any Wealth Management Firm and The Financial Advisor M&A Guidebook: Best Practices, Tools, and Resources for Technology Integration and Beyond. Cynthia Greenfield  is a Leadership Coach and owner of the consulting firm, in the Momentum, and also the Chief Experience Officer at Private Ocean Wealth Management. She brings 15 years of experience working with leaders and teams in the financial, technology and academic sectors, helping businesses develop strategies that build stronger relationships and create organizational growth during disruption and transition as a result of a merger, xvii

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About the Authors

acquisition, change in management or expansion. Her goal is to inspire positive motivation, eliminate obstacles and help move people and businesses forward purposefully and collaboratively. Working with executive teams and individuals, Cynthia focuses on the power of intention, thoughtful action and accountability that drives and delivers meaningful results. She believes that clear communication, confidence and productivity can be inspired if nurtured in a trusted partnership. Together, Cynthia and clients dream big, set goals, navigate obstacles and build a roadmap to a complete and fulfilling life.

List of Figures

Fig. 1.1 Transtheoretical Model (the Stages of Change model) by Prochaska and DiClemente Fig. 6.1 Productivity & profitability: how leadership influences macro and micro culture

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Introduction

It’s no secret that culture is a passion of mine, and has been since I started in this business more than 30 years ago. I am often asked—sometimes teased— about my work culture “soapbox,” and why I encourage so strongly for advisors to pay close attention to the environment they have created for their firm. A large part of that drive comes from my own personal work experience on both ends of the spectrum, from unsatisfying situations with poor work/life balance and high turnover, to inspiring, collaborative cultures that led to increased productivity, high morale, and strong retention with both employees and clients that made a positive impact on a firm’s ROI (Return on Investment). Culture can be a game-changer or a deal-breaker, and unlike numbers on a screen, its success metrics are hard to pin down. And the stakes get infinitely higher when you add a second culture to that equation during a merger or acquisition. I believe that as advisors, we do what we do because we want to help people achieve their goals. We do this by carefully building relationships that foster trust and loyalty. That same commitment applies to our businesses and our industry. Working together, we share what we learn in our experiences so that others might succeed where we have stumbled. We are fortunate to work in a profession that is driven by service, and I am proud and grateful to stand alongside some truly remarkable people. One of those people is Cynthia Greenfield, who I met more than 11 years ago when she officially came on board as the first hire after my firm, Friedman & Associates, merged with Salient Wealth Management. She had a front row seat to our first days, months and years as we gradually found our footing as a strong, tightly knit group of people sharing a vision. We went from a $600MM in AUM firm to a $2.3B firm and Cynthia played a large role in that growth.

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This book was inspired in large part by her contribution to preserving—and creating—our firm’s culture throughout the years, including two acquisitions. She also worked with me through the years of owning Junxure CRM, a fintech company, helping to foster a work culture known for its impeccable service and dedication to its clients. If you have had a chance to meet her, you will agree that she is naturally open, inquisitive, and embraces change with enthusiasm—she’s almost fearless about it! She encourages people to challenge what they perceive as their obstacles and helps with solutions that are supportive and empowering. I am honored to work with her and to co-author this book with her. Mark Tibergien, former Chief Executive Officer of Advisor Solutions at BNY Mellon Pershing, said it best in a 2018 article for ThinkAdvisor [1], “Cultural fit and leveraged synergies really are essential components in a successful merger or acquisition.” During the M&A process, we often place so much of our focus on the economics of a deal that we overlook (or undervalue) a key driver in achieving those numbers—the people. The problem is, without people working together effectively, the economics don’t work. Sweeping things under a rug or setting them aside for later will only come back to haunt you. And speaking from experience, there is no easy way and no checklist you can complete that will truly prepare you for what you’re getting when you merge with or acquire another firm. Often, it’s not until the deal is done and you start doing the hard work behind the scenes to integrate firms that the real obstacles of working with a new group of people may arise. And no matter how much researching and interviewing and discussion of alignment that you undertake ahead of time, there will always always be an unknown factor that you couldn’t have anticipated. Now, if there were templates, materials and a roadmap on how to identify those unknown factors and mitigate them, I would have followed them! Instead, what we have available are numerous guides on the art of the deal and little to nothing (as of yet) on how to successfully integrate RIA cultures. Our goal for this book is to share our blueprint for achieving and maintaining a successful, integrated work culture, and how principals should address head-on the obstacles that may appear during an M&A event. In the chapters that follow, we will address each step of the M&A process as it relates to integrating work cultures. Not surprisingly, the process starts with a self-assessment of your own firm’s culture and gauges your attitude to change. We’ve also included high-level case studies, starting from Private Ocean’s creation in 2009 to two subsequent acquisitions, as well as additional profiles of deals done by Sequoia Financial Group and Wealth Enhancement Group, that we hope are helpful in identifying some of the challenges you may be facing.

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When appropriate, we have changed the names of firms and individuals out of respect and confidentiality. By the way, this book is not meant as a guide to how you should run your business or how you should shape your culture. All RIAs are unique and we are successful because of it, not because we tried to mimic someone else. There are, however, some key components that are common in bringing firms together culturally faster and with minimal heartache (and cost). Ideas that create confidence, foster trust, set clear and achievable expectations, and provide a sense of inclusion and empowerment. Until you do these things, you might find yourself facing an uphill battle in seeing your deal pay off. I am often asked with some level of healthy skepticism if culture is really a measurable metric of success. The answer is a resounding YES.  The fallout from overlooking culture before, during and after the M&A process can prove costly on several levels. The first is productivity. I have said in the past that the first year after a merger or acquisition is about integration. The second year is when you really start to see rewards. When people can’t (or won’t) work together well, things slow down, obstacles mount, communication breaks down, and it starts to show in your operational efficiency. The second and more costly impact is to the advisor-client relationship. A merger or acquisition is already a disruptive event for some percentage of your client base, and when operations aren’t consistent, mistakes happen, things are overlooked, and it often confirms some client’s fears that what they’re experiencing now is not what they signed up for. As an aside, it’s important to mention that we started writing this book in the first quarter of 2020. I don’t have to go into detail what the impact of the COVID-19 virus outbreak was like for our industry, our country and the world. In the future, many of us will recall this time as a blur of chaos and disbelief, as markets briefly experienced a significant drop and we quickly understood that we would not probably ever be returning to “business as usual.” Overnight, we were thrust into a new era of co-working and serving our clients from our homes, and like many firms, it was a true test of our culture. This extraordinary time inspired us to add a final chapter to this book, which addresses how Private Ocean prepared for and reacted to the immense change to our business, and what we did to keep things on track. Whether you’re considering your first merger or acquisition, you’re in the middle of the trenches or you’re past GO and looking ahead at future M&A events, we believe that there are steps to be taken to preserve the integrity of your vision while allowing room for growth. We also believe that many missteps can be caught early and corrected or avoided altogether. And with each

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future M&A event, you add more layers to your process from the lessons you have learned. A company’s culture is a living, breathing entity. It’s like a silent employee, elusive, evolving and potentially destructive if not given the appropriate amount of attention. Conversely, by proactively managing that silent employee and anticipating its needs, you can make a significant, positive impact on your future success. We hope that you find this book enlightening and informative in helping you navigate through your past, present or future M&A event. Greg Friedman

References 1. Tibergien Mark, “Does Culture Really Matter in M&A?” Thinkadvisor.com, 27 June 2018, https://www.thinkadvisor.com/2018/06/27/does-­culture-­really­matter-­in-­ma/.

1 Understanding and Succeeding at Change Management

Greg’s Perspective… A few years ago, I was on stage in front of several hundred advisors, speaking on the topic of M&A. I opened by asking everyone to raise their hand if any of the following questions applied to them. Are you actively engaging in a merger or acquisition? Are you considering M&A in the future? Have you been approached about participating in an M&A event? At the end, I then asked for those who hadn’t raised their hand. Not one single person in the room raised their hand. How did we get here, and so quickly? Increasing competition, shrinking margins, slowed organic growth and an aging generation of advisors are all factors in this M&A tidal wave. According to a report by Echelon Partners, 2019 marked a seventh straight record-setting year for M&A activity in the RIA space, with 203 acquisitions [1]. And while M&As may seem like an “easy” growth or succession strategy for firms, the only easy part may be signing off on the deal. When Cynthia and I were discussing the outline of this book, walking through the natural steps of a merger or acquisition, we agreed that the first factor to address was our approach to handling change. There are innumerous books available on the topic, from cheese-moving analogies to going from “good to great,” and leaders across the board have recognized that while the change itself is challenging, it’s how people react to that change at varying levels that causes ripples in stability and productivity. One thing is for certain: change is the only constant in our lives. Whether we’re prepared or not, change is coming in one form or another—in our © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6_1

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G. Friedman and C. Greenfield

personal lives or in our careers. And while we often can’t control what, when or how it happens, we can control our attitude toward the change and let it either stop us from moving forward or help propel us to something better. For an RIA, M&A is change at its finest. It’s disruptive, no matter how little will actually change to a firm’s structure. No two mergers or acquisitions are the same, and whether you are absorbing one firm into another, merging two firms into a new one or letting one firm continue on as a separate entity, there will always be elements of change that can lead to issues. The information in this chapter may overlap in future stages, but addressing change in the beginning (and keeping that mindset throughout the process) can be a helpful tool to understanding why problems may arise throughout the integration.

Communicating Change Two of the biggest questions advisors might have about anticipated change are when do you notify your team about a potential M&A and how much do you share? While there are no perfect answers to these questions, Cynthia and I can offer our recommendations based on two factors—what we know about our own people and our culture, and what we’ve learned from past experiences. Let’s start with the “when.” When you decide to communicate any M&A activity is very dependent on the existing culture and leadership style for the firm. Let’s say, for example, that you and your team have worked hard for a decade, building a business, and now you’re considering M&A to get you to that next phase of growth. You’ve been very transparent in the firm’s goals, and you’ve even had many of your people involved in making business decisions. It may make sense to send the message out early that you’re entertaining selling or acquiring if that is what is consistent with what you’ve done before. On the other hand, if you’ve built a culture that is very top down with a commander at the helm and employees largely sticking to their day-to-day responsibilities, the right “when” may be on the day you announce the deal. The idea is to be consistent and limit confusion. There is no right or wrong answer to this question in how early or late you share the news of an impending deal. The landscape is really wide and there are pros and cons to both approaches. If you tell your team in advance of the deal, you’re trusting that people will not panic or let the unknown impact their current performance and their attitude. You’re also betting on not having to do damage control if for some reason the deal falls through. On the positive side, transparency offers people a chance to communicate and openly weigh

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in. Speaking from personal experience, sharing information in advance hasn’t lessened the issues related to change, but it has expedited the process to relieve them. Ultimately, for us, the goal is to build toward a shared vision of the future for the firm, and keeping people informed along the way has cultivated a sense of inclusion. Deciding to tell your team after the deal is done can also be tricky. Yes, you keep things moving forward without the inevitable disruption of a merger or acquisition. Perhaps your team is even accustomed to being on a “need to know” basis about the business, and that works best for your environment. The issue arises when suddenly your team has new colleagues, perhaps new titles, and new or expanded expectations for their roles. At any given point, people will be dealing with different levels of anxiety, questioning the clarity of your vision and trying to figure out where they fit. Communication can be a great equalizer or a divisive weapon in this situation. For instance, in our initial merger to become Private Ocean, my firm had been briefed for months prior to the deal. To the other firm, much of the process and information was not discussed widely among the staff. The gap in information sharing contributed to additional issues that made it more difficult for us to come together as one firm with one culture. (See Case Study 1 for more information.) The second communication question is “How much should you share?” Think about your people and the culture that you have created for your firm. Would they benefit from knowing the high-level details of an M&A event? Would they appreciate a regular update on progress as you move forward? In our monthly all hands at Private Ocean, for instance, we share a brief update of any M&A activity if it’s relevant to the team. But perhaps more importantly, we reiterate our goals at every company retreat and in every goal-setting exercise. The firm is on a growth path, and M&A is part of that strategy to get us where we want to go. We also constantly address how we expect things might change—overall and for each person. So when the topic of M&A comes up, no one in the firm is surprised; in fact, they feel included on the team that will help us achieve our next phase. As a company, we are fairly consistently researching how things might change for the better and we communicate that every step we take is intentional and strategic. It’s important in our culture that people should expect things not to stay the same. No matter your strategy for communicating the change, the end game is the same. You want a high-functioning team of satisfied employees to deliver your services and help run your company efficiently. Any M&A event creates some level of uncertainty that didn’t exist before, and understanding your company’s culture will help you greatly in determining your approach to sharing information.

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Once you’ve got a communication game plan, you can take this approach into your discussions with the other firm prior to the merger, even it’s done at the very highest level. The key is to find alignment and begin building positive momentum among leaders and teams before and right after the deal is done. Here are Cynthia’s seven steps to embracing and motivating change, and her take on the subject.

Cynthia’s Perspective…  even Steps to Succeeding at Change During and After S an M&A Event As an executive coach, I’ve worked with firms managing transition during a merger or acquisition. Following the steps below, whether you have a third-­ party facilitator, a designated team lead or a principal leading the charge, they can help ease the pressure related to great change. 1. Perform a quick values exercise. Work with both firms’ leaders to identify what values are most important to them—and what they envision is the best version of themselves. What qualities and characteristics are they demonstrating? Make a list, prioritize these qualities and have it available as visual guide for what they want to achieve in the change. 2. Look for opportunities. With two lists in hand, discuss how the firms envision their shared destination. Look for values that already overlap and identify how a shift or an improvement in some areas might help better align their vision. 3. Visualize success. We all have a vision in our heads of success. Encourage leaders to articulate that picture; how does it look and feel? What goals— financial and otherwise—would you be achieving? What would your people say about working in that environment? How would your clients talk about you and why would they continue to refer their friends and family? 4. Build a roadmap to achieve that vision. With a shared understanding on the definition of success, it’s now time to build a roadmap, setting metrics, realistic milestones, and a timeline that makes the transition manageable and attainable. 5. Agree on how you will manage setbacks. Acknowledge progress is never linear and be prepared to recognize setbacks. Agree on a plan on how to manage these potential issues, and take the time to identify possible pockets that may need extra attention.

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6. Chart your progress. Whether it is an individual, a team, a set of leaders, or even as a designated champion or an external executive coach, someone needs to hold the team accountable for their progress during the change. This means no judgment and no negativity, only encouragement and support. Discuss delays with understanding and an attitude of solving, not blaming. Give credit when and where it is due as you meet your milestones and hit target goals. Keep in mind that we are all individuals first and motivated by different things, so success and progress may look different to each person. 7. CELEBRATE ALL SUCCESS. It is easy to lose sight and recognize how far you have come when you’re mid-change. Plateaus, failures and regressions are part of making changes as are small wins and breakthroughs. Don’t forget to celebrate the successes and acknowledge the great work that is happening. Through all of these steps and beyond, protecting the client and employee experience should be a priority. Ask yourself in any situation, “Are your actions encouraging people to trust that you have their best interests in mind?” Greg has used this analogy of an RIA in the past, likening it to a tree with many leaves. The leaves represent clients, and the branches represent employees. At any point in its lifetime, a tree has stronger branches than others, and leaves that are healthy and green, and others that may be yellow and wilting. An M&A event is the equivalent of someone shaking the tree. If someone were to shake your tree today, how many leaves would stay rooted to their branches? How many would fall?

Understanding the Psychology of Change There have been many studies on the stages of how we process change, and in our experience, the Transtheoretical Model (also called the Stages of Change Model), developed decades ago by Prochaska and DiClemente, best captures the six behavioral steps of confronting, accepting, resisting and accepting change [2, 3]. The original study evolved from the examination and comparison of smokers who quit on their own and others who were incapable of quitting. The bottom line was that people quit smoking when they were ready to do so (Fig. 1.1). The stages occur in a cycle that may repeat with relapses with behavior that takes time to re-learn. It is important to note that different people may enter

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Fig. 1.1  Transtheoretical Model (the Stages of Change model) by Prochaska and DiClemente

or exit the cycle at different stages based on their personal experiences and attitude toward change. The stages are: 1. Precontemplation—The stage where people have no intention to take action to change and do not see their behavior as problematic. People in this stage lean more toward a negative outlook of making a change versus the benefits of making a change. 2. Contemplation—At this stage, people are aware of an issue that requires change, and though somewhat skeptical of the benefits, they have intention to take steps toward action. 3. Preparation—In this stage, people are prepared to take action within the near future (defined as 30  days). They begin to believe that change is a positive step toward a better place. 4. Action—These are people in a stage of active change in their behavior with an intention to continue moving forward. They begin acquiring healthy new habits and modifying unhealthy ones.

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5. Maintenance—This stage involves people who have made substantial changes to their behavior with the intention of maintaining that behavior change going forward. There is an active effort to avoid relapses to earlier stages. 6. Relapse—At any point, but typically after reaching the maintenance stage, people often slip back into old behaviors that may seem easy or learned. Some people may not experience relapses, and rather “terminate” from the cycle after reaching the maintenance stage. Using this model to understand the stage where your people may land can be a useful tool to moderate any issues that may arise. And once you have a better understanding of the potential impact of change on your overall culture and its people, it’s then time to walk through the courting process of M&A events and how to effectively preserve your culture while also assessing those you may soon be calling coworkers. Key Missteps to Avoid Before a Change • Not watching your language—everyone has their feelers up and one careless word or joke can be unsettling to employees who are experiencing a sense of uncertainty. Tip: Don’t make jokes, speculate or exaggerate with negativity the impact of the change. • Playing cloak and dagger with information. A lack of communication creates a void that is often filled with negativity and insecurity. Tip: Even if your approach is to limit communications prior to an M&A event, squash rumors quickly, answer questions directly and assure your people that their needs and their concerns are being taken into consideration. • Overlooking anxiety cues. Anxiety is contagious, and if not kept in check, it can rub off on other employees and even clients. Tip: One technique we’ve taken is to encourage open conversation with employees to identify what brings them happiness and fulfillment in their career. Have them share a time in their life when they experienced this and create a list of identifying words they associated with that time. Now compare that list to their current situation. What’s missing? Is it a personal or professional issue? Many times, it might be a personal issue that’s at the source of anxiety. “One of the biggest surprises for me during the merger was the contrast in transparency with the larger team on what was happening,” said Greg. “My approach was to update everyone about our progress along the way. That was not the case with Salient, who seemed to largely keep business details at the leadership level. Neither way was ‘better,’ we were just different.”

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 reg’s Final Word: Evolving Culture While G Preserving Core Values There’s an important difference between protecting your culture and allowing it to evolve organically as you grow. It comes down to your core values, which should never change, and all of the outside factors (people, growth, goals, etc.) that are destined to alter your company’s culture, for better or for worse. For instance, there will always be more of an agility to being a smaller firm. As you grow, everything becomes more complicated and moves slower, because there are more layers to consider in every decision, more discipline needed to make sure you’re doing your due diligence, and more checks and balances on decisions made for a larger business. Basically the stakes are higher for making sure things are done well! I think about culture in the way that my dad did when he used to talk to me about reputation. He used to say that a good reputation was the hardest thing in the world to build, and the easiest thing in the world to ruin, because one misstep can damage everything that you’ve worked for. Culture is similar, in that you can work hard for many years to create something from a vision, only to have it damaged by one bad move. A merger or acquisition is one very big move for your culture, and it can lead to great things or tear down what you’ve worked for years to create. That’s the gamble, and unfortunately, expecting things to stay the same culturally simply doesn’t work if you’ve decided that M&A is part of your growth or succession strategy. That’s not to say that evolution is a bad thing—I believe it’s the opposite! Even the most satisfying, tightly knit cultures must progress because it’s almost a living breathing entity that must be nurtured. This doesn’t mean you need to lead a certain way, you simply need to foster an environment that creates success for the company. You want to attract good people who understand the rules of engagement. You want to bring on clients who partner well with your team and who mutually benefit from your relationship. The point is to be intentional about infusing your core values into everything that you do, diligently and fiercely protecting those values, and then letting the rest naturally bloom.

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Case Study—A Tale of Two RIAs The Deal In May 2009, Salient Wealth Management and Friedman & Associates, two established, RIA firms based in the SF Bay Area, announced a merger that created one of the largest wealth management firms in the North Bay at that time. The resulting entity was temporarily named Salient-Friedman Wealth Management LLC. and then rebranded Private Ocean Wealth Management. At inception, Private Ocean Wealth Management managed approximately $600 million in assets under management and served a clientele of 400 affluent Northern California investors with a minimum of $2 million to invest.

Profiles Friedman & Associates

Salient Wealth Management

• Founded by Greg Friedman in 1991 in Marin County • Seven employees in one location • Approximately $250MM AUM • Nationally high-profile and influential in the fintech sector; Greg was the CEO of Junxure, a CRM platform for advisors • Served affluent individuals and families in Northern California and the SF Bay Area

• Founded by Richard Stone in Marin County in 1983 • One of the oldest privately held wealth management firms in the Bay Area • 14 employees in one location • Approximately $500MM AUM • Strong investment management team • Served affluent individuals and families in Northern California and the SF Bay Area

Background Prior to the merger, Greg Friedman and Richard Stone had known each other professionally for about 15 years and were aware that their offices were “four to five miles apart.” They were members of a common custodial referral program and saw each other from time to time at various events and receptions, but did not consider each other competitors. After one such event they decided that they should finally sit down for a lunch and talk about business.

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Both firms were highly respected and recognized in the industry. Along with numerous other awards, Salient Wealth Management, LLC was honored as one of the Top 100 Registered Investment Advisors (RIAs) nationwide for seven years by Worth Magazine. It was also named fourth in the San Francisco Business Times list of Top 25 independent RIAs in 2008. Friedman & Associates was the 2007 Winner of Charles Schwab Institutional’s IMPACT Awards® for Best-In-Tech. At the time, Friedman also owned CRM Software Inc., which made the Junxure customer relationship manager software. In addition, Friedman was recognized by Investment Advisor Magazine in 2008 as one of the “Top 25” most influential people in the financial services industry as well as a “Mover and Shaker” by Financial Planning Magazine in 2008. Very quickly, they discussed exploring options to work together for a number of reasons. They were in the same area serving similar clients and coming together might mean expanded services and other immediately added benefits for clients. It was also an opportunity to scale while laying out a longer term succession plan for the firm. Richard was concerned about selling into a larger consolidator as it would likely impact the culture he created within a holding company structure. Greg’s upward trajectory of growth and commitment to culture would preserve the client experience in the years to come. They found “amazing synergies” in those first meetings on shared principles—particularly when it came to client service. They anticipated accelerated growth and strong client retention from tapping into each firm’s strengths, including deeper capabilities and access to resources in financial and retirement planning, investment strategies, estate planning and insurance analysis. Richard and Greg held discussions for about a year performing ongoing due diligence along the way with the help of consulting firm Moss Adams LLP. After the merger, Richard served as CEO with Greg serving as President of the merged firm. The firm’s name itself was a merger of the two firm’s biggest attributes—the “Ocean” referring to the vast resources and the power of the information available and the “Private” referring to personal attention and the ability to harness that power and those resources to benefit the client.

Cultural Challenges Immediately after the merger, the teams came together with Richard and Greg welcoming both teams with enthusiasm and excitement. They were positioned for growth and the firm was eyeing a healthy hiring streak to support the expanded team. Their first offsite retreat was a day-long event held a month later, at a family camping facility.

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“The meeting room at this facility was actually a little chapel,” said Greg, “And we had projectors set up for a day of working on the company’s vision and goals. For the employees, chairs were set up in rows of four on both sides of the room. Everyone from my firm sat on one side and everyone from Richard’s firm sat on the other. There wasn’t even an attempt to mingle! We made everyone stand and mix it up before we started.” Besides the invisible line between the groups, Greg felt his communication style was very different from what Salient’s team was accustomed to. Naturally candid and relaxed (as were his employees), he perceived that Salient took a more formal approach to communicating and to sharing information related to the business. What he realized quickly in those first interactions was that the employees only had basic information about the plans for the company. “One of the biggest surprises for me during the merger was the contrast in transparency with the larger team on what was happening,” said Greg. “My approach was to update everyone about our progress along the way. That was not the case with Salient, who seemed to largely keep business details at the leadership level. Neither way was ‘better,’ we were just different.” The stark contrast in the firm’s communication style and the realization that their philosophy toward everything varied wildly, from how to approach new projects, to technology changes, to creating operational efficiencies, led quickly to a cultural disconnect. While theoretically they shared ideals and a commitment to client service, how those values were defined and executed were different. Friedman’s team was collegial, personal and familial. Clients were greeted like family members on the phone and in the office. Salient’s team was accustomed to a more academic approach. Clients were given impeccable financial guidance in a more formal setting with an advisor who was a professional consort. Again, there were no “rights” or “wrongs”—just differences. “Over time, we had unfortunately taken to using divisive terms in jest to identify what ‘side’ of culture an employee was on,” said Greg. “New hires felt they had to choose their ‘team’ when they joined. Dealing with someone across party lines implied the possibility of conflict. In retrospect it did much more damage than necessary, furthering dividing us and making the road to coming together that much longer and harder to attain.” Some employees expressed that they “hadn’t signed up for this,” or communicated of the changes that “we don’t do things this way.”

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Solution Recognizing an ongoing and deep-seated fissure in the firm’s culture, Greg and Richard took the reins in identifying both the largest issues and the missteps that needed course correction. They came down to three main factors: • Leadership • Communication • A philosophical difference in shared values

Leadership The first issue Greg and Richard addressed was focused on the structure of the business and the role of leadership. As many M&A deals have a blurred line around “who is in charge,” it was important for Greg to take a more assertive role in his expectations of teams and to better align with Richard on who would be making decisions. This would become more visible over time in meetings and at off-site gatherings. Second, Greg began empowering team leads in an “expanded leadership” role that would give him more exposure into how employees were performing together at the micro-level. Greg would then meet monthly with these team leads, addressing any issues as needed. While this was an endeavor on Greg’s part, he knew it was necessary to begin shaping the culture of the firm he envisioned—and knew was possible— before the merger.

Communication Greg knew there were bad habits that needed to be broken in terms of communication. First, he instructed his team leads (and announced at company gatherings) that there would be no more use of “us vs. them” type language, even in jest. Also, there would be no use of “Friedman” or “Salient” in terms of “how we used to do things.” This took time and practice, even at higher levels, but it eventually phased out from their vocabulary. At the six month mark, the group had moved in together into Salient’s space that was completely remodeled, expanded and rebranded. One key move to help encourage cross-cultural communication was the placement of offices. Greg and his team made sure that no one aside from Richard from

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Salient remained in their original office, and employees from both firms were intentionally comingled. Lastly, he put a stake in the ground about his approach to communication, which he wanted adopted firm-wide. With Richard in agreement, Greg would encourage open and honest communication among colleagues and promised more transparency on the firm’s performance and clearer expectations for employees. He expressed that he wanted office doors open, he had break rooms stocked and often brought in food to encourage casual gatherings, and he set a schedule for off-site retreats that were to be held twice yearly. These retreats would largely focus on team-building and be facilitated by a third-­ party executive coach.

A Philosophical Difference in Shared Values One the most fundamental issues at stake was the divide between employees who simply did not share, trust or understand the firm’s basic values. People are motivated by different priorities, and not everyone fit into the mold that was quickly being pressed for Private Ocean. Some of the issues expressed were an inherent distrust of the firm’s leadership, a feeling of underappreciation, a loss of autonomy, dissatisfaction in work-life balance, or a sense of loss over “how it used to be.” The outcome was poor performance, costly turnovers, and negativity in the workplace that impacted morale, cultivated insecurity and sparked worst-case scenario speculation in hushed rooms. To identify these employees, team leads began holding weekly 1x1 meetings with employees to establish a regular line of communication. Over time, as barriers began to break, leaders were able to get to the root of issues with specific employees, bring them to the larger team and deal with them accordingly. In some cases, employees were unhappy with their current role or felt they were under-utilized. Some were simply reacting to change without an outlet to communicate. And as is expected in most M&A events, a very small number of people were no longer in a firm that suited their needs.

Conclusion In hindsight, Friedman admits that there were many aspects of the merger that seemed convenient. Both firms used Junxure CRM, they were located within minutes of one another, they served the same clientele and on paper, they shared the same values and believed that the work culture they had

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cultivated was key to their success. What he learned was that success came down to the strength of its people working together, and that no two groups of people will ever be alike. How people process information, how they approach what they do and how they work with others will always vary. Coming together takes time and must be factored in to the overall timeline for integrating two firms. Perhaps most importantly, the impact of change on individual people cannot thoroughly be anticipated but it can be mitigated. As an aside, something that did bring the team together more quickly was something that no one had planned for—the financial crisis of 2008–2009. According to Greg, this was an “all hands on deck” moment with massive amounts of work involved and communications with clients to serve their needs. “We didn’t retract or retreat and cultural issues were quickly set aside,” Greg said. “We stepped up, served our clients, and walked away from that time smarter, sharper, and more united. It was one positive outcome from a very dark time.”

References 1. Seivert, Dan. THE 2019 ECHELON RIA M&A DEAL REPORT, Jan. 2019, https://f.hubspotusercontent30.net/hubfs/7475083/ECHELON%20 Partners%20-­%20The%202019%20RIA%20MA%20Deal%20Report.pdf 2. Prochaska, J. O., and DiClemente, C. C. “Stages and Processes of Self-Change of Smoking: Toward an Integrative Model of Change.” Journal of Consulting and Clinical Psychology, 1983, 51, 390–395. 3. Prochaska, J.O., DiClemente, C.C., & Norcross, J.C. (1992). “In search of how people change: Applications to the addictive behaviors.” American Psychologist, 47, 1102–1114. PMID: 1329589.

2 Self-Assessment and Five Steps to Identifying Your Ideal Work Culture

Greg’s Perspective… Culture is your firm’s personality and character. It’s made up of the sum of your unique values, beliefs and behaviors that are observed, experienced and acknowledged among your people. This is HIGHLY influenced and driven by you—the leader of the firm—by what you promote and nurture and exhibit among your people. A strong, positive culture can help attract and retain quality employees, drive performance and spark innovation, all of which can impact the financial success of your business. A culture of chaos—disorganization, disruption, lack of communication and consistency—can be equally powerful in tearing down what you’ve worked hard to create. The unfortunate thing is that while it may take years to carefully cultivate an environment for success, it only takes a few missteps to damage your culture and slow down your progress. Herb Kelleher, American billionaire and founder of Southwest Airlines, once said that “Culture is what happens when no one is looking.” It’s a profound statement that I have applied often when measuring the health of our culture. On any given day, I ask myself—are we all walking the talk? Are we exemplifying the guiding principles that we promote as the foundation of our culture? If I gauged employee satisfaction today, what would I hear? Does it align with my perception of who we are and how we should feel about our work environment? When asked point blank for their input, some people will simply pay lip service. They might actually even believe what they say. But it’s their actions that speak the truth when they’re among peers, when they’re working © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6_2

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independently, or when they’re asked to step up in a situation. It is HOW people show up day to day—that’s your company culture. I’ll stress again that I don’t believe that there is one right or wrong definition of a “good” culture. But there is a definition for a strong, healthy one: When people feel informed and they adhere to your guidelines and follow your processes. When they are confident about the firm’s goals and their role in achieving those goals. When they understand the expectations of them and how they should work together with colleagues. When they show up, perform and are satisfied with what they do every day. In our industry, there are many flavors of a successful work culture, and if the firm is doing their job, they are attracting the right type of person to fit into that environment. Speaking from experience, Private Ocean has always used a comprehensive hiring process that assesses cultural fit as much as it does skills and aptitude. It’s led to low turnover and long tenures, and a solid sense of loyalty and collegiality. An RIA can run smoothly for years this way, and sometimes it isn’t until you’re considering M&A that you need to stop and do a self-checkup on your culture so that, if nothing else, you can accurately represent yourself in negotiations with possible partners. If finding a financially viable match in another firm takes time, effort and a lot of due diligence, it can be just as daunting to find a firm on the same cultural wavelength as your own. True, you don’t necessarily need to align on everything or even have identical cultures—that’s nearly impossible and there’s a benefit to introducing unique positive traits of two firms—but you do need to be heading in the same direction with a compatibility match that scores high enough that merging won’t set off a domino effect of roadblocks and fundamental disagreements.

Identifying Your Culture—And Your Priorities According to a 2018 report by the Harvard Business Review (HBR), there are eight cultural archetypes based on two primary factors that apply “regardless of organization type, size, industry, or geography: people interactions and response to change [1].” As culture and leadership are tied together, assessing a company’s culture (and it’s leaders) comes down to determining where they fall in these two categories. The eight archetypes according to HBR’s study are:

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1. Caring—which focuses on relationships, teamwork and trust. Work environments are welcoming, familial and collaborative, which fosters a high level of loyalty. 2. Purpose—which places a high value on idealism, compassion and making a positive impact on the world. Purpose culture is tolerant, socially aware and driven by serving the “greater good.” 3. Learning—which is driven by innovation, creativity and exploration. Learning culture is driven by curiosity, knowledge and in inventing new solutions. 4. Enjoyment—focused on fun, joy and spontaneity. Work cultures are light-­ hearted and given room to “play” and stimulate the mind. 5. Results—emphasizes accomplishments and outcomes. A Results culture may be highly structured by goals and achievements where people strive to perform and win. 6. Authority—a top-down approach to culture and leadership, which has a commanding leader at the helm and is often competitive within its employee ranks. 7. Safety—which focuses on being prepared and planning carefully for the future. Work culture stresses predictability and minimizes risk, and leaders emphasize being realistic and anticipating change with caution. 8. Order—Thrives on structure, rules and a methodical approach in business. People play by the rules, cooperate and believe in approved processes and procedures. In our own self-assessment, we identified with elements of several of these cultural archetypes, and in our Guiding Principles we even capture a handful, from our intellectual curiosity to our light-hearted sense of humor. While we may identify heavily with one or two archetypes, this is simply another tool to help you better define your work culture.

Your Professional Culture Vs. Your Social Culture There are two sides to your culture to keep in mind during the assessment process—your professional culture—the one you present to the outside world—and your social culture—the one you nurture internally between employees. While both are authentic and hold the same beliefs and values, there is a balance in a professional environment of how we conduct ourselves

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and how we wish to be perceived by our clients, our partners and within our communities. Examples of professional culture can be found in our digital footprints, (i.e., our websites, our social media platforms and our press coverage), our community involvement and most importantly in our interactions with those we serve. In Private Ocean’s case, we are collaborative and approachable, but always professional and knowledgeable. A firm’s social culture might be very different from its professional culture, or fairly similar. In our firm, our social culture takes the attributes of our professional culture and adds a more personal level of light-hearted collegiality and informality. Many of our teammates associate with each other outside of work and share interests and hobbies. This is just one example, but it’s important to remember that both environments need certain elements in place to thrive.

Five Exercises to Assess Your Cultural Values How does a leader assess something that seems in many ways to be objective? The answer to that question come from looking inward at the firm’s people and processes and then determining the attributes and attitudes that matter to you. Often leaders have an “idea” of how things are going, but they’re oblivious to the inner workings of department silos, toxic employees or other factors that can chip away at a strong infrastructure. Here are five exercises we have used recently as both a temperature test for our culture and to measure the potential impact of folding in another firm as part of an acquisition.

Exercise 1—Self-Assessment at the Leadership Level Start by taking inventory with your leadership team or with team leads on your processes, people and the overall atmosphere. This will help you create the background and provide color from the responses you’ll receive from your employee survey. I recommend bringing in an executive coach or change management consultant like Cynthia for this exercise, as it encourages interaction with an unbiased party with nothing to gain (or lose) when sensitive subjects arise. These are some examples of the types of topics you’ll want to cover. • Atmosphere. Start by asking your team—what words would they use to describe your work environment? Is it collegial? Energetic? Professional? Fast-paced? Challenging? Make a list of these terms for people to see in front of them as they go through each topic.

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• People. How would they describe their teammates? What are the demographics of your employees? What is their attitude toward their work, the clients and the firm? How do they interact with others? Are there commonalities among the group that are worth noticing? Are there outliers and what sets them apart? • Leadership. How would this group describe its leadership team? Are they approachable? Supportive? Likeable? Respected? Intimidating? Transparent? How do they communicate with employees and at what frequency? Are opportunities provided to build relationships outside the office (i.e., off site retreats, team building exercises, one-on-ones, etc.) How are victories celebrated and defeats handled? How flexible/strict are things like dress codes, work schedules and so on? • The Client Experience.* Describe a client’s interaction with you from their first phone call or email to their first visit, to ongoing interactions. Who makes that first call and what kind of impression do they give to the client? How about when a client comes to the office. Who greets them and what is the process to welcoming them? What do they see when they walk down hallways? Are there photos or artwork on walls that reflect the kind of environment you want to project? Are office doors open or shut? Are people openly working together? *It’s important to stop here for a moment to stress the importance of gauging these factors carefully, especially things like the client experience or the definition of “great client service.” There is a potential here for the “Grand Canyon” of miscommunication! When we ask questions, often people tell us what we want to hear, or we interpret things in a way that suits us best. In the end, how something is described and what it actually looks like to someone can be very different. While we may wish for some things to align, it’s important not to have blinders on in these discussions. I recognize that this first step may seem a bit like working in a bubble with people who are likely the most enthusiastic about your culture, but it should serve only as a baseline for the next steps. Getting an idea of what you think is happening versus what is actually happening can be a great indicator of where you need to do some work. By the way, if you’re a smaller firm, there is no reason why you can’t jump into this exercise with your entire team and forego the employee survey. There is no “one-size-fits-all” method, and no one knows your people better than you.

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Exercise 2—Daring to Dream Now it’s time to step back and imagine your ideal culture. The goal in this step is to walk away with a mission statement—one that everyone can agree on and get behind as you move forward. You’re likely not that far off in some areas and perhaps need to invest a little work in others. Keep in mind this will always be an ongoing process that requires maintenance and tweaks as you grow and evolve. 1. Using the information gathered in exercise 1 combined with the firm’s goals for the future, have everyone on your leadership team draft a one- to two-sentence mission statement or vision for the culture of the firm. In our case, we created our Guiding Principles, which I drafted together with our leaders and then shared with the larger team for the feedback. 2. Share your statement with the team and discuss. Assign someone (perhaps a coach or consultant) to capture all of the statements. What are the common phrases and words? What are the priorities and is your leadership team on the same page? 3. After the discussion, have someone draft a few versions of your statement. 4. Once the leadership team agrees on the message, introduce the concept to your employees, and the reason behind it. If you already have a cultural mission statement in place, use this exercise to revisit from time to time to make sure who you were before is still who you want to be in the future.

The Genesis of Our Guiding Principles Like many advisors, I travel a lot for meetings and conferences and speaking engagements and it’s common for me to visit the offices of my peers in the industry. On one such visit, I noticed a sign made of five statements on the wall facing the reception area. This was not a value proposition; it was a clear vision of what they believed in and who they endeavored to be. The sign stayed with me. I imagined employees coming to work every day and being greeted by those words. It was a daily affirmation of their values. I also thought about the impression those words made to clients (or prospective clients) who walked in for a meeting. Naturally, it made me think about what Private Ocean’s statements would be if we had something similar on our walls. We had always had a list of our values, and we included them in client welcome letters and employee packets. We lived these values day to day, but we had never put a stake in the ground and identified strong statements that summed up who we were and what we wanted to achieve in serving others. I began to sketch out sentences and shared them with small groups of people. I asked, “What words and phrases resonate with you when you think about who (continued)

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(continued) we are?” The team came back with “clients first,” “service,” “excellence,” “curiosity,” “collaboration” and “everyone has a voice,” among others. From there, we crafted five statements that best captured the essence of those words and phrases. Everything we do is in service of our clients. Our words are our commitments. We pursue excellence in all things. We are intellectually curious. Everyone has an important contribution. Life is short. Laugh. I then sent a draft of these to the entire team and asked for their input. Was there anything they would add or change? While we could have drafted these from a leadership perspective, it was important to us that everyone participated in this exercise. Once the Guiding Principles were officially adopted, we created a graphic that we could use as a sign to be hung in all of our offices, and we took it a step further and had desktop plaques created and distributed to all of our employees. Now we use these principles in our approach to everything that we do and in conversations with new hires or potential new partner firms, they tell a clear story of who we are together and what we believe.

Exercise 3—The Employee Survey Now it’s time to gather data from your team. Employee surveys, if done properly, can be useful tools to help you understand your firm’s current cultural identity. If you’ve chosen to do a survey, we recommend multiple communications in advance of sending the survey to give people time to think about their responses. Be clear why you’re doing this—the reason will vary based on your goals. You may simply want to do a regular checkup on your culture and identify areas that need attention. You may be prepping for an M&A event and want to assess sentiment about the firm’s current atmosphere. Whatever the reason, the more transparent you are about the purpose of the survey, the higher the likelihood that you’ll receive honest responses. The survey should be brief enough so as not to burden employees with a time-consuming activity, and offer them an opportunity to elaborate should they wish to provide more information. And finally, decide if the survey should be anonymous. While not required, anonymity in these surveys may bring more forthcoming responses about a firm’s culture and leadership.

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Sample Questions to Consider • How would you describe your workplace culture? • Do you believe the firm follows through on its mission statement/guiding principles? Why or why not? • Is there a culture of collaboration in the firm? • Are you satisfied with the method of communication from leadership? • How would you describe the firm’s leadership style? • How would you describe the firm’s definition of success? • How satisfied are you with your job security? • Are you clear about your role and how your work impact’s the firm’s success? • Does your supervisor involve you in decisions that are made for the firm? • Do you feel you receive timely feedback on your performance? • Are you satisfied with how performance reviews are conducted and the compensation structure around performance? • Are you given opportunities to grow in your role? • How likely are you to recommend or refer a friend or colleague to the firm? • Are there additional questions that you would have liked to have seen on this survey? Responses to these types of questions can quickly help you determine where you’ve been successful in realizing your ideal culture and where more work is needed.

 xercise 4—Considerations for a Potential Partnership E (or Acquisition) Whether or not you have identified a candidate for your merger or acquisition, it is never too early to assess your needs from a cultural perspective. The more information you have on a firm the better, as it can help you head potential issues off at the pass and capitalize on strengths that could benefit both firms. Here are some topics to ask yourself about the potential firm (or a future partner firm) outside of typical facts and stats: • Can they clearly describe their culture with confidence and consistency in M&A discussions? • Does the firm consider cultural fit a priority in their strategy? • Do their leaders set the tone for the culture they describe?

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• What is their communication style? Do they prefer transparency or a more conservative approach? • Do they describe their approach to the client experience in a similar manner to your firm? • What is their typical hiring process and do they factor cultural fit into their approach? • How often do they assess their culture to make sure they’re still aligned with their beliefs? • Have they been through an M&A before? How would they describe the integration process as it relates to people and culture?

Exercise 5—Completing Your Scorecard With the information gathered in Exercises 1–4, you’re now ready to complete your scorecard to rank key cultural factors in regards to your current culture and what you want in a partner firm. You’ve assessed your current culture, identifying strong points and areas that need improvement. You’ve discussed and agreed upon your ideal culture. You’ve gauged employee sentiment. And you’ve considered your priorities in identifying or assessing a potential partner firm. In this final step, share this scorecard with your leadership team for them to complete and compare answers.

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 reg’s Final Word: Your Cultural Identity G as a Calling Card Your firm’s culture plays just as important a role in showcasing your unique identity as its assets, strategy, technology and projections. Having the ability to describe your culture consistently can be a powerful asset when beginning M&A discussions with potential partners, as it cuts right to the heart of your business—its people. Though it may seem like a lot of legwork before an M&A event, I assure you that it is time well spent. Regardless of the future growth of your firm, this type of assessment shouldn’t require a potential change before you do a checkup on the cultural health of your business. And speaking of checkups, these come in handy when performed on a regular basis, as mindsets gradually change along with the times. While you should never need to alter your foundational beliefs, it’s smart to remember that as we evolve, so does our workforce and the social norms that make a company a desirable place to work. In 2020, for instance, as more and more advisors are looking at succession, a new guard of advisors is rising and they bring along with them their own generational views. Making sure you continue to assess your cultural identity as you grow can help you stay sharp and relevant without having to compromise your core values.

 ase Study—A Cultural Match, C an Operational Divide The Deal In January 2018, Private Ocean Wealth Management announced the acquisition of Lakeview Financial Group, a Seattle-based registered investment advisory firm with $380M in assets under management. Lakeview was re-branded Private Ocean and continued to operate in its location in the South Lake Union area of Seattle.

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Profiles Private Ocean Wealth Management

Lakeview Financial

• Founded by Greg Friedman and Richard Stone in 2009 as part of a merger • 29 employees in one location • $1B AUM • Served affluent individuals and families in Northern California and the SF Bay Area

• Founded in 2006 by advisors John (Mac) Dunstan, Lisa Peters, Julie Back and B. Kelly Keydel • Ten employees based in Seattle in the heart of life sciences and tech-centric South Lake Union • $380MM AUM • Served individuals and families in Seattle and the surrounding areas

Background Private Ocean had long taken an approach that it would be open to researching potential firms for a merger or acquisition as part of its growth strategy. The owners of both firms were introduced when participating in Philip Palaveev’s Ensemble Institute and immediately found commonalities in their values and their philosophy toward client service. One of the owners of Lakeview Financial, John (Mac) Dunstan, was looking ahead toward succession and wanted to lay a foundation of growth for the firm. Though the vetting process took 18 months, coming to a “meeting of the minds” on a philosophical level was seamless. According to Greg, the firms shared “nearly identical values, cultures, and approaches to client service,” and this (as well as the financials) played a large part in determining that the firms were a good fit. The addition of Seattle’s impressive people also offered significant and immediate benefits for the firm’s clients, as well as more scalability and depth to better serve their clients’ evolving needs. “At the time, I often heard ‘Why Seattle?’ The answer seemed obvious to me on a number of levels,” said Greg. “Seattle is a vibrant, creative city with much to offer, and we saw an opportunity to expand our reach in a demographic that was not unlike that of the SF Bay Area. That our cultures seemed to line up well – not to mention we used many of the same technologies – only sweetened the deal.”

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Cultural Challenges One month after the acquisition, the teams came together for its first annual retreat in Marin County. The gathering is a long-held tradition for Private Ocean and serves as a chance to connect to the long-term vision for the company, a review of the past year’s performance and a reset to clarify firm goals for the upcoming year. “Any M&A event causes disruption and no amount of communication and pre-planning is going to alleviate everyone’s anxiety about a new environment with new leadership,” said Greg Friedman. “We brought in a third party facilitator to run the retreat, and the agenda was less about goal setting and more about integrating people and finding common ground. At the end of the event, we were pleased with the response we got from the employees. They felt we had chosen our new partners wisely from a cultural perspective.” It wasn’t until the pre-onboarding process began that cultural differences began to surface. For Seattle, their benefits, their work schedules and even their dress code was changing. The team was used to a less structured leadership style and a more casual work environment. With Private Ocean, there was more organization and direction. Operations members charged with onboarding found themselves offering reassurance in response to the changes and uncertainty. Then came the integration work, which identified operational gaps. As Lakeview had been a smaller firm of ten people including seven advisors— five with the CFP® designation, two Certified Divorce Financial Analysts (CDFA®), one CFA® charter holder and one with a Juris Doctor (JD) degree and an LL.M. degree in taxation—and three client service professionals, the team wore many hats and identified these as part of their role. With Private Ocean, tasks and responsibilities were more segmented between larger teams. Office processes were also structured differently. Naming conventions for common tasks varied between the firms, causing confusion and delays. Communication to clients was also handled differently. One common misstep, Friedman said, was overlooking the Seattle team’s different attitude and reaction to change. “Our clients and staff in the San Rafael office had become accustomed to change as part of a positive evolution toward something better and greater,” said Friedman. “We were, after all, the product of a large merger, and many of our clients were with us long before that deal. They had seen firsthand the benefits of working with an expanded bench of professionals with impressive credentials.”

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On the other side, Seattle’s team expressed immediately in their first communication to clients that they should expect “no changes” or disruption in their service. Employees expected little to no change in their roles, despite now being part of a new, completely different organization. While attitudes were positive and hopeful, it was hard to ignore the growing gap, which impacted culture and trickled down to operational effectiveness. “There was definitely a divide between the larger team in San Rafael and Seattle on several levels that took its toll on the work culture in the beginning,” said Cynthia Greenfield. “How quickly one office moved in response to change, for instance, as opposed to a more cautious and slower pace. Small things were exacerbated by distance and communication. At times, Seattle expressed feeling like a ‘satellite’ office of the mothership, and struggled to find how they fit into the overall firm.” The result was a sense of disconnect, both from the team in San Rafael responsible for training on the integration of systems and processes and the Seattle team who were expected to make tremendous changes to their operations in a short period of time.

Solution Feedback from leadership in both offices led to a deeper dive into the root cause of the operational gridlock. Though employees expressed their satisfaction with the firm overall, there were growing issues that were becoming harder and harder to avoid. These were narrowed down to: • Clear Communications • Change Management • Organizational Structure

Clear Communications One thing that was taken for granted was distance. While it’s easy to reiterate goals, expectations and do check-ins from across a hallway, in Seattle there was an expressed sense of feeling like “an outsider looking in” to the home office and its culture. It’s also more difficult to squash negative speculation that can easily spread under the radar from hundreds of miles away. One of the first things Greg implemented were small groups and committees that always included a member of the Seattle team to represent their interests.

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Everything from technology integration to marketing to possible future M&A activity had someone from Seattle on the phone or on a video screen to weigh in with their thoughts. Greg also implemented a clear communication plan over the course of the first year to keep everyone up to date on the measures taken by the firm to integrate Seattle into Private Ocean. This included the “what,” “when” and “how,” but more importantly the “why.” Understanding the reason behind changes, and when to anticipate them, helped smooth the path toward adoption and understanding. All-hands meetings each month were re-structured to show progress on this plan.

Change Management Though values aligned and cultures were similar, what differed between the offices was the appetite for and attitude toward change. San Rafael had seen tremendous growth and benefits to merging a decade prior, and as Greg was a technology advocate, the team was accustomed to new technology, changing processes and added personnel that happened at a rapid pace. Seattle was in a unique situation where they (and their clients) had previously experienced so much change that they were looking to minimize any disruption. This challenge would take time to overcome, but began with clear communication, expectation setting and more color on why changes were being implemented and the benefits to clients and employees. Exercises on understanding and embracing positive change helped alleviate some anxiety, as did more one-on-­ one conversations that enabled individuals to feel heard, included and understood.

Organizational Structure Perhaps most powerful was Greg and his leadership’s team’s approach to understanding one major cause of resistance toward change. Stability was at a premium, given the firm’s previous changes, and high-performing employees saw their responsibilities and roles change seemingly overnight. Job descriptions varied, schedules changed, duties changed and reporting structures shifted. While some employees quickly found their footing and adapted, others were shaken and left feeling disconnected. Greg and his team invested time in each of the ten employees, having multiple consultations not just to understand what they had done in the past, but what they’d like to be doing

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in the future. Combined with each individual’s strengths and skills, the result saw three employees change job roles completely to better suit their needs and their career aspirations.

Conclusion Taking a cultural alignment for granted can be just as detrimental to the success of an M&A event as overlooking the gaps. Using the platform of shared values helped bridge some of the lower hanging issues, but in the end Greg and his leadership team needed to slow down and take several steps back to address seemingly minor issues that could have quickly snowballed into much more challenging problems. “There was definitely a divide between the larger team in San Rafael and Seattle on several levels that took its toll on the work culture in the beginning,” said Cynthia Greenfield. “How quickly one office moved in response to change, for instance. Small things were exacerbated by distance and communication. At times, Seattle expressed feeling like a ‘satellite’ office of the mothership, and struggled to find how they fit into the overall firm.”

Reference 1. Groysberg, Boris, Jeremiah Lee, Jesse Price, and J. Yo-Jud Cheng. “The Leader’s Guide to Corporate Culture.” Harvard Business Review, January–February 2018, https://hbr.org/2018/01/the-­culture-­factor.

3 First Impressions—Initial Discovery

Greg’s Perspective… There are the four main stages of integrating two work cultures during the M&A process. Stage 1 involves the initial meetings, typically between a few select individuals or just the principals of the firm who beyond numbers, share their over-arching philosophies, goals, and respective visions for the future firm. The second stage expands the circle with the introduction of additional team leads who may discuss at a high level each firm’s processes and approaches to operations. The third stage occurs after the deal is complete (or near complete), and it involves early collaboration between teams and the start of employee interviews. The last stage involves implementing the processes you’ve created and working together as a new, integrated team. In this chapter, Cynthia will kick off the process with Stage 1—Initial Discovery, and walk through a typical first meeting between firms. She’ll also address some common questions and offer tips for owners to consider.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6_3

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STAGES OF CULTURAL INTEGRATION STAGE 1: INITIAL MEETINGS Typically, the first meetings between firms happen with only a few select principals in attendance.

STAGE 2: TEAM COLLABORATION As you continue through the assessment phase of the M&A vetting process, you may begin introducing more team members to provide more information. STAGE 3: POST M&A INTRODUCTIONS Once the deal is done (or close to when the deal is done), you’ll start interviewing additional team members to see how you’ll fit together. Often, you’ll need to dig deeper to go beyond those “first interview” impressions. STAGE 4: WORKING TOGETHER After the dust settles, it’s time to start moving forward together to achieve the firm’s goals for growth and integration. The more information you have before this phase, the more prepared you will be in anticipating how change will impact people in both firms.

Cynthia’s Perspective… A Guide to Introductory Meetings During my long partnership with Greg, I’ve learned a lot about the art of M&A introductions and the process that helps both firms make the most out of these early meetings. Both with potential buyers and sellers, my role has been to observe what is and isn’t being spoken during these conversations, and together Greg and I share our insights to determine next steps. Are we asking the other firm the right questions? What should we be focusing on beyond the spreadsheets and slideshows? How can we interpret the discussion so that we don’t miss important cues that could lead to future challenges? Here are some common questions to answer before that first meeting.

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How Are Firms Introduced? Before the first meeting, two firms are introduced in some form or another which then leads to conversations about potential partnerships. How these firms are introduced varies—for instance, Greg and Richard Stone (Private Ocean’s other founder) had known each other professionally and had seen one another in passing for 15 years before they recognized a potential partnership opportunity! In many situations, these referrals come from a third party. One interesting thing Greg does in preparation of a phone call on introduction is to ask around about the firm. He checks the website and does some initial research, but more importantly he wants to know how people describe the firm and its principals. You can learn a lot about someone by how they are described by their peers in the industry.

Who Should Attend the Initial Meeting? In many situations, the very first “meeting” is a phone call. When Greg or one of the advisors is introduced to a prospective partner firm, they have a casual conversation at a high level about their situation (i.e., a principal is looking to retire or grow the firm). If there is enough reason to take the next step and meet in person, it’s with only a very select few, and based completely on the interest around that deal. Greg, for instance, has done the first meeting alone but prefers to have a partner (I have attended several of these). While you could certainly invite more parties to the table, at this stage, you want less noise and more room to listen. You do, however, want someone who can best represent your firm and its values and articulate them both verbally and in body language. A Partner Approach to Introductory Meetings “In these meetings it’s really beneficial to have a partner, I appreciate what Cynthia brings to the table. She represents our values, is articulate in her responses, asks great questions and perhaps most of all, is amazing at listening to what people say and observing what they don’t.” -Greg

How Much Time Do You Plan For? First meetings shouldn’t take too much time—perhaps a couple of hours at the most. There is a lot of information to cover, but at this level, you can get

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through it at a steady pace with the right tools. Reserve the meals and activities for the future if you decide to continue on the path. One common misstep to avoid: going too quickly. You’ve taken the time to get together and share information; don’t rush the meeting in favor of “saving everyone’s time.”

What Does the Agenda Look Like? This first meeting is not when you dig too far into the financial or operational weeds. You’re mostly focused on introductions and getting to know one another and having a conversation. Yes, you have an agenda and you certainly want to walk away with next steps, but it’s more about painting a picture of who you are and where you want to go. Then you ask them for the same information—what’s their dream for their firm in the future? What does it look like and how would they like to get there? Hopefully you overlap a bit and find yourselves on the same page and keep the conversation going. To keep things focused, it’s always useful to go over the topics you’d like to cover in advance with your partner(s) and offer guidelines on what you’d like to share—and not share. A good analogy here is to think of this first meeting like you would a client discovery meeting. You’re there to learn about the other firm and also to share the same for yourself. It’s a conversation, not an interrogation. Just remember that time is short for everyone so be concise, keep things moving, and minimize distractions. (See below for a sample of a presentation Private Ocean has done in the past.)

Where Do These Meetings Happen? Circumstances often dictate the location of the first meeting. Ideally, you want to hold this at one of the firm’s offices because as a buyer or a seller you can learn a lot in this setting. Greg believes that while there are benefits to visiting both offices through this process, as a buyer, he prefers to hold the first meeting at our office because “we are acutely aware that we are selling ourselves in this scenario” and it’s important to set an excellent example of who we are and how we conduct business. As a seller, he prefers to hold the first meeting at the other firm’s location as this is a fantastic way to learn how that firm presents itself. A neutral ground is also an option, but certainly limits what you can learn in the first face-to-face meeting.

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Who Is Driving These Meetings? In our experience, the buyer typically drives the meeting. But in any situation, someone is motivated to grow, or sell, or move forward with a specific goal in mind. This first meeting does not need to be “driven” per se, but someone does need to take the wheel to keep the agenda on track.

What Should Be Your Goal in These Meetings? This is obviously subjective, but in any merger or acquisition, this goal is to ferret out whether or not this deal is a good business fit for both parties. This first meeting is when you start peeling back the onion and start analyzing whether or not you should move forward. What you can expect is a bit of a “first date” experience. Anyone attending will put their absolute best foot forward. No one is going to air their issues out in front of strangers. This doesn’t mean you can’t be candid—and there is definitely a way to communicate without giving away all your trade secrets. From a cultural perspective, your goals are a little distinctive from your business ones. We recommend paying close attention to the other firm’s: • Communication style. –– How were introductions handled? How did they describe themselves? –– How do they answer questions? Are they direct? Candid? Guarded? In some meetings we’ve attended, we would repeat questions and never get a direct answer. –– How do they speak to each other? Is there a natural rapport or do you sense anxiousness or strain? –– How do they describe their culture? Does it align with their communication style? • Body language. –– How do people present themselves? Are they professional? Casual? –– Are there any signs of stress when questions are asked? Fidgety movement, lack of eye contact, wrapping arms around one’s shoulders or behind the neck, biting lips, bouncing knees and tapping fingers or rubbing materials together (like tapping a pen on a table) are all nonverbal signs of stress.

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–– Are they mirroring your actions? A common technique to build rapport, create comfort and gain acceptance is to mimic someone’s movement and positioning. –– Assess the chemistry in the room. It won’t take long to determine if you’re at ease with those across from you or if you’re getting forced one-­ word answers that kill any chance at personal connection. Pay attention to all of it! • The aesthetics. –– First impressions are key. If you’re holding the first meeting at your office, what kind of impression does your office and your people make on these visitors? If you’re at the other firm’s office, what does the building and the lobby/reception area look like? How is the lighting? Are people interacting in hallways and offices? Did they offer you a beverage and lead you to a conference room? Is your first experience consistent with what you’ve been told about the firm?

Driving the Conversation—Your Presentation or Mine? One of the most useful tools we’ve used in introductory meetings is a templated presentation that we customize depending on the potential partner and the situation. Its purpose is to be an interactive discussion driver on key points that should be considered at this early stage. This type of preparation establishes from the onset the value that both firms bring, and on your part, it shows organization, experience, confidence and thoughtfulness. It also shows consideration of everyone’s time. Without some structure, these conversations can easily wander and be less constructive. It’s important to remember that people interpret and define things differently, and a few pointed discussion questions can help you both share who you are and what you want from this deal as well as dive deeper and have honest (as possible) conversations about important topics that are beneficial for everyone. Here is a sample presentation flow that we have used in the past. 1. Cover Slide: “It Starts With a Conversation.” However you wish to word your intro, you should come out of the gate immediately after introductions with your “Why.” Why are we here today? What’s on your wish list for merging or acquiring? What are your dreams for

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the firm? This naturally leads to a conversation about vision. What are you looking to achieve with this deal that would help you fulfill your mission? 2. The Who. Once you’ve both shared your vision, you’ll want to share more about who you are—your guiding principles, your mission statement, your culture and so on. One of Private Ocean’s values, for example, is continuous innovation through technology. Firms we speak to should know this up front and share how they align (or don’t) with each key piece of your unique puzzle. The Who also applies to whom you serve. Do you have a common client? Are you serving a similar demographic in the same geographic area? This is an excellent opportunity to discuss where you might overlap, and what opportunities may be available to expand your reach. 3. Firm Structure. Next, you can dig in a bit to your organizational structure and some general facts on the firm (ownership, locations, employee roles & responsibilities, offerings, compensation, value proposition, service models, technology platforms and even approach to service). You need not overshare too many details that you’d prefer to keep close to the vest, but know what’s important to you and be willing to ask good questions to gauge compatibility. Here is some sample text from a slide we’ve used in past meetings. Remember, there is no unnecessary formality needed; the goal is to quickly assess whether or not to move forward. Deciding if we should keep talking. What are the potential benefits for both firms: • • • •

for our clients—enhanced services, more resources? for our employees—new opportunities? to create growth in new or existing markets? expanded ownership and future succession of partners?

In the example image below, we’ve used a very high-level chart to “score” potential partner firms. This is an exercise for both firms and determines priorities and possible issues. The green indicates that you are “comfortable with the fit” between the firm on that topic. Yellow denotes that more conversation is needed and red identifies possible deal killers to moving forward.

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The chart can also be used to represent a firm’s priorities or even “score” the other firm on alignment. To add a less “black and white” approach to this exercise, you can use a number scale instead of colors.

4. Mutual Expectations and Mutual Next Steps When you conclude your conversation, both firms should feel informed about whether or not next steps are warranted and be excited to get started if appropriate. A key step in this process is to document what was discussed, summarize key topics and issues and communicate them with the other firm. You want no room for miscommunication. Now, in many (perhaps, most) cases, these meetings help you decide that this is not a good fit in helping you achieve your goals. But both firms walk away informed and more confident in what they want in a partner. Expediting what you don’t want is just as important as finding a viable match to move forward.

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The Debrief—Sharing Notes When Greg and I meet to discuss our thoughts on an introductory meeting, we’re typically on the same page. We review the basics and the financials, and compare things like structures and client bases and services provided. We also pay close attention to the people themselves, as they represent the firm. Cultural integration is paramount to M&A success, and no amount of financial incentive would overshadow how important it is to feel as though our people will integrate well together. While some warning signs might appear in that first meeting, it is difficult to gauge cultural compatibility based on one interaction, no matter how in-­ depth the conversation. That being said, ask yourself and your colleagues how they perceived the other firm and continue to do your research. A lot can be uncovered through a few phone calls and in digital footprints to help paint a more comprehensive picture. Things to consider: • Leadership background and behavior. Beyond the principals, who are the other leaders of the firm and what are their background and experience? Further, what is the perception of the firm’s leaders in the industry, the community and among peers and competitors? • Employee retention. Have their leaders been in their roles for some time? Does their team seem “new” or constantly turning over staff? • Training. What is their approach to employee growth and ongoing education for staff? What credentials does the firm’s staff hold? • Achievements. Has the firm or its employees been recognized for its culture, its individual achievements or other awards? • Relationships. Who does the firm partner within the community? Do they sponsor any organizations or support any causes? As for cultural deal killers, in general, obvious misalignment on investment philosophies or lack of chemistry or communication can shut down a deal quickly. We’ve also encountered instances of firms whose language seemed disconnected from their reality. For instance, impressive credentials on screen and “selling” yourself as the best in the business doesn’t make sense if the firm is losing money year after year, shows no sign of growth and the owner needs to sell. Greg has said before that 10% of a deal is about valuation and structure and terms, and the other 90% is about the people. Your ability to accurately assess another firm and the depths to which you truly understand who they are and

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what they wish to accomplish will significantly impact success on the other side.

 reg’s Final Word: First Impressions Count G on Both Ends Obviously, when two firms come together to discuss a possible merger or acquisition, it’s based first on early assumptions of mutual business benefits. While much of these initial conversations focuses on those benefits, it’s important not to lose sight of the intangible things that make working together easier or more challenging. Introductory meetings are just that—introductions. It’s the first step of many if you do decide to continue moving forward. They serve as an initial litmus test for both of you to decide if you could potentially be a good business fit and also if you feel like you could work together to create something better with the end result. Now, many of these deals aren’t about bringing two teams together for a full integration; there are many flavors of M&A that might simply have the selling firm continue operating business as usual under new leadership. No matter the path, change is part of the package, and to be successful, you must feel like you are working with people who believe not only in the same endgame but in the steps along the way and how they will affect the people involved.

4 Coming Face to Face: Expanding the Circle

Greg’s Perspective… After the introductory meeting and you mutually decide to continue exploring a possible merger or acquisition, it’s time to start digging in with due diligence. At this point, how confident you are in moving forward may vary on a number of factors that are unique in every situation. One thing that does not vary, however, is that you’ll start having a series of scheduled phone calls and meetings to learn more about how you will align to achieve your goals. From a cultural and operational perspective, it also makes sense to begin introducing more members of your team to the fold. Even though your interaction with the whole team may be limited at this stage, this is when you will really start to see how people communicate and work together, how the business has operated, and what the future might hold in an integrated environment. In this chapter, Cynthia and I will outline the steps you should take to make the most of these interactions, including how to effectively introduce team members, how to quickly assess the other firm’s culture and how to protect your foundational values. We’ll also offer some lessons we’ve learned along the way.

Taking the Right Steps Forward As you are beginning the exploratory phase of a deal, there are some assumptions you should AVOID. For example, at Private Ocean, it comes as no surprise if we mention that we’re in talks with a firm for a potential deal. Part of our culture is both the acceptance of change and an ongoing momentum © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6_4

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toward growth with M&A as a factor to our strategy. Other firms may keep this type of movement under wraps, with only leadership involved. This is at their discretion, and it’s important to be sensitive to their approach. That being said, you will want to start working with leadership to pull back the covers. It is important to note that at any of these steps, you may decide it is best not to move forward. That is the purpose of due diligence, and if you’ve done it correctly, stepping away can mean saving your business a lot of costly heartache—and dollars. Knowing that a deal could fall through due to a number of reasons, there is definitely a tightrope to walk between sharing and oversharing information and investing enough time in your research. As a principle, I don’t typically introduce anyone on our team to a new group until all of the financial terms are basically agreed to—at least verbally. Once you feel like you’re on the same page, you can proceed with the steps below. 1. The first introductory meetings consist of a few leaders and then a few directors. Size varies by firm, of course, but in general we start small, with our highest-level executives, and then expand the circle as we begin diving into different areas of the company (investments, client services, marketing, IT). In all of these meetings, leaders are given clear direction in advance on what information to provide and what they can expect when working with the other firm. As a primer, I encourage my team to review bios and do their own research on the people they will be meeting. 2. With your team, it’s good to pause and do an assessment at this point on the work being done. What impressions are your leaders getting from their counterparts? What issues do they see being potential roadblocks to success? Start putting together a punch list of their opinions and findings so that they can be addressed sooner than later. 3. After assessing and comparing the different areas of the business and identifying the strengths and opportunities, it is then that we start taking a closer look at individual team members. Who are they and how do they currently fit into the business? Where do you think you may overlap in job responsibilities? Where are there gaps in this new hypothetical environment? How will streamlining things like technology and operational processes affect people’s current roles? What is the pay structure and how are titles distributed? The decision to find the right seat for people takes a long time, and the process to review every role in the firm starts at this high level. 4. If you’ve reached step 3 with confidence, you should begin holding some preliminary interviews with individual employees. At this point, you have a strong sense of how the other firm has operated and you’ve c­ ompared

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technology suites, workflows, and perhaps even touched on cultural nuances that are unique to the firm. You also have a sense of each individual from their supervisor and teammates—their strengths, their opportunities and whether or not they would make a good fit in the new environment. Cynthia’s Take on Titles Even though Greg has often stressed that he prefers a less hierarchal organization with “support leadership” and empowerment where everyone has a voice and contributes, something that we have consistently encountered in these deals is the wide variance in how firms structure their organizations and the importance placed on titles. Those titles often come with diverse responsibilities that in a new environment may look completely different than before. With employees, a change to a title or their duties can be disruptive and stir up insecurity and uncertainty. If an employee felt their role was clearly defined and reflected in their title before the deal, how do they feel if in a larger firm they’re no longer doing 30% of their tasks because the definition of their role has changed? Are they still satisfied with their job, or do they feel what they enjoyed doing the most was taken away from them? A great deal of importance and value may be placed on titles and that is directly related to that firm’s culture. This may create a sense of displacement in the existing firm if not identified and addressed. The bottom line is that titles matter to some people, even if they don’t matter to you (or vice versa). For some, it may be arbitrary. For others, titles are something that feel personal, in particular with members of the firm being integrated into the new firm. A title can symbolize a sense of ownership and control in an environment where there is disruption and change. It’s important to assess how both firms approach titles and the weight given to them by employees. You may find that titles matter more than you thought to those who previously never voiced an opinion.

Cynthia’s Perspective… Protecting Your Cultural Values With great change on the horizon, how do you preserve your cultural values while also being respectful to the needs and beliefs of the other firm? It’s not an easy question to answer, because every situation is different. Assuming that you’ve taken the time in your introductory meetings to feel like you share enough of your values and philosophical beliefs, what happens next is natural. It’s evolution. In any firm, a culture is something that can change with the addition of just one new person. It can change when someone leaves, or when you change office locations or launch a new service or product. The real questions to ask yourself are “What are the core things about our culture that we

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want to protect? What elements do we want to have resonate in everything that you do?” Is it a collaborative spirit? Open communication? Intellectual curiosity and innovative ideas? Whatever makes you who you are as a firm is what you should focus on harnessing and promoting. There are some steps you can take to proactively preserve your core values as you evolve and begin sharing with the other firm. Working with your new partners, why not dedicate a meeting where you share and compare some cultural aspects of the business that are valued and/or expected from each team? In some cases, these are things that are overlooked until the end of the deal. It’s important to note that these types of items should be handled with great sensitivity and care in how they are communicated. For instance: • What is the onboarding and offboarding process like for employees? What will onboarding look like for the employees being merged into the new firm? What HR tools do you use and offer employees? (See Chap. 5 for more information on effective onboarding.) • Is there a goal structure tied to compensation? If so, how is this determined and is there an end-of-year bonus structure? • What channels are given to employees to communicate their experience? Is it hierarchical or an open-door policy with leaders? • What is the expected work schedule for everyone once you’re merged? How flexible are you on those hours? • How are things like birthdays, work anniversaries and even new business acquisitions handled? Are they celebrated? If so, how? • How and where can people congregate for meals and breaks? Is it typical for colleagues to have lunch together in a break room or go out for a coffee together? Does the firm foster that type of camaraderie? • How does each firm approach volunteer days or community engagement? Are they mandatory? Are employees excited and engaged about giving back? • Do the firms hold any offsite events or have traditions that employees enjoy and consider a differentiator from other firms? • What additional benefits does each firm offer that employees find valuable? You’ll be surprised at how crucial and motivating some of these items are to employees, and when disregarded, can send a signal of indifference toward your cultural values and undermine your message.

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Lessons Learned From our own experiences and in sharing stories with our peers in the industry, there seems to be a few common themes when it comes to lessons learned during the due diligence stage of M&A. Here are some valuable takeaways we’ve gathered over the years. • People today are looking for a place, not a job. We are fortunate in this industry in that many people who choose to work in financial services—in particular for an RIA—aren’t simply there to punch a timecard. Yes, a livelihood is a priority, but in our experience, meeting with other firms and going to conferences, we’ve seen a real dedication to serving people and helping them succeed. By the very nature of what we do, we are personally integrated into our clients’ lives. We know their children and their grandchildren. We celebrate their graduations and their weddings and we mourn them when they pass away. So unique to our industry, our people are likely not just looking for a job. They’re looking for a place and a purpose. • Some people will leave, and that is OK. One way or another, no matter how much you want to avoid it, some people will simply not fit into the new firm. We’ve learned that while it’s worth being patient and empathetic as people adapt to change, no one can “force” people to change. It may take some time to find the right fit for an employee at the firm, but you should trust your intuition. At a certain point, keeping someone who clearly doesn’t fit or is unhappy in the new environment can be damaging to your culture and is frankly, not healthy for that employee. Some of these situations are difficult and feel personal, for instance, a stellar employee might thrive in an environment when the firm has only five people. But as you grow and expand locations and add staff, they struggle to keep up. Imagine suddenly coming in to work with 20 new coworkers—that change is immediate and it’s simply not for everyone. • There’s always a natural pecking order. You really never know who wields the power at a firm until you start peeling back the layers. Yes, there are leadership titles and organizational charts. But they don’t account for the people who, for one reason or another and for better or for worse, have amassed some influence on your business. It might be someone who is the only person who knows how to run key technology platforms. It might be someone who is antagonistic, has a negative attitude, or is indifferent and/ or resistant to the change. On the other side, you may find that someone

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who is a “leader” doesn’t command respect from his or her employees. In any deal, these are the unique quirks that you’ll uncover and need to address. • You can’t expect others to do what you don’t do yourself. If you’re leading the way and communicating the benefits of a path together, you have to do more than talk the talk. If you expect your people to learn four new technology platforms but you’re “too busy” to learn them yourself, that send a clear message. If you champion culture and collaboration but your door is always closed and your team-building events keep getting pushed out, that also sends a message. Show what you expect from people by setting the example yourself. Trust takes time and words go only as far as your actions. This applies to everyone, by the way, not just leaders. We all play a part in the success of the firm, and the rules should apply to everyone. • Technology integration forces things along quickly. As we mentioned previously, we’ve always chosen to introduce people to each other before the deal closes, with very few limitations on who can be tapped for information. Why? Because we’ve felt that the more people are involved early, the more prepared and amenable they will be to change. We also believe that people should be included because they have made a contribution to our success. In particular, as technology plays a very large role in our business, we’ve had to open doors to multiple teams to start working together. What we’ve learned is that nothing gets people thinking about integration efficiently like introducing new technology. It’s time consuming and the stakes are high, from unravelling how existing systems work and don’t work, to determining if one system is better than another, to adoption, implementation and training. While this can be a stressful time, it also has the potential to build relationships quickly. • It’s important to get the right people in the right seat on the bus. This is something Greg has spoken about on many occasions and I have seen this applied with great success at both Private Ocean and at Junxure. In any successful business, everyone is traveling in the same direction in the same vehicle. We all share the same goals and look forward to reaching our destination, whatever that may be. However, it’s not just about having the right people on the team to get you where you need to go. People can be motivated and have the right attitude and aptitude to help elevate your business. That’s where your hiring process does its job. However, whether through your business’s natural evolution, your employees’ growth trajectory or an M&A event, what you find is that sometimes you need to make some seating changes on your bus along the way. Being flexible enough to entertain adjusting your organization while keeping your business objectives in mind means the potential for great opportunity. Employee ­retention

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and loyalty, not to mention the positive impact on your operations, are two just outcomes we’ve experienced first-hand on many occasions by keeping an open mind and tapping in to each person’s unique strengths and passions.

Greg’s Final Word The due diligence phase of the M&A process is hard work—don’t underestimate the time you will spend to do this well. You will be asking tough questions, answering tougher ones, and hoping that on the other end of this long process you’ll find that you’re stronger together than apart. There is no set amount of time that it should take to complete this stage. In our experience, while a deal can come together and be consummated in three–six months, you should be patient and not rush things—it is critical to discover all that you need to do in order to make a good decision. If you have moments of frustration and you’re discouraged by your progress, I assure you this is normal and you’re doing the right thing by taking your time to get this right. The worst thing you could do is rush through this stage thinking that there are shortcuts. Trust me, you’ll pay for those on the other side! I often say that although words can resonate, trust will always take time— more time than you think. No matter how many times I repeat our guiding principles, people will need to see those in action across the board consistently before it starts to mean something. That type of intentional communication and action starts in this stage and continues long after the deal is done. In Chap. 5, Cynthia shows us how this plays a key part in bringing people together and in building momentum toward a culture of success. In Chap. 6, she continues that work with how to build a blueprint and nurture the culture that you’ve worked so hard to create.

Case Study: Adapting to Rapid Growth The Deal(s) Since 2009, Sequoia Financial Group, a large wealth management firm serving private, institutional and corporate clients in the Midwest and Southern US, has made five acquisitions. The most recent deal occurred in January 2019, when Sequoia announced that it had acquired LJPR Financial Advisors, a fee-only financial advisory and wealth management firm headquartered in Troy, Michigan, with $776M in AUM.

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Profile Sequoia Financial Group • Founded in 1991 • Five acquisitions since 2009 • 89 employees in locations across Ohio, Michigan and Florida and approximately 3372 clients (As of August 2020) • $4.6B AUM (Form ADV from 7/31/2020)

Background Founded in Ohio in 1991, Sequoia Financial Group, LLC takes a client-­ centered approach to providing comprehensive financial planning and wealth management services, including asset management, estate and retirement planning, fiduciary consulting and family wealth services. Sequoia currently has offices throughout Ohio, Florida and Michigan. Sequoia has cited a targeted growth rate of 15%. In their latest deal, Sequoia Financial Group's staff grew from 66 to 89 employees. Tom Haught continued as President of Sequoia Financial Group and Leon LaBrecque, former Managing Partner and CEO of LJPR Financial Advisors, transitioned to a new role as Chief Growth Officer. Sequoia attributes their success with integrating firms after an M&A event to a ten-person integration team. Two of the key players on that team, who have helped lead their growth initiatives and integration efforts, are Chief of Staff, Kevin Tichnell, who in addition to leading their M&A strategy is also responsible for advisor recruitment, and Shaun Kapusinski, Director of Technology & Operations, who is highly involved in Sequoia’s technology systems, training and support. Kevin and Shaun focus on two distinct parts of the deal—the pre-merger work and the post-merger integration. From a cultural standpoint, most of the time of the front end is spent with the principal or with a small group of people. Not that this is an issue—according to Kevin and Shaun, as firms typically follow the principal’s cues on culture. “Size is less relevant than you think when it comes to culture,” says Shaun. “What’s more impactful is the appetite for and attitude toward change. For instance, we’ve had a couple of acquisitions that were small and they were incredibly different. In one situation, we were set to spend time in an

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out-of-­state office to help with technology integration and were told that we shouldn’t come as they didn’t feel it was necessary. It’s challenging to train people on completely new systems in a new work environment remotely. We found this firm to be overall more resistant to change and so the integration process took longer to complete. I contrast that with a later acquisition where they were very eager and open to learning new processes and adopting new programs. A firm’s attitude toward change is definitely reflective on leadership and culture.” On culture, Kevin adds, “What’s important is recognizing that every firm has both a professional and a social culture.” Professional culture, Kevin says, is established through firm policies and attitudes toward things like technology, client demographics and service levels, locations, work schedules, dress codes, benefits and other documented factors. To begin assessing professional culture, Sequoia’s team often starts by asking what the future looks like for them, asking a series of questions ranging anywhere from, “How do you think about technology and client services?” to discussing things like work hours and holiday celebrations. “You start to get a feel very quickly for how the office operates in these types of conversations,” Kevin says. Social culture is what you can’t see or find necessarily documented in an employee handbook. How well do people seem to get along? Do they congregate in shared spaces, go out to lunch to talk shop and celebrate shared successes? Do they suggest new ideas, new technology systems, or offer solutions to challenges that may not directly concern them? Do they readily participate in company traditions like off-site social events, take part in community outreach on behalf of the firm and perhaps most tellingly, refer potential new hires to the firm when recruiting? “It’s interesting how undervalued the social culture can be during an acquisition,” says Kevin. “For example, this last firm we acquired had a tradition of Beer Fridays, and it’s incredible the leverage we got out of continuing that with the larger group. It paid more dividends in building goodwill than any process we could put into place.”

Cultural Challenges In any deal, people are concerned about their job and how their lives are going to change. The individual employee interviews—whether it’s 3 people or 20 people—are very important to identifying opportunities to improve communications and set clearer expectations. One exercise Sequoia does with

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incoming employees is to ask them to make a list of all of the tasks they currently have, and then segregate them into three buckets: Things you love to do, things you hate to do and the tasks that fall in the middle. According to Kevin, this type of conversation is disarming and sparks honest responses. “Someone is not asking what I do, but rather how I feel about what I do,” says Kevin. “It’s amazing what people will share from this perspective.” The challenge, Kevin and Shaun agree, has always been the actual integration process. Common past missteps included: • Communication. We learned that in any situation it’s almost impossible to over-communicate upcoming changes, to the point, Kevin says, that “people are sick of hearing about them.” It’s a mistake to assume that people “get it” and don’t need to hear about changes to the business. • Conflict Avoidance. “When we did our first few mergers, we tried hard not to break anything,” Kevin says. That led to everyone walking on eggshells to avoid creating conflict or stirring up something that would damage what had worked previously in the firm. “What we’ve realized is that when a firm is being acquired or merging, they want and expect positive change. So, while we’ve thought we’re doing people a favor by not rocking their boat, we waste time not making progress. Now we’re changing things before we even close, and it sets the tone that change is coming quickly.” • Rigid Timelines. Everyone is optimistic. But no amount of planning will account for curveballs along the way when it comes to integration. “A key misstep for us in the past has been not spending enough time together in the beginning, as culture plays such a vital role in how quickly people will adapt and act on change,” says Shaun. “Culture affects attitude, and attitude affects action. Action impacts timelines.”

Solutions Sequoia has learned from previous deals the importance of assigning key champions to lead the integration. With more than ten years spearheading acquisition efforts, both with the client services team and with technology and operations, Shaun is uniquely qualified to adapt quickly to the different factors of each deal. With Kevin leading the overall strategy, they’ve developed a process for gathering and sharing information before taking a team approach to adoption, implementation and training. “Our integrations teams in the past included three people from each firm and no designated owner  – just department representatives,” says Kevin.

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“Their responsibility was to create the least disruptive plan for integration and make the most out of communication channels to keep everyone informed of our progress. They weren’t tasked with keeping score, or deciding who ‘wins’ or ‘loses’ on a particular topic. They also have a ‘get out of jail’ card if a decision needs to be kicked up to leadership. The employees looked to this group as advocates for them, as it’s not just principals telling them what they want or need to hear. By having communications come from someone who is not a principal, it really creates a different perception of the integration, and offers a feeling of representation and inclusion. As for Kevin and Shaun’s roles, “We’re player-coaches on these different integration teams, whether it’s asset management or client services or HR,” says Shaun. “This gives everyone the exposure they need to understand the big picture and give them a structure of where we’re headed. The more you can involve people from the other end on that deal, the more you’re immediately collaborating.” While acquiring or merging with a smaller firm has its advantages and disadvantages (for instance, a smaller firm may be more malleable to change and able to move more quickly), a larger firm also offers certain benefits. A more layered structure, a focus on future growth and more resources can help move the integration process along. In Sequoia’s most recent acquisition, the presence of a COO in addition to the owner meant more players to help people merge together. “On the other side, a larger firm is more likely to have pockets of culture,” Shaun says, noting that both larger and smaller firms come with their strengths and opportunities. “At our firm, we’re all Sequoians, but with the size of our organization, there will always exist different micro-cultures, often by department. This is reality and not necessarily detrimental in any way. It’s just important to recognize that this will occur and it will shape how and what you communicate.”

Conclusion For a rapidly growing firm like Sequoia, reaching across state lines and expanding staff with each deal, it was important to dedicate a team to spearheading acquisition activity and integration. These key people addressed topics like technology, operations, HR, client services, as well as assessed cultural fit. With each acquisition, Kevin and Shaun stress the benefits of spending more time ahead of the deal to gather as much information as possible to ensure a smooth transition. “The more we learned ahead of time the better,” says

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Kevin. “Part of project planning in the beginning is to spend time together in a very strategic way. It needs to be part of your plan up front.” And while each deal is unique, what is consistent is that culture is typically driven by principals, and there is both a professional and social culture to consider. Decisions are often driven by cultural values. Size is less relevant than a firm’s appetite and attitude toward change. In the end, Kevin and Shaun liken an M&A event to two families coming together. Each family may be different, and even if the owners build great relationships, it’s always important to remember that all the other family members are along for the ride. Pro-active communication and allowing for time and space to adapt are the keys to success.

5 Bringing It Together—Kicking Off Cultural Integration

Cynthia’s Perspective… At this stage, your integration plan has already been set into motion. It began with those first introductory meetings and really kicked in once you started to introduce more of your people to the fold. By now, you’re ready to take that next step toward a “Go Live”—or the date you officially merge and announce yourselves as one team. The details that go into that launch are delicate and complex, and though it is an exciting time, the actual experience can uncover cultural issues as the dust settles and people start really working together. Greg has long advocated for team “champions” to help lead the integration charge, including someone to foster a unifying culture. This role is responsible for reiterating our values as often as possible, shining a light on real examples of our guiding principles at work, and creating opportunities for people to bond and build relationships. This person or people serve not only as leaders, but as representatives of who we are and what we preach. They work closely with other leaders to consider people issues throughout every step of the integration. In this chapter, I’ll share the blueprint that we’ve used to speed the cultural integration process, including providing a consistent onboarding process for new teammates and facilitating ongoing events and activities that are designed to bring people together. I’ll also share how we’ve identified and managed outliers and how we’ve tackled some ongoing challenges that are common in any M&A event.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6_5

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Setting the Course from the Top Like every initiative, cultural integration is steered from the top down. The example set by leadership before, during and after the M&A event is critical to its success in the long term. Greg, for example, has long been known for his reputation of candor and transparency, and we’ve certainly used that to our advantage in our communication strategy. Employees have come to expect Greg to be forthcoming about the who, what, when, where, why and how of any potential deal, and that expectation has led to a great deal of trust in dealing with great change. Applying that same open-book approach to incoming firms has been both a surprise and a refreshing change. In one year, with two acquisitions, we saw two widely different reactions to Greg and his leadership team’s communication style. For example, one firm, whose communications closely matched Private Ocean’s, found comfort in his transparency. The other was skeptical. Greg would say that no matter which approach a leader takes toward getting people on the same page, you will be met with resistance and hesitance. Why? Because words are just words until actions back them up. The key is consistency. Consistent schedules, consistent messages, consistent attitudes. If you say you send an internal bulletin every Wednesday, send one without fail. If you have a monthly all-hands, follow a set agenda so people begin to understand how things operate. Don’t miss or constantly reschedule 1x1s with employees. Be where you say you will be. Avoid making exceptions and excuses. And if you live by your values, then show them in every conversation and every action that you take. It’s a team effort, and a culture champion can help keep people accountable when naturally, we slip back into old routines. From a leadership perspective, there are a few key points and reminders to keep in mind as you officially make introductions and kick off your integration efforts. 1. It’s a game face moment, and it will pass. Even if you’ve had individual interviews and introduced teams to each other, leaders must expect that people will initially present their “job interview” face. Just as in an interview, people will say things and present themselves in a way that they feel will best please their new employers, rather than express how they really feel. They might not even quite know how they feel, except that they are experiencing some anxiety and uncertainty about their future at the company. Unlike a typical new hire, these employees are waking up in a new day to a new role in a new company. Understanding that getting to know

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each other will take time and patience means offering numerous opportunities for people to let down their guard. It’s natural that they may be asking themselves internally, “How do I fit in here? Will my role change? Will I like working for this new company?,” while outwardly expressing their excitement and happiness about the merger. There will exist—even subconsciously—an “Us vs. Them” mentality. No matter how open you are to change, habits are hard to break. How a firm “used to do things” is the standard when you begin, so introducing a new process or a new way of doing things is going to be seen as “other” than the norm. This will naturally permeate into an “us vs. them” perception, even if only at the most minute of levels. To overcome this mentality, a culture champion can make a positive impact by offering a safe opportunity in a new environment to feel heard and included during the transition. Answering the question, “What’s in it for me?” We are all survivalists, and though this is not to say we are inherently self-centered, it’s natural and healthy for employees to assess in a situation, “Is this still the right place for me?” At the end of the day this is a career choice, and it’s an employee’s right to decide what’s best for them. Leaders must make a strong case and communicate why they should care, what the opportunities are for them and why this merger or acquisition is a positive step forward. Not everyone ends up making the cut. We touched on this a bit in a previous chapter, but just as employees ask, “What’s in it for me?” a company must also continue asking, “What does this employee bring to the firm?” It is never an easy assessment and hard decisions are typically part of the deal. While some of these people are identified before the merger (redundant roles, for example), sometimes it isn’t until after the deal is done when you realize someone is not a good fit. Some issues can be resolved, and others cannot. For example, perhaps an employee’s work is outstanding, but they struggle with change. Addressing the situation early can certainly make a difference if the employee is open to making some changes. In another example, an employee may be respected and well-­ liked, but their skills simply aren’t at a level needed for their position and it’s impacting productivity. Maybe they’ve made some costly mistakes. At some point you must decide when to step in and work with an employee and when it’s time to let go. Sometimes this is a mutual decision where the employee recognizes that this isn’t the right place for them. Leaders absolutely cannot lose focus. This change is an all-hands-on-­ deck moment, and it’s not over once you celebrate coming together. Three months, six months, even a year after a merger, leaders must be diligent in continuing to communicate often, checking in with employees, highlight-

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ing progress and acknowledging milestones reached. Leaders should also do a temperature check on their own performance. Are they consistently delivering on their promises to the team? Are they taking care to protect and exemplify the cultural values that were shared at the beginning of the merger? How would you say employees are feeling about morale? Greg has often planted a few key people to reach out to employees and ask for their opinions on culture and see what we could be doing to enhance employee satisfaction. Culture doesn’t run on auto-pilot, it’s organic and responds to many factors, many of which are out of your control. Firms should never get too comfortable that they’re “done” doing the work to cultivate it. With all of these factors in mind, your next natural step is onboarding, which can play a great role in setting the tone for your firm’s quickly evolving culture.

Onboarding New Teammates When merging employees into the new firm, there is always some level of onboarding that occurs after the M&A event. In our initial merger and the creation of Private Ocean, every employee went through a process of migration to new systems, the establishment of titles and compensation structure and a review of their job description. In our subsequent acquisitions, changes for existing employees were minor, and incoming employees were handled with great care and consideration. Every deal is unique (e.g., some firms are more attached to specific titles or work schedules or a strict pay structure than others), but the goal is the same—to create as seamless an experience as possible for new employees that is welcoming and reflective of the firm’s culture.

Prep Work An onboarding experience is only as smooth as the work leaders put in before the merger. These crucial, behind-the-scenes activities can truly impact the evolution of your culture, as incoming employees essentially experience a complete job change to a new company. I spoke with Private Ocean’s Director of Operations, Channing Hussey, who managed in large part the operations and H/R process to migrate Mosaic Financial Partners’ staff into Private Ocean (See the Case Study at the end of this chapter for more information). Three months ahead of the deal closing, Channing and Sabrina Lowell (Private Ocean’s San Francisco Office Managing Partner, Advisor and

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Principal) began meeting regularly with Greg and his Chief Operating Officer, Susan Dickson, to discuss the intricacies around bringing on board Mosaic’s employees. Greg and Susan were often in Mosaic’s main office in San Francisco, and quickly began meeting with each individual employee about their current role and how they might transition well into the Private Ocean team. The change would not be insignificant for these employees, as Mosaic was officially closing its doors and employees had to be “terminated” from one firm and “rehired” as new employees. This had implications on compensation and bonus structures, 401K contributions, and possible impacts to Social Security, disability and insurance coverage and many other factors. Channing and her team worked with Greg and Susan to proactively anticipate and work through all of these issues in creating offer letters for Mosaic employees. The goal was not only to make the change as stress-free as possible, but to also press upon these people that their needs were met and their personal situations were considered with the greatest level of sensitivity. For those employees who were not extended offer letters, great care was taken to communicate why they would not be transitioning (duplicate roles, caseloads, organizational structure and needs, etc.). Though every step in the process held its challenges, Channing says her top priority was to ensure that each person was considered individually and that they felt valued for their contribution. This continuous expression of gratitude and respect made great changes easier to absorb as employees felt that their new employer was looking out for their best interests.

Private Ocean’s Onboarding Process Potential new hire candidates get their first glimpse of Private Ocean’s culture during the hiring process. We typically vet a candidate through a series of interviews that involve many members of the team from different departments. The idea is that a candidate who is invited to come in to our office has already proven from their resume that they are capable and qualified of performing in the role. What you can’t gauge from a polished C.V. is someone’s personality, their life and career goals, and what motivates them to come in to work every day. An abbreviated version of that hiring process occurs after an M&A event, and the actual onboarding process elevates that cultural experience with consistency, courtesy and care. The steps we have taken during onboarding employees in this situation include:

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• Multiple 1x1 sessions with leadership, both at the executive level and the direct supervisor level. The goal in these sessions is to determine the details of their employment, set expectations and answer questions. • Pre-onboarding communications from H/R and/or operations and technology. These are typically done via email with information about technology system access and training and H/R system setup. • A personality assessment. The Birkman Method [1] is sent electronically for employees to complete prior to onboarding. The Birkman is an assessment made up of a series of questions that then assign Map Symbols to each employee based on their responses. These symbols derive from a multitude of factors that are measured including Interests, Behaviors and Needs. They represent a unique aspect with regard to one’s approach, style and areas of motivation. • An individual or group onboarding session (based on location and availability). During this typically hour-long in-person meeting, a member of our human resources team walks through orientation and distributes packets that include information about the firm including: –– A welcome letter specific from executive leader to that group –– The employee handbook –– Information about benefits –– Inserts promoting team-building activities including volunteer days and off-site events –– A “who to go to” list of employees with images for answers to common questions –– Additionally, each employee is given a plaque engraved with our Guiding Principles • Technology training. Around the time that orientation is scheduled, employees will also receive training as needed on technology systems including CRM, Financial Planning software and other systems. • Shadowing. During the first few weeks after the deal closes, each employee goes through a series of shadowing activities to better understand each department in the firm. • Operational training. This step occurs with the employee’s direct supervisor and covers processes and procedures unique to the firm. Employees learn about the firm’s clients, its products and services, and its approach to service. These sessions transition into regularly scheduled 1x1s with the employee’s supervisor.

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• A Birkman follow-up meeting. In this session, which is typically scheduled soon after onboarding, a member of the H/R team reviews each employee’s Birkman test results and translates them so that they begin to have a better grasp of how the firm’s staff interacts with one another. This is simply another communication tool to help people better express their needs from their colleagues and also to understand how each person’s individual personalities impact their day-to-day interactions and productivity. It has proven to be a great ice breaker when getting to know new people in the firm.

The Birkman Method: Utilizing a Personality Assessment Program Susan Dickson, Ed.D, MBA There are numerous personality and trait assessment tools available today, all of them with their own psychological methodologies, outcomes and action steps. Deciding on which assessment tool to use really comes down to what attributes the firm values most and what they want to achieve in administering a tool that profiles some aspect of their people’s personalities, abilities and values. What I have often seen in my experience is that the chosen tool is reflective of a company’s work culture. At Private Ocean, for example, as we stress communication and our commitment to serving and taking care of others, we have used the Birkman Method to help us better understand each other and mitigate any conflicts that arise because of stress or miscommunication. The Birkman Method is an online personality, social perception and occupational interest assessment that addresses our preferences (interests), behaviors (our “usual” behaviors), our needs and expectations and how we behave when those needs are not met (our “stress” behavior). I joined Salient Wealth Management in 2005 as their Chief Operating Officer, and introduced the Birkman Method as a leadership communication tool. At the time, I was also the President of the Junior League in Napa-Sonoma, and we had used it to better understand each other in a work environment. We found it to be more than just an ice-breaker, though it certainly helped start conversations and build relationships between colleagues. By understanding not just how people communicate and react but more importantly the why, it quickly broke down walls and encouraged empathy and appreciation for the different personalities that inevitably come together in any organization. That initial implementation of the Birkman Method (Salient had ten employees at the time) was met with a mostly positive reception, though to be fair, we did have a few skeptics at first. By the time Salient merged with Friedman & Associates and we became Private Ocean, it was one of the main tools we used to help bring two different groups of people together, because we could quickly learn about our new colleagues and ourselves. While that first transition wasn’t without its challenges, Greg has always been passionate about culture, and he was a driving force behind helping to create a strong, cohesive and nurturing work environment. It was as important to him and to us as anything else, and at every retreat and every leadership meeting, we (continued)

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(continued) would discuss the numbers and then we’d brainstorm how we could enhance our culture and build the firm into something people valued and were excited to be a part of. We applied the Birkman and this same approach with future acquisitions and found them to be very useful in understanding (even before the deal was complete) who we were welcoming into the firm. The differentiator for us with the Birkman over other tools were the needs and stress components. While some tools focus on three key personality traits of a person, the Birkman is designed to provide insight into what specifically drives a person’s behavior under stress and in optimal environments. We’ve used it to resolve employee conflicts and to help break down why an employee was unsatisfied in a certain situation. We have also taken to using it when a new employee joins the firm. Not to “size them up” but rather to help us best prepare leaders and colleagues about their new teammate and how they might create an environment that is welcoming and motivating. Ultimately, we’ve found the tool to be helpful in enhancing the firm’s culture and supporting of its Guiding Principles.

Gathering the Team As people begin to settle in to their roles and work toward achieving operational and technology integration goals, it’s important to consider how you will bring people together for the first time as a large group, whether you are able to create a team “retreat” or simply set up a dedicated all-hands or town hall setting to both celebrate and begin laying out the direction ahead for the team. The goals of this gathering are straightforward in that you want to celebrate the firm’s growth and the addition of new team members while acknowledging the great change that has occurred.

The Off-Site Retreat From the very beginning at Private Ocean, Greg has advocated for an offsite team gathering that is just as focused on culture as it is on progress. The firm holds two events a year—a two-day offsite event in January to kick off the year with new firm goals and a mid-year event that is typically a one-day temperature check on performance and milestones. The mid-year is unique in that it also incorporates a weekend that involves camping activities, shared meals and a gathering of everyone’s families on a river in Marin County. It has become a treasured tradition for the firm and a symbol of its collegial culture.

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On several occasions, we’ve had one of these off-site events scheduled very closely after a deal closed, giving new colleagues a chance to quickly bond with their leaders and teammates. During these particular off-sites, we have adapted the agenda to focus almost 80% on cultural integration rather than measuring business goals. At a recent event, I facilitated many of the activities that were intended to help people from different office locations let down their guard and relax— this was a bit of a departure from previous mid-year retreats as it was internally structured (rather than created by a facilitator). Private Ocean has an Expanded Leadership group that represents each area of the company, and they helped shape the agenda for the event. The consensus was that people wanted an overall check in, but have it less focused on sharing charts and graphs and key performance indicators and more centered on communication, team building and team work, and individual contributions. It was designed to be a hands-on workshop with ample opportunities to connect with colleagues. (See Appendix for the Agenda from this event.) This particular event was eye opening in that it was the first time we saw noticeable cross-socialization between offices, departments and roles. While it’s natural to gravitate toward people you already know or whom you work closely with, the work that went in to planning this event—as well as the activities and interactions prior to the retreat—helped encourage people to seek out those they did not know well, start conversations and ask questions, and begin building stronger relationships. By the time we had our group dinner, we realized that we no longer needed assigned seating to encourage people to branch out. Some highlights and a common theme with each of these off-site retreats: • People appreciate honest communication. An acknowledgment that there are challenges across offices and that integration is time-consuming and at times, frustrating, was a welcome message to those working hard to move the company forward. • Not surprisingly, non-work focused activities are always a hit. In the past this has included karaoke, team competition meal prep, and s'mores on a bonfire at the beach. What’s interesting is that very quickly, discussion about work topics fades away and people bond on a human level, over laughter, shared hobbies and life aspirations. • Size will impact your ability to make changes. There’s an agility to being smaller as a firm and as you grow, things move slower because you require more discipline and more checks and balances. If you have three people in your office, you may brainstorm new policies at a retreat that you can

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implement the day everyone is back in the office. With 50+ people, there needs to be an expectation that great ideas require vetting for the benefit of the entire firm. This may take time, but you’re committed to listening and to implementing the right steps to achieve your goals. After these events, don’t forget to survey your employees on the activities and the event itself. Did they find it helpful? Did it achieve your goals and meet their expectations? Which activities stood out the most and why? How did this event fare compare to previous events? What can be done differently in the future? All of this information is valuable to help create memorable off-­ site events that truly make an impact on your people and continue to nurture your work culture.

When You Can’t Get Together (or Have Multiple Locations) For firms that are not able to meet in-person as a group, there are other ways to connect with people on a regular basis to help establish the firm’s cultural values. Distance can certainly be an obstacle for firms just coming together, but with technology tools and regularly scheduled touch points, you can begin to shape people’s expectations and express the foundational elements of your culture.

All-Hands or Town Halls There are always benefits for bringing people together, even virtually, as a large group. While you may miss out on face-to-face contact, you gain a number of positive opportunities that can help promote your culture. Things like: • Sharing an overview of the firm’s current performance—are we on track to meet our goals? What is the firm focused on achieving and how can each person make a contribution? (What and how much you share depends on your leadership style and your culture.) • Awareness of different department’s priorities, accomplishments and challenges. Oftentimes we function within sub-cultures based on our location or our departments. Coming together reminds us that while we may be apart physically, we are all working toward a shared vision. • A Q&A for leadership on timely topics. While some may not be comfortable asking questions in front of a large group, leadership can take these

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opportunities to offer information and guidance on topics that are on top of the mind. (See Chap. 8 for more information on how we tackled business operations in 2020.) • Acknowledgment of our coworkers by leadership and the rest of the staff. A gathering of the whole group is an excellent occasion to call out those who go above and beyond. • Celebrating special days. As a firm grows, it may be hard to call out every individual’s birthday or work anniversary. The large gathering is a time when you can make special announcements, congratulate people, and share stories that remind us that we work with incredible, dedicated peers. Private Ocean’s “Wave” A constant favorite aspect of any group gathering or meeting is the recognition of individual employees for their commitment to our clients and to the firm. It began as individual “shout outs” between employees at our annual retreats, and evolved into what we call the Private Ocean Wave. The Wave is an award presented monthly to one person who demonstrates phenomenal service that epitomizes what we strive to achieve with our Guiding Principles. Each month, we remind employees to fill out an anonymous survey online if they’d like to nominate one of their fellow teammates for extraordinary work. There are only three questions in the survey—what is their name, what Guiding Principle did they most exemplify, and can you provide examples of the great work they have done to support that Guiding Principle? At monthly all-hands meetings, the winner’s supervisor gives an introduction and presents the award to the employee. This is an excellent way for us to reiterate our values while also recognizing a member of our team with our gratitude and admiration.

How often you hold an all-hands meeting or a town hall is up to you, and these should be held in addition to (not instead of ) in-person meetings. A smaller firm may opt to gather weekly, and as you grow this might move to monthly. I would not recommend going much longer than that as things change rapidly and this type of regular check-in really makes a difference in keeping people connected with that group mindset.

Traveling Leadership When you merge or acquire a firm, decisions are made about locations. Do you consolidate? Do these offices continue operating under your brand, or do they operate as they were before the deal, only with different ownership? Whatever the situation, in any deal, the acquiring firm determines what

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structural, operational and cultural goals they wish to achieve. In our case, as we acquired two firms with multiple locations, we knew that we wanted to begin our cultural integration very early on. This required members of our leadership team to travel to each location on a regular basis, with at least one member of our San Rafael team in each of our new offices between one and two weeks a month. We specifically set up satellite offices so that there would always be dedicated space for these people to work, and we also created a schedule so that employees would know which leader would be in the office and when. From there, the leader would run weekly meetings and check in with individual employees. The first year after every deal, we take this approach in investing to bring people physically together.

Executive Leadership Outreach Sometimes executive leaders only meet face to face with individual employees once a year—if at all—and it’s typically when money and performance discussions are on the table. We believe that this is a missed opportunity to promote cultural values across the firm, and in particular with new employees. Beyond retreats, all-hands, 1x1s and other touch points, our executive leadership also reaches out multiple times during the year to check in with each employee. With 50+ employees in three offices and a handful of remote workers, this can become a time commitment, but it has always been important to Greg that people truly feel as if they are valued for their individual contributions. His agenda is typically to have no agenda; he simply asks, “How are you doing? How’s work? Are you happy? How’s life? What can I do for you?” He has said that sometimes employees who join the firm through an acquisition are skeptical at first of his motives, but by the second or third time he reaches out, he sees the walls break down. In one recent conversation with a younger employee, Greg says this person recalled things that were said to him in their initial interviews, and he said, “I’m so excited to be here and everything you told me would come true has come true.”

Ongoing, Repetitive Communication You cannot overcommunicate your expectations or reiterate your cultural values enough when it comes to integrating people after an M&A event. It’s important enough to repeat over and over and over (just like we have in this book!). It takes time for people to adapt to a new setting, but the more you repeat them—at every gathering, every all-hands, in communications

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and so on—the more quickly people will feel confident about their individual responsibilities and goals, and the more secure they will feel in their new role.

Resolving Ongoing People Issues as It Relates to Culture Addressing ongoing issues with employees who are unhappy or underperforming is never easy. However, this is still a business, and as much as we inherently care about taking care of people, there is a time when we have to make tough decisions about people. It’s up to you to recognize when to step in and offer additional support and coaching, and when to make the call to part ways. People who erode your culture often fall into the latter category. From experience, given our hiring process, these situations have been rare. With M&A and teams coming together, it can get trickier making sure everyone is on the right seat on the right bus. It’s in your best interest (and the employee’s) to identify possible issues and address them. We recommend starting by listening to your intuition. Are conversations with these employees strained from the beginning? Do they express dissatisfaction with colleagues with some part of their role, or the firm, or the firm’s leaders? Are their attitudes perceived as negative, skeptical or combative in any way? We always believe that our people are our most important investment, and we use several methods to start a new conversation with these people and perhaps get to the root of their dissatisfaction. In some cases, this is just a natural reaction to change that can be overcome with more support and open discussions about their future and what they hope to achieve in their career. In other cases, we find that an incredible employee is simply better suited for a different role. And other times, we find that this person may not find what they need in the firm and it’s best not to prolong the inevitable. This is part of any M&A transaction and should not be considered a failure in any capacity. It’s just a part of your evolution.

Greg’s Final Word As a leader, have you ever asked yourself, “Why do people choose to work together in this firm?” The key word here—which helps define your culture— isn’t “choose” but rather, “together.” You may offer attractive compensation packages, great benefits or flexible hours, have an impressive reputation or an

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enviable location, and all of these things may play a part in why people want to work at your firm. But it doesn’t answer why your people choose to work together to help the business succeed. If you asked them today, do you think people would say that they feel challenged and inspired by their teammates? Is there a sense of respect and admiration that is shared among peers? Do you believe that people look forward to coming in to work because they take pride in what they do and they feel appreciated by their fellow employees? If you can’t confidently answer “Yes” to these questions, that in no way means you are failing. Culture is fluid, and like advisors, our firms vary by personality, by goals, even by whom we serve. If your work culture wasn’t designed to focus on the “together” part, that in no way means you cannot succeed. The questions you might ask your team about why they choose to work as a team may be more related to financial gain, healthy competition or a shared vision to expand the business. Whatever your goals, it’s important to keep in mind that whenever you’re merging two firms into one, you must consider that people have different needs in order to feel appreciated, inspired and motivated to work with their new colleagues. Investing time during the implementation phase to assess your people for cultural fit is just as important as understanding how well they’re technically equipped for their new roles. In our deals, we’ve always made an extraordinarily concerted effort by person to assess everything from priorities to personalities to job performance and potential, and we take care to align the firm’s needs with a clear, positive path for that individual. We address up-front that we understand their fears and their concerns and we are as clear as possible about how we believe they can either succeed in the firm or if their best path is elsewhere. Skipping this crucial step during the integration is, I believe, a big miss for advisors in an M&A event. What ends up happening when you assume people will simply plug in and continue to serve the firm is that you’ve swept under the rug people’s natural instinct to react negatively to an unknown future. Even if you’re a well-oiled operational machine, if you don’t address the change with each person—size does not and should not matter—you can expect to have turnover. You may lose out on some great people who were unknowingly slotted into the wrong roles. You can also expect dissatisfaction, confusion and a quiet, dangerous erosion of your culture. If you think all of this “people stuff” is a time commitment, you’re right. Though you should invest time to get to know your people to make sure everyone is in the right seat on the bus, this doesn’t need to be a painful process. It’s exploration of opportunity you may not have uncovered, and it only serves to protect your cultural values. With key people in place—champions

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like Cynthia and Channing, included—we’ve created a roadmap that allows us to factor in this time that we spend on each employee. We still make mistakes along the way, of course, and some people require more time than others. But with a little help from those who are really tuned in to emotional intelligence (EQ), we have been able to sharpen our timelines and speed up our processes to both take care of our people and keep our integration on track.

Case Study: Matching Values, Two Interpretations The Deal In October 2018, ten months after acquiring Seattle’s Lakeview Financial, Private Ocean made a second acquisition of San Francisco-based Mosaic Financial Partners with $620M in AUM, two locations and 20 employees. Mosaic was re-branded as Private Ocean and continued to operate in its offices in San Francisco and Walnut Creek.

Profiles Private Ocean Wealth Management

Mosaic Financial Partners

• Founded by Greg Friedman and Richard Stone in 2009 as part of a merger • 29 employees in one location • $1.5B AUM • Served affluent individuals and families in Northern California and the SF Bay Area

• Founded in 1987 by Norm Boone • 20 employees in two locations— San Francisco and Walnut Creek • $620M AUM • Served individuals and families in the San Francisco Bay area

Background Several years prior to the acquisition, Private Ocean CEO, Greg Friedman, and Mosaic Financial Partners’ founder, Norm Boone, had a dinner at Fisherman’s Wharf in San Francisco. Norm was looking to plant the seeds of succession, and had begun considering external buyers that would offer continuity for his clients and employees. Greg was also putting into place a growth and succession path for Private Ocean, with M&A playing a key role.

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The acquisition of Mosaic provided Private Ocean with a stronger position in San Francisco and the North Bay and East Bay areas, noting that multiple locations were important to meeting investors on their turf as “there are a lot of bridges out here and people don’t like to cross them,” Greg said at the time. Greg and Norm had known each other for many years, and coincidentally, Norm began his financial advisory career over three decades prior to working at Salient, the firm that merged with Greg’s firm to form Private Ocean. Norm left Salient to start Mosaic. Both men agreed that there was great philosophical alignment when it came to financial planning, investment management, client service and technology. “We put a lot of effort into investment management but we start with planning [2],” Greg said to WealthManagement.com when the acquisition was announced. “And if you look at our technology stack you will find about 80 percent alignment in what we use.” That tech background was another similarity that was unusual for advisors at the time but offered a competitive advantage for Private Ocean. Greg was the founder and former co-owner of Junxure CRM, a fintech firm that he sold to Advisor Engine the previous year. Norm and his wife, Linda Lubitz, had owned IPS AdvisorPro, which they sold to Fi360 in 2013 [3]. Those similarities also extended to their enterprise mindset, said Channing Hussey, Private Ocean’s Director of Operations. “You saw it in the benchmarks and in shared best practices. It was less about getting people on the same page and more about how we achieve alignment with what had already been accomplished in both firms.” From Mosaic’s perspective, they had already been pro-active in communicating early and often that the firm was searching for a buyer, said Channing. The message was clear that the deal was focused on caring for their clients, their employees, and meet a financial threshold that would satisfy the principals at the firm. The acquisition was completed on October 1, 2018, and facilitated through David DeVoe, managing director at the investment bank DeVoe & Co. At the time, Mosaic had 20 people on its staff, a handful of whom did not transition due to redundancies. In the span of ten months, Private Ocean doubled in size to more than 50 employees in four locations.

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Cultural Challenges On the surface, Mosaic’s values matched Private Ocean’s Guiding Principles nearly word for word, said Channing. But how those values were interpreted was widely different. Part of that disconnect came down to location. “There is a social culture and a work culture,” Channing says, “Working in a fast-paced city like San Francisco, you attract a certain type of employee who serves a distinct type of client. The values Mosaic upheld were driven by how they delivered on services that met those clients’ needs. You could say it was more ‘formal’ in nature, though we all shared core beliefs.” Once the deal was set into motion, Norm specifically assigned all acquisition activities to Channing and Sabrina Lowell, Mosaic’s then Chief Operating Officer. Three months prior to closing, Greg and his Chief Operating Officer, Susan Dickson, began holding regular meetings in the Mosaic offices to work out the details of the acquisition. They also began meeting with individual employees. “I believe it was beneficial that Greg and Susan didn’t ask too many questions up front about the employees, and this was intentional on their part,” Channing says. “They wanted to get an unbiased sense of the culture and our people, paying careful attention to any red flags that popped up along the way.” One of those red flags, Greg says, was underestimating people’s varied reactions to and acceptance of change, even though it was anticipated. “We took for granted that our values were so similar on paper and that the team would quickly embrace great change with positivity,” Greg said. “We overlooked some things that should have been addressed sooner in the process.” On Mosaic’s side, change came fast and furious on multiple levels. First, there were significant shifts to titles and structure. Mosaic had financial planners and Private Ocean had tiers of advisors. Mosaic had more layering in the areas of administrative support. According to Channing, a number of people expressed that they felt demoted because of their new titles. There was skepticism in the beginning that this move was as beneficial for employees as first described. “We certainly faced challenges integrating our cultures, and this was due in large part to all of the changes that were happening so quickly on our end,” says Channing.

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Solutions To overcome feelings of doubt and soften the impact of the myriad of changes, Channing says that she and Sabrina created an extensive analysis of each employee for Greg and Susan to review. From those assessments, the group put together an overall package that they presented to employees in interviews. “Having that complete analysis gave us the tools we needed to discuss everything from benefits to compensation to bonus structure,” said Channing. “When it came to title shifts, for instance, as long as we could show a 5% net benefit to employees, whether it was enhanced health benefits, more vacation time, expanded responsibilities, etc., they were ecstatic about the move. The issue was really more about perception than the truth, and each person needed to see how this change was truly in their best interest.” While outward change seemed disruptive for employees, the work behind the scenes to transition the team was considerably more complex for operations and human resources. As Mosaic was officially shutting its doors, it had to “terminate” its employees, close out their 401(k)s, and consider any tax implications, insurance coverage and vesting schedules. “Each employee that was eligible to transition to Private Ocean received an offer letter, and they were given a week to make a decision,” Channing said. “A lot of work went into those letters before they were distributed. We had a lot of conversations with each person about compensation structure, retirement accounts, and bonus schedules. We tried not to restart social security and California disability coverage. The big picture we tried to give everyone was that while we recognized the change meant some amount of compromise, the benefits far outweighed the changes they would experience in the short-term.” When a Mosaic employee signed their job offer and officially became a Private Ocean employee, a celebration was held in the office welcoming them to the team. They were greeted by new teammates and sent congratulatory messages. It was important that “every single person was celebrated,” Channing said. Not everyone was a good fit for the new organization, and Channing and Sabrina had made considerations for those people as well. Another purpose of the employee analysis was for their own assessment into Mosaic’s productivity, workload and compensation. Some people’s roles were determined to be duplicitous in the new company, and they were not asked to join the new firm. Others raised red flags about cultural fit, but no one was initially denied an offer based on this factor.

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A celebration was held for the Mosaic team on the day the deal closed. Then again at one month. The constant celebration, which led quickly into the holiday parties for both the firm and its clients, gave everyone a strong sense of positive momentum that it was a new beginning with great things on the horizon. “Everyone we met at Private Ocean from the beginning was best-in-class and extraordinary,” said Channing. “They really lived their guiding principles, not just in their work but in their interactions.” Rebranding happened almost immediately, with new signage, new collateral, new business cards and other materials to welcome the team to Private Ocean. “It may sound operational, but it made for a tangible shift for everyone, signaling that it was a new day,” said Channing. Greg gathered the team in San Francisco in that first week and handed out plaques engraved with the firm’s Guiding Principles. He reviewed each of them, and asked for examples of each one that people had experienced from their new teammates in San Rafael and Seattle. “I felt like it was a real eye-opening moment for them,” Greg said of that meeting, “Because it’s one thing to read words and another to realize that people are exemplifying these things in everything that they do.”

Conclusion It’s human nature to seek commonalities, and this applies often in M&A. When meeting with potential partners, especially when the finances aligns with firm goals, advisors can overlook gaps in favor of what appears to be shared values. The key is communication—and taking your time to really understand the culture and individual people’s needs before making any moves forward. Often in these deals, some changes may seem like operational details, but they do irreparable damage if overlooked. Things like compensation and bonus structures, time off, work schedules, benefits and titles may all symbolize something different from one company to another. Setting the tone before the deal close, including the care and consideration into bringing people over from one firm to another, can determine whether employees dig in and adopt their new environment or begin searching elsewhere for a more suitable position. Some of the most important things to consider when bringing people together:

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• Pick leaders. While the process integrating and onboarding Mosaic was incredibly collaborative, the proceedings were largely driven by two trusted members of Mosaic’s leadership team in concert with Private Ocean’s executive leadership. People need to know who to turn to for guidance and direction; someone who lays the path and says, “This is the way.” • Encourage employees to speak up. There will, no doubt, be difficult conversations along the way during this process. Discussions about money, personal time, where and when we work, our titles and our health benefits can seem daunting during an uneasy time of great change. As leaders, it’s important to encourage these conversations with pointed questions, especially as they are most likely to know what matters most to their people. • Distinguish red flags from red herrings. A crushing mistake many firms make during these deals is in who to invest in when bringing people over to the firm. Change affects people in different ways, and it takes time to assess that some great people are simply in the wrong seat on the bus, or if they don’t belong on the bus at all. While there is no crystal ball that hurries this process along, there are factors to consider that can help determine when to invest and when to let go. Performance, attitude, aptitude and outlook are all early indicators of an employee’s potential success. The lesson is that sometimes you have to make a decision based on your long-term goals even if it’s painful in the short term.

References 1. Birkman Method, The. The Birkman Method, 28 July 2020, birkman.com/ the-­birkman-­method/. 2. Janowski, Davis. “Private Ocean Acquires Fellow Bay Area RIA to Create $2.2 Billion Firm.” WealthManagment.com, 25 Sept. 2018, www.wealthmanagement.com/ industry/private-­ocean-­acquires-­fellow-­bay-­area-­ria-­create-­22-­billion-­firm. 3. fi360. “fi360 Acquires IPS AdvisorPro.” PR Newswire: News Distribution, Targeting and Monitoring, 29 June 2018, www.prnewswire.com/news-­releases/fi360-­ acquires-­ips-­advisorpro-­228166891.html.

6 Timelines and Blueprints: Nurturing Your Integrated Culture

Cynthia’s Perspective… In October 2018, Private Ocean had just completed its second acquisition in eight months. It was an exciting time for us that doubled the size of the firm and expanded it into three additional locations. As you can imagine, we were riding high on momentum and morale. After all, we felt we had done our homework on the front end of these deals and checked off the list of cultural must-dos on the back end. On the surface, this seemed to be the case, as people expressed gratitude for the thought and care put in to the transition, as well as enthusiasm about our upcoming annual retreat. By the end of 2018, the firm began shifting its primary focus to meeting integration goals for technology and operations while preserving the integrity of our service to our clients. We also continued to look for opportunities to bring people together, as we knew all too well that even though the ink was dry, our combined culture was still taking shape. Over the years, one lesson that we have learned is that when it comes to culture, sometimes issues appear when and where you least expect them, and only after lingering undetected for some time. While it may seem clear that some people need extra time to adapt to change for instance, others might be less obvious in their unhappiness or uncertainty. A slight change in process, for instance, might set off a chain of tiny reactions that brings something to the surface. That then affects other people, and how those people communicate or act is a direct result of the work environment that you have created. If all of that makes your head spin a bit, that’s normal. A firm’s culture is ever-­ metamorphosing, and while it must evolve to continue meeting your needs, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6_6

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it’s also important to recognize when you need to stop and put down stakes in order to preserve your foundational values. As people are the key driver of your culture, one common unknown factor of these deals, which Greg has mentioned in previous chapters, is that sometimes it takes time after a deal to find how and where people fit best “on the bus.” When two firms are about the same size and roles are clearly defined or similar in nature, the road to integration might be slightly easier than say, a large firm that is more evolved and specialized in their roles acquiring a smaller firm where employees wear lots of hats. Suddenly the people in the smaller firm are giving up control of responsibilities and perhaps finding themselves with new identities, which can lead to some people feeling disconnected. If communication isn’t open and leaders aren’t asking, many times they don’t realize that the employee is unsatisfied until they give their notice. This is just one example, but the lesson to learn here is that while you may think you’ve taken all the right precautions to ensure employees feel included and are excited about a merger, you won’t actually be able to gauge the impact for some time after the deal is done. Assuming there is no way to predict if and when these issues will arise, how long should a firm take to realistically come together culturally, and what are some things that can be done to continue nurturing an environment with engaged, motivated employees? The answer to the first question, from our experience, is that the base timeline is between two and three years after a deal closes. You read that right—it takes much longer than you think to absorb the changes, integrate, and then function at your highest efficiency. Here’s a sample timeline breakdown: • Day 1: The deal closes. Due diligence is complete and you’ve signed the deal. You’ve also laid the groundwork for your integration strategy. Announcements are made. Celebrations are held. Business signs go up, business cards and letterhead are ordered. Technology tools have been assessed and processes have been set up. You’re ready to go! • Day 1–90: The first three to six months is a whirlwind of excitement, and you’re mostly focused on getting everyone up and running, whether you are trying to come together as one team, or establish the new team under new leadership. Training takes place. Benchmarks are set up for achieving technology integration goals. Strategies are laid out for rolling out and communicating changes to clients. You are putting your best foot forward, and at this point, everyone may seem like they’re along for the ride. • Day 90–Year One: Between the six- and nine-month mark, you start to see people slowly coming together. Through work activities and regular ­interaction in person or virtually, people naturally begin building relation-

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ships and expectations. In any situation, it takes a while for people to know what’s real, and over time, their perception of their colleagues and leaders begin to change. It’s typically during this time that you also begin identifying cultural issues, that is, those who are most resistant to change or who are struggling to adapt. At this stage, the honeymoon phase is ending, so there is a premium placed on being consistent with your behavior and your cultural values. If your environment is one of leadership commanding control to get the job done, stay consistent with that stance. If your culture is warm and nurturing, be consistent. You want people to count on you to be who you say you are; it’s far too easy for people to simply relapse into what feels normal and comfortable to them. • Year One–Year Two: Depending on the deal and your situation, you may be well on your way to solidifying your culture and seeing people working effectively as one strong team. But from experience, it is often a two-steps forward, one-step back journey. Greg has said that at this stage it may feel like some things work against you at times, stemming from basic human nature to expected and unexpected business disruptions. This period is when you should really be staying focused and address any minor issues as they appear. Also, at any given time, people may be dealing with personal issues that they don’t freely share because this is a “busy” time; being sensitive and aware of your people and checking in regularly can reveal possible speed bumps in the road to integration. • Year Two and Beyond: The positive thing about Year Two is that by now, you likely have a strong handle on your identity—its strengths and its opportunities. You know where you need to spend time developing business and you know what pockets of people, process and technology need more guidance and attention. The downside is that you are also fully aware that you have inherited and developed issues that didn’t exist before the deal, and some of those may be complicated, sensitive and far more difficult to resolve than you first imagined. These shouldn’t be considered missteps or roadblocks, by the way. They come with the territory of merging or acquiring with any firm (similar to a family, we all come with our quirks!) What’s important is to stay diligent and committed to addressing those problems rather than kicking the can or avoiding them altogether. The fallout from these issues—when ignored—can be monumental in both the short and long term, effecting both business productivity and profitability. To answer the second part of the previous question, “what are some things that can be done to continue nurturing your culture?” it first takes a bit of self-reflection for firms to identify what culturally has been meaningful to

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employees before, during and after this process. This may include the physical environment, group traditions, unique perks and benefits, visual symbols and “legend” stories. At Private Ocean, in addition to consistently reinforcing our Guiding Principles and holding twice-yearly off-site retreats, we have regularly scheduled volunteer days serving our communities, we’ve planned ongoing social activities, and we’ve taken great care to bring people together across office locations as much as possible. These activities have been widely appreciated and expected, in some cases becoming firm-wide traditions that give employees bragging rights with their families, friends and professional network. The key has been consistency and care, with our leaders serving as role models for the culture. And speaking of role models, we’ve taken things a step further by creating an established group of leaders—our Expanded Leadership Team—that represents each area of the company. Greg has often said that he never makes business decisions about the firm in a bubble. He values and solicits feedback from his leadership team, and the formation of this particular group was designed to bring to the table on a regular basis the most pressing issues of each department. It also provides the rest of the firm exposure into the current projects of other areas and locations, and gives an impression of inclusion, advocacy and representation among other leaders. The format for these meetings is straightforward. They occur monthly for 90 minutes, and each leader representing their area of the company gives a report out of the team’s work. Unlike an all-hands, in this more intimate setting, leaders can address more sensitive topics such as employee engagement and workload concerns as they relate to their projects. By bringing different perspectives to the table, Greg and his executive leaders can make informed decisions about appropriate messaging to the rest of the staff that is thoughtful and intentional. While I acknowledge that at 50+ employees, Private Ocean has the luxury of bringing together a group of people in this capacity, this concept is less about what every advisory firm should do and more about being creative in capturing key voices that contribute to your firm’s unique culture.

 he Blueprint: Seven Impact Areas to Continue Nurturing T Your Firm’s Culture Every firm is distinctive, from its leadership to its culture to its clients. There will never be a “one-culture-fits-best” for RIAs, and often that is a key reason why we decide to take a position in a certain firm, or why our clients choose

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to work with us. Naturally, we all want to surround ourselves with others that we can relate to on some level, whether it is personal or professional. The RIA industry’s cultural spectrum is vast and layered, but there are general aspects of business operations that any firm can leverage to help cultivate the corporate environment and instill its core values. Here are seven considerations to keep in mind to help cultivate and preserve your foundation as your firm grows and evolves. This is obviously not an inclusive list, but does cover some of the areas we use as opportunities to cement our ideals with our employees, and on a higher level, with our clients and our partners: 1. Leadership 2. Hiring & Recruitment 3. Goals 4. Processes and Procedures 5. Physical Space 6. Group Activities 7. Internal Communications

L  eadership Leadership and culture are eternally tied and interdependent. Culture functions as a living, breathing entity that finds its shape and grows based on the elements of its environment. Leadership provides the roots, water and sunlight for that entity, and factors like where and how it’s planted, and more importantly how it is cared for and by whom, all play a role in whether or not it flourishes or withers (Fig. 6.1). When it comes to nurturing culture and continuing to express the firm’s values, everything starts and ends with leadership. These people should expect to walk the talk, be authentic and communicate the firm’s values often through words and actions. Some examples for leadership to implement on a regular basis include: • Consistent tone and language in conversations, meetings and via email • Recognition of accomplishments—both small and large • Repetition of integration goals (both short and long term), how they align with your values and the benefits to your employees • Outreach to individual employees when possible to check in, with no agenda • Drop-ins on smaller group gatherings or department meetings

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Fig. 6.1  Productivity & profitability: how leadership influences macro and micro culture

• Organization of social/extracurricular gatherings to give people opportunities outside of work functions to connect • Encouraging conversations about personal growth Leaders should also be sensitive to the micro cultures that exist within the larger framework of the company. These are often overlooked and often they are nearly as important as the overall culture. I’ll explain. Differently from a hand-picked team of people that you choose for one department, an integrated team from an M&A event brings together people from two previously different firms and different cultures. For example, a client services team may add five new people to a team of ten. Those five people go through two rounds of integration—into the firm and into the department. They have new executive leadership and new supervisors. They may find where they fit into the bigger company picture, but they might struggle to find their identity within their department. It could also be the other way around. In some cases, those five people might carry great influence that affects the original ten—completely changing its dynamics. Either way, these smaller groups can morph quickly. How we act and feel within smaller circles with our peers who perform similar job functions is different than how we present

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ourselves in a larger group. And each of these sub-cultures plays a key part in shaping the firm’s culture. It’s important for leadership to stay connected with supervisors on how each integrated group is evolving and intervene if necessary.

Hiring & Recruitment One powerful way to communicate and preserve your cultural values is during your hiring process. Greg has long advocated and practiced a multi-­layered hiring approach that has played a large part in creating a “dream team” of individuals who are loyal, high-performing and share the same values as their peers. Some employees have been with Private Ocean since its inception; others were part of one of the original two firms before they merged in 2009. It’s not uncommon for the team to celebrate the 18th or 19th work anniversary of a colleague! Traditional methods of hiring rely heavily on skills and resumes. The most impressive candidates are filtered through human resources, and then invited to come in and interview with their prospective supervisor. That supervisor then decides on the hire. Our strategy is 50% skills and 50% cultural fit. Greg would say that you can teach skill but you can’t teach heart, and I agree with him. In the past decade, we’ve implemented a process that is definitely more time consuming and involves quite a few more people, but the results have paid off immensely in selecting candidates that are best suited for the firm and stay for the long haul. How It Works 1. Candidates are filtered for skills, experience, education and so on, as well as what isn’t in the resume. A cover letter can speak volumes about someone’s motives for seeking a position, from canned graphs about “wanting new challenges” to starting a new career path to relocating to the area. An interesting note about my experience working with Greg and the leadership team at Junxure and at Private Ocean were the number of people who were 180-degree career changers. That commonality gives people a fresh perspective about their roles and our industry that has often been very beneficial for the firm. There is also something inspiring about people who are willing to take a risk and start over mid-career because they have passion for it. 2. The first phone calls are typically with our human resources representative. Before the firm invests the proper amount of time in a candidate, they are vetted in a phone interview about their background, their experience and their interest in the role.

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3. The first, second, perhaps third meetings are held in succession and evolve over the next few weeks. The amount of time spent may vary based on the role in the firm, but nearly everyone goes through a series of in-­ person interviews to gauge many things including cultural fit (advisors also go through a technical interview to assess their knowledge and their approach to what they do). Is there natural rapport with this person? Do they value the same things that we do? Do they seem eager to please or eager to learn? The meetings may include operations team members, direct supervisors and potential teammates and other leaders or colleagues in the firm. The interviewers are given the candidate’s resume ahead of time, and afterward they share their feedback. Care is taken not to overlap questions too often, but asking a question several times might solicit different answers. Nothing is wasted in these meetings. 4. The offsite meeting. By this point in the process, we typically change the scenery. We recognize that the candidate is investing as much time as we are in these interviews, so we will intentionally meet offsite, usually for a meal. The objective here is for people to begin naturally letting down their guard. Over lunch, people start talking a bit more freely, perhaps, and let their true colors show. The takeaway is that you can assess a lot about someone’s character by how they treat others. 5. Lastly, everyone who has met the candidate offers their input and leadership helps determine if the candidate is the right fit. I can say that in the few instances where the firm rushed to hire a candidate, it’s led to some issues down the road. It’s in your best interest to slow down and take your time during the process of adding new people.

Goals What better way to reinforce your values than through the quarterly and annual goals your firm and your employees set for themselves? At Private Ocean, we use something called the Golden Thread concept, first shared with us by Andy Elkind of The Elkind Group, where we envision how each of us and what we do affects and is connected to everyone else. We all make a difference, we all have our unique contribution, and we are all accountable for the success of the firm. Using this approach, people understand our vision, understand the role that they play in creating success, and they have the metrics to help them achieve their personal goals that funnel upward toward the firm’s goals.

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As part of this Golden Thread, we use a “Four Sail” category system to help people determine what area of the firm’s success their individual goal falls. This changes over time, but these may include operational excellence, company growth, client experience and employee engagement. From there, employees work with their direct supervisors to create SMART goals (Specific. Relevant. Measurable. Attainable. Time.) every quarter. Check-ins are scheduled to make sure everyone is on track. Creating a “Golden Thread” Concept As a firm grows, it can become more challenging for individual employees to understand how they contribute to the overall goals of the firm. In a smaller organization, for example, one person might be responsible for answering phones, managing the office and even serving clients with basic needs. When a firm doubles in size or adds locations, those responsibilities may be divided up differently across many people. Some senior-level people might advance to a managerial role. Others may find (as was in our case), that their calling lay in completely different roles within the firm. Some questions that arise during periods of growth and change including an M&A event include: “How am I making a difference in the firm’s overall success?” “How do I know if I’m managing my time and prioritizing work based on what’s most important to the firm? “Do I still feel like this is the role I signed up for before the merger?” “Am I challenged and feel like I am growing in my career?” The Golden Thread concept was designed for employees to visualize how their individual goals are tied to team goals, department goals and ultimately the firm’s success. It starts with sharing the firm’s goals for a given period of time, for instance, the firm goals may want to achieve 98% client retention rate. Each department should discuss with their team how they can contribute to client retention. Which efforts make the biggest impact in client satisfaction? What communications help nurture a relationship and which activities exemplify value? From there, each employee works with their direct supervisor on what their individual goals are to help the firm achieve that goal. Below is an example of how this works from the perspective of a client services team:

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2020 Firm Goal: 98% Client Retention. Department Goal: 100% response rate to clients within two hours of contact. Team Goal: Proactive outreach in concert with client services team twice yearly to clients regarding individual tax needs, charitable/gifting obligations and RMDs. Individual Goal: Personal touch points quarterly to clients via email, phone and video conference. When you’re in a larger organization, or one that is growing rapidly, it can be easy to feel disconnected from the larger goals of the company. It can also be challenging to understand how one contributes in the growing firm and how they should prioritize their responsibilities. The upward funnel visual of the Golden Thread gives employees a clear sense of contribution and how their role (and the roles of their colleagues) are all inter-connected, and it also offers management the added benefit of implementing a way to effectively help employees manage their time and activities that feels purposeful.

Understanding Competition (Greg’s Perspective)

We are all naturally competitive, some of us more than others. Depending on your firm’s atmosphere, this may be something you encourage or discourage, but it’s not something you should pretend doesn’t exist. My approach has been to accept that some people are more competitive than others and are even personally motivated in some cases to compete with their peers. It’s all about understanding what drives different people to do their best and creating an environment that is flexible enough to allow different types of personalities to succeed. Everyone has their individual strengths, and as a leader you want to tap into those by finding what inspires people to perform at their best and highest level. My goal is to help build the right career path for each person based on their skills and aspirations, not how they measure up against one another. I’m also keenly aware of how goals, performance and compensation are tied together, so it’s important that bonus structures are based on individual goals rather than team goals, with an added layer of performance of the firm that benefits everyone. This has strongly influenced our culture to be collaborative and supportive, with employees admiring the strengths of their peers and viewing these as an asset for the entire firm.

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Processes and Procedures An obvious area to make an impact on your culture is in your operational policies and procedures. It’s important to address both firm’s policies before an M&A event, and again sometime after the deal is done. It’s important to review where both firms overlap and what factors carry the most weight, and then determine if there are areas where you need to adapt to evolve with the larger group. The key is to offer clarity and a guide for employees to follow. The elements of operational process to consider would encompass: • • • • • • • •

Organizational Chart and Hierarchy Dress code Benefits Package Work Hours and Remote Work Policy Time Off and Holiday Schedules Performance and Bonus Structure Reward and Recognition Programs Growth Opportunities (Educational Reimbursement, Promotion Process) • Community Outreach (Volunteer Days, Charitable Matches) • Planned Team Building Activities (In and Out of the Office)

Internal

Additionally, this should also include the firm’s hiring practices, the firm’s stance on current social issues (as appropriate) and available communication and feedback channels for employees. It’s important to pause here for a moment and think about process as we grow from M&A activity. It’s natural and necessary that as a firm gets larger it requires more structure to stay on track and move forward with discipline. However, too much process can start to feel alienating for everyone on the firm—both those who were part of the original organization and the employees who transitioned from the acquired firm. Here is an example: Imagine a firm run by two principals whose culture largely valued the engagement and inspiration that the two owners provided to their team. They had found a true cocktail for success and were growing quickly, which enabled them to acquire a smaller firm. They took great pains to put many processes in place that would allow them to step back from an operations level and have middle managers resolve any issues along the way. If there was a problem, they had a process to solve it. Quickly, however, employees felt cut off from the owners, whose presence in the office seemed to

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decrease and whose doors were now often closed. Culture became more policy-­driven and influenced by middle managers with far less experience and charisma. In the end, engagement dropped and turnover picked up. The lesson here is that it’s important not to lose sight of what made you successful in the first place, and explore ways to preserve those elements as you continue to grow and make necessary changes to streamline business.

Physical Space One of the key ways to integrate culture is to create a consistent experience in different offices—in Private Ocean’s case, we work hard after a merger or acquisition to quickly change signage, colors, collateral, and even front desk and workstation layouts to better align with our culture and establish that this is a new day. I believe we take for granted how impactful our physical offices are on our culture. Not only do they make a first impression with our clients, it’s also where we spend a good portion of our lives together. It tells your story and shapes the client experience, it affects our behavior and how we interact with one another and it creates an unspoken code of conduct. Our space also accomplishes something quietly that other elements of culture do not—it sparks all of our senses. Imagine a time when you walked into an office—maybe for a doctor’s appointment, an accountant or for a business meeting. From the first few seconds you walked into the building, your senses were absorbing elements that helped shape your first impression. The art on the walls, the people walking around you, whether or not there was music playing in the elevators. Taken one by one, some of these things may seem more trivial than others, but as a whole, how you perceive that business was inadvertently shaped by how you felt—even before anyone said hello. Here are elements of our physical spaces that play a role in shaping culture. • Location and Building. Your actual address including the building are like the cover to a book. What part of town are you in? Is it convenient and easily accessible or is the traffic so bad that clients feel anxious anytime they need to come to your office? Is there nonstop construction across the street or is the area run down? Is your office on a desirable street lined with cafes and other convenient services? What about the building? Is it well-­ maintained? Modern? Clean? Is it WELL or LEED Certified? Is there front desk security or a concierge to greet your guests and employees? If you

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asked your employees candidly, would they say that they are proud to work in that location? • Ergonomics. The American Society of Interior Designers (ASID) in 2017 partnered with Cornell University, Delos, and the Innovative Workplace Institute to research the impact of design and ergonomics on the workplace [1]. From their findings, they deduced that workspace design affected the employee experience which then impacted productivity, retention, employee health and the firm’s overall ROI. Ergonomic elements include: –– Lighting. I assure you that anyone who has worked in an office will lament the effect of bad lighting on their overall mood. The ASID’s study on workspace ergonomics noted that 68% of surveyed employees were dissatisfied with the office lighting. Harsh lights can feel as if you’re in a dentist’s chair and dim lighting can be harmful on the eyes. If you work in an office and you notice people bringing in desk lamps from home or who seem to work in the dark, you may have an issue at hand. Natural light is always preferred, but daylight bulbs and light matte paint colors on walls can be useful tools also. –– Temperature and air quality. Raise your hand if you’ve worked in an office where you wore a jacket or sweater all day in the middle of July! Or if the temperature regulated sections of the office space where one employee prefers the Arctic while the other prefers the Sahara. Both the temperature and air quality of an office can make an impression nearly by themselves. The Occupational Safety and Health Administration (OSHA) recommends that indoor work environments be between 68 and 76 degrees [2]. –– Acoustics. Noise pollution is a top distraction to productivity. Office chatter, phone calls held on speaker phones, the sound of keyboards rattling, chat beeps, email dings, mobile ringtones and even mechanical sounds from servers or HVAC systems can add a lot of disruption to your workday. It’s not so easy re-designing your workspace to accommodate all of this noise, but taking a few shortcuts could make a real difference. Furniture placement, partitions between workstations and workarounds to give employees in close quarters areas to have private conversations can be useful. Also, sound bounces off hard surfaces, so installing softer materials such as acoustic panelling on walls and ceilings can reduce noise. –– Colors and Décor. There is a science that ties emotion and color, and it’s no wonder that many RIA firm’s use the same palette of colors to symbolize stability, trust, knowledge and wealth. The same could be

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applied to your space. What colors are the walls? What type of artwork have you selected for hallways and office spaces? Are there plants or other signs of organic life? Is the furniture consistent across the office, in neutral tones and a more traditional style? Perhaps it’s more modern and minimalistic, with pops of color. Paying attention to these details can help you set a very intentional mood. –– Workstations and work areas. Do shared workspaces encourage collaboration or conversation, or do they feel boxed in and isolated? Do teams sit near each other or are they spread out across the office? Are offices prevalent or is there an open layout? Are employees offered tools that protect their health such as ergonomic keyboards, chairs and standing desks? • Waiting area, conference rooms and hallways. Your front desk area is another place to communicate both your brand and your cultural values. Everything from how your receptionist greets people to the type of refreshments you offer to keeping jars of firm-branded candy on the counter to setting magazines on a coffee table with advertisements for the firm. At Private Ocean’s home office, for example, our front desk area features a large fish tank as well as plaques from several ocean-life preservation non-­ profits that we sponsor. The artwork down our hallways includes nature-­ focused pieces by our talented clients. Our conference rooms are named after bodies of water. Also, we make a point to keep our office doors open throughout the day, and we encourage people to greet others as they walk down the hall. Every one of these elements makes a difference in conveying your brand and your culture.

G  roup Activities In our experience, there is nothing more advantageous than coming face to face to help break down barriers and form solid relationships. When that’s not possible (see Chap. 8), you can still bring people together without physically being in the same room. Here are some suggestions for group activities to build cultural awareness and improve cross-culture communication. There are so many of these to choose from, but these have been memorable for us in the past, in particular in our first gathering after a merger or acquisition. • Ice Breakers—These can be five-minute activities held at the start of a group meeting that involves one-question, such as, “What did you want to be when you grew up?” and “What was your most memorable childhood vacation?”

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• Listening/Not Listening—At one offsite retreat, we divided the room into two groups. One group was to listen, the other was to share a personal story about themselves. In one scenario, the listener was instructed not to interrupt the speaker, and at the end, ask questions and then summarize what they heard. In the second part of the exercise, we switched roles. However, the second group of listeners was instructed to interrupt constantly. The takeaway was on how important it is to let people feel heard. • Three Takeaways—This is a fun speed activity, where we pair everyone up on the team and give them each 60 seconds to share three things about them that is unique. When both pairs are done, their partner has to repeat the three things to the team. We have learned lots of fun and quirky things about each other this way, and it really helps break the ice immediately after an M&A event as we find things we have in common and things that are new and interesting that makes us unique. • Investigative Reports—Each person is assigned a secret subject, that is, a fellow employee, to do a mini report. The questions they try to answer might include, “What has this person achieved in the last year that has helped the firm grow?” “What challenges did they overcome to get there?” “What would you say are this person’s greatest strengths?” and because we tie everything to our Guiding Principles, “Which Guiding Principle has this person most exemplified?” The work then comes down to the “reporter” interviewing people who work closely with this person to get answers. The result is that we learn more about someone we may not work with on a daily basis, and our colleagues are given an opportunity to share positive experiences working with their teammates. • The Group Project—These are fun, social opportunities to work together in teams to create something. It may be a holiday-themed (we have grouped people together to create gingerbread houses at Christmas, for instance) or games-based (think trivia teams) community-focused (volunteer groups) or based on meal-prep (at retreats we have teamed people to create a portion of a meal for the entire company). In any case, it’s an opportunity to create an air of friendly competition while also grouping people who may not normally work together.

Internal Communications As people settle in to their roles and your business finds its new groove, a key part of continuing your momentum is through various forms of internal communications (and not just from leaders or in meetings). While leaders should certainly drive this initiative, it’s also encouraging to hear from other voices in

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the firm based on their role. For instance, helpful technology tips are better served coming from the IT director versus the CEO. Examples of internal communications include: Internal Newsletters and Updates Perhaps most accessible and easy to create is the timely internal newsletter or other digital communication that keeps employees in the loop on news about the firm. You might decide to send these weekly, monthly or quarterly, based on bandwidth and information. A few tips to consider when planning these communications: • Make it valuable. Share messages that are relevant and that people find useful. • Make it timely. What you share should apply to what matters to employees today or in the shorter term, not next year. • Make it concise. No one has time to read a thesis on upcoming training. Use bullet points, share high-level details, and refer people to another source if they desire more information. • Make it personal. Internal communications are far more enjoyable to read when it applies personally to the employee or features their coworkers on a personal level. Make it considerate. Don’t send internal newsletters on Monday at 8 AM before a very busy week, or at 8 PM on a Friday. Consider afternoon, after 2-3 PM, on Wednesday or Thursday, when people are more likely to have a little downtime but are still plugged in and in front of their computer. A Firm Intranet or HR Program Gaining popularity are programs that centralize communications and give the team more exposure of what’s going on in the firm. Online HR programs store data about payroll, benefits and company policies, but they can also be used to post message and keep track of firm goals and performance. Intranets and firm “Wikis” are highly customizable cloud-based tools that can be set as the default browser homepage on employee’s desktops in the office. These applications can share information about firm-wide operational updates, reminders on employee to-dos, give status and progress on firm and department projects, and offer an opportunity for employees to collaborate.

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Bulletin Boards and Other Visuals Shared spaces like break rooms and lunch rooms are opportunities to establish cultural values and communicate with your team. You may decide to put up a bulletin board in a lunch room because it gets lots of foot traffic, and post anything from upcoming flyers for company events to fun charitable challenges to discounted movie tickets and other perks. You can also encourage employees to use the board to share their own messages or photos. Maybe an advisor’s teen is giving piano lessons or offering babysitting services. Maybe someone has season tickets to the Golden State Warriors games with a couple of dates up for grabs. Social Media While social media platforms such as Twitter, LinkedIn, Facebook, Instagram and others may primarily target clients, prospects or the public, they are in many cases widely used and shared by your employees. Each platform serves a different purpose and should not be composed of canned content that is copied and pasted across channels. What social media does for employees is legitimize the business, reaffirm your cultural values and give people an easy opportunity to share posts with their networks. For example: • Twitter—is where you post links to blogs, media, announcements and news about the firm. These are typically brief and include a link and an image. • LinkedIn—is also for sharing content including blogs, webinars, podcasts and other content including press coverage but is also used widely for job recruitment and network building. • Facebook—is for Super fans. Here you can be more personal, share images from a recent off-site retreat or congratulate a coworker on a recent addition to the family. (Note—some firms create a private group for employees only. We have seen great benefit in appearing more relatable and personable to the public as it aligns with our brand.) • Instagram—Facebook’s hip cousin, focused mostly on sharing images. Instagram is an excellent way to promote the firm’s culture. Photos from bowling night, happy hours and other fun activities can be interspersed with upcoming webinar promotions or announcements about the firm.

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Greg’s Final Word Management consultant and writer, Peter Drucker, famously said that “culture eats strategy for breakfast,” and I tend to agree with him. The idea is that no matter how much you plan for the success that you want and how many processes you put into place to get there, without an engaged and motivated workforce behind you, you’ll find yourself struggling to get anywhere. There is always a driving reason for why firms entertain a merger or an acquisition. It may be as simple as a principal is retiring and wants to provide a consistent experience and level of care for her clients. It may be that one firm wants to grow rapidly and sees opportunity for that growth by merging with other like-minded firms. I’ve always been sensitive to the situation at hand and understood that depending on the reason, there’s a great deal of patience involved on both sides to assess how people feel, what’s gotten them to where they are today, and what they expect for the future. Throughout the process, there is a balance of being consistent, firm and driven toward integrating while also acknowledging and being sensitive to people’s experiences. For example, there is a time to gather input and be collaborative, but there’s also a time to make executive decisions. Knowing when to do both can be daunting, but it should always come down to vision. Keep your vision on the front burner and use your judgment and your understanding of your people to take steps with caution, care and purpose. Once the deal is done, there is so much work ahead of you to keep people moving forward together. You are no longer the firm you were before, so no one should say “Well this is how we have always done things.” One of the lessons I learned in these deals was that instead of saying, “This is Private Ocean’s way, so let’s do it this way,” I think again about our vision and where we want to go, and accept that positive change means there may be a new way of doing things. Another key lesson I have personally learned is the power of people to help continue the work of cultivating your work environment. Coming together is one thing, staying together is quite another. Part of that comes down to the natural evolution of your workforce over time. Outside forces may certainly influence how your firm’s culture shape shifts over the years, but much of the change is due to your people. Having a strong network of leaders and champions in place will help move things in the right direction so changes feel organic and enhancing in nature. Understanding what should and will change versus what should never change will give you guidance to know when you should hold fast to your

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beliefs and when you should be open to something new. It’s like integrity and ethics, and how one never changes—integrity—while the other, ethics, has evolved over time and in response to social awareness and the changing needs of our society. The same concept can be applied to the changing needs for your growing business versus your foundational values. While some aspects of business and business culture require a pivot or a need to adapt, what should never change— ever—are your core values.

 ase Study: Cultivating a Team Environment— C One Region at a Time The Deal(s) Since its inception in 1997, Wealth Enhancement Group has completed a total of 17  M&A deals, to date all acquisitions that absorbed the acquired firm under the Wealth Enhancement Group brand. Anchored in the Midwest, the firm has added locations rapidly in clustered regions in the Tri-State area of New York, New Jersey and Connecticut, and down the East Coast through Pennsylvania, Virginia, Georgia and Florida. The firm also has a location in Houston, Texas. The most recent deal, as of this writing, was the acquisition of Atlanta-based RIA, JOYN Advisors, Inc. with approximately $1.3 billion in client assets in February 2020.

Profile Wealth Enhancement Group • Founded in 1997 • 17 total M&A deals • 32 locations in 13 states in the United States • 440+ employees • $18.9B in client brokerage and advisory assets as of 06/30/20

Background Wealth Enhancement Group (WEG) is a Greater Minneapolis-based independent wealth management firm offering comprehensive and customized

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financial planning and investment management services. Their expertise is focused on six key areas of wealth management (financial planning, retirement income planning, tax strategies, investment management, estate planning and insurance), and they utilize a team approach that they call the Roundtable™. WEG’s CEO since 2003 is Jeff Dekko, who is responsible for overall leadership, growth and development of Wealth Enhancement Group. With 32 locations in 13 states serving clients across the United States, WEG continues to grow organically and through key strategic acquisitions [3–5]. According to Jeff, every deal begins with finding the right fit. Even when assessing data about a firm (WEG uses RIA Database to research potential firms), WEG looks for points that align with their identity and their future growth goals. For example, they review if the firm is planning based and if the data suggests that the firm is committed to a client relationship that’s based on planning. Also, based on that firm’s structure, they assess the likelihood that the firm has staffed themselves accordingly to deliver on their services. Jeff notes that when it comes to finding potential partners, whether or not WEG identifies the firm or they are approached by a firm, they are always looking at the deal through the filter of how they deliver on their commitments and whether or not they are team-minded partners. When that doesn’t align, he says, it gives him and his team an initial impression about cultural mesh. “WEG is known for its team-driven culture,” Jeff says. “We look for firms that demonstrate that they are collaborative and open-minded. It’s not just ‘the advisor’s way or the highway.’ Our strategy has always been representative to that commitment to teaming.”

Cultural Integration Strategy Once WEG enters into a letter of intent and begins their due diligence process, a team specifically tasked with assessing cultural fit and how to best integrate people begins working with the other firm. Part of that process includes educating the firm on WEG’s values and processes as well as achieving clarity on the definition of service. There are four separate integration leads that cover processes, innovation, business development and operations. “Clients have expectations based on their experiences, and when you acquire a firm, the previous firm’s promises become your promises,” Jeff says.

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The integration team serves as a liaison between the acquired firm and WEG’s centralized planning, investments, marketing and operations teams to help ensure best practices from all parties are effectively deployed to uphold a consistent client experience.

Why Location Matters WEG’s expansion strategy, Jeff says, is in creating a significant, recognizable brand in financial planning that is rooted in creating “heft” in key locations around the country. To date, all of the firm’s acquisitions have been rebranded as Wealth Enhancement Group. A key piece of their service model is in centralizing support teams for advisors. This approach, Jeff says, has helped cultivate a strong team environment that also ensures the best resources for advisors across the U.S.  Location also plays a role in preserving their team-driven culture. “At first glance, if you look at our locations, some of these transactions might appear to be spread out all over the place,” Jeff says. “In actuality, you’ll see that two of our acquisitions were Chicago-based firms, for example, because we wanted to create an immediate sense of scale and saturation within that marketplace. It’s hard to be a team if you don’t have people.” Jeff further explained that they set sights on the East Coast, including the Tri-State area of Connecticut, New York and New Jersey, and completed four deals in that region alone (with a fifth in the works as of this writing) [6]. They then moved down the Coast into Pennsylvania, acquiring several firms before branching into Baltimore and the Washington, D.C. area. “It was never our thinking that we’d put down flags across the United States just to say that we had an office in one particular city or state,” Jeff says. “We target one particular area at a time to create a sense of locality. In the Upper Midwest, for example or on the East Coast, you’ll notice our offices are tightly grouped—and this is absolutely intentional. This also aligns with our service approach, offering resources that cross-pollinate, such as advanced planning groups or advanced investment groups that might be supporting advisors in Northern New Jersey but located in New York.”

Fundamentals of Integration • Expectation • Continuity • Communication

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Expectation Jeff recalled being at an industry conference four or five years ago where he was speaking on M&A topics and was surprised to hear that some advisors discussed acquisitions in transactional terms with the expectation that those firms would begin functioning exactly as the acquiring firm. “If you think during these deals that people are the nail and you’re the hammer, you’ll be in for some challenging times ahead,” he says. “These are human capital businesses and some sensitivity is necessary to understand that during an M&A event, both firms are going to experience change and growing pains. You do yourself and your new partners a disservice if you don’t take the time to listen to each other. One of the biggest benefits of coming together is to take the best ideas from both sides to create something better for the firm and its clients.” Looking back at our first acquisitions, there was confusion in both firms on many levels that caused a tremendous amount of stress. What we learned from these experiences is that inevitably, both firms need to accept that change is inevitable. Moving ahead with that mindset, it helps us think about who we hire for the firm we are today, not yesterday. There’s a lot of art to these deals, including ensuring that people feel heard on both sides and really investing in and building these relationships so that over time, you can come together as one team.

Continuity One of the keys to the firm’s success in quickly integrating cultures is attributed to their ability to institutionalize its processes that are easily understood and repeatable. Its Roundtable system, for instance, begins when an advisor creates a “case” for a new client. The advisor then brings the case to the Roundtable, a team of specialists and advisors, with the purpose of giving clients a “comprehensive review of their overall financial picture.” The Roundtable is part of WEG’s three-step UniFi™ process, which creates a unified financial plan by bringing together all of the component of a client’s financial picture.

Communication Frequent communication from leadership plays a role in keeping WEG’s culture intact. They hold webinars twice a month and in 2020 started a series that addressed topics including the racial unrest, the COVID-19 pandemic

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and the impact of the presidential election. They also hold monthly meetings that explore a leader within the firm to better acquaint employees with departments and locations with whom they might not have regular interaction. “Like every business, we experienced our own challenges in 2020, and our leadership team made a point to call every employee in the company to check in on their personal situation,” Jeff says. “One of the takeaways for us that came out of this experience was the opportunity to revisit our company values—written in 2008–2009. We have always believed in the strength and the benefits of a collaborative people culture, and this felt like a perfect time to review, revise and recommit to who we are, what we do, and why we do it.”

Conclusion Every step in every deal should be strategic, intentional and serve the firm’s overall goals for growth. Growth while preserving cultural values can be challenging, but WEG has used its Roundtable approach to serving clients, as well as its core values, to help find alignment among incoming firms. Setting realistic expectations for employees and preserving a consistent client experience are at the heart of each deal. According to Jeff, he believes that at its core, successful M&A deals come down to relationships. “I think the biggest thing to take away from an initial meeting with a potential firm is assessing compatibility,” he says. “Intuition is key, and pretty quickly after you meet people you can envision if you’ll make a good fit. Bottom line, if you don’t get a good feeling, trust it. In our experience, when we ignore these signs, you’ll find the transition to be more challenging than expected. These are the deals that typically take up a lot of time after the deal is done.”

References 1. American Society Interior Designers. “First WELL & LEED Platinum Space in World Showcases Impact of Design.” American Society of Interior Designers, 13 Dec. 2017, www.asid.org/news/asid-­releases-­comprehensive-­research-­study-­on-­ the-­impact-­of-­design-­in-­the-­workplace. 2. United States Department of Labor. “Reiteration of Existing OSHA Policy on Indoor Air Quality: Office Temperature/Humidity and Environmental Tobacco Smoke.” Reiteration of Existing OSHA Policy on Indoor Air Quality: Office Temperature/Humidity and Environmental Tobacco Smoke | Occupational Safety and Health Administration, 24 Feb. 2003, www.osha.gov/laws-­regs/ standardinterpretations/2003-­02-­24.

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3. Wealth Enhancement Group. “Wealth Enhancement Group Announces Acquisition of JOYN Advisors as Firm Expands National Growth Trajectory.” 21 Feb. 2020, www.prnewswire.com/news-­releases/wealth-­enhancement-­group-­announces-­ acquisition-­o f-­j oyn-­a dvisors-­a s-­f irm-­e xpands-­n ational-­g rowth-­t rajectory­301008872.html. 4. Wealth Enhancement Group. “Wealth Enhancement Group Announces Acquisition by Leading Global Growth Private Equity Firm TA Associates.” BusinessWire, 31 July 2019, www.businesswire.com/news/home/20190731005226/ en/Wealth-­Enhancement-­Group-­Announces-­Acquisition-­Leading-­Global. 5. Robbins, Christopher. “Majority Stake In $11.8B Wealth Enhancement Group Sold To TA Associates.” Financial Advisor, 31 July 2019, www.fa-­mag.com/news/ lightyear-­capital-­sells-­majority-­stake-­in%2D%2D11-­8b-­wealth-­enhancement-­ group-­to-­ta-­associates-­50840.html. 6. Wealth Enhancement Group. “Wealth Enhancement Group Expands Presence in New York with Acquisition of RCL Advisors.” Wealth Enhancement Group, 31 Oct. 2019, www.wealthenhancement.com/news/wealth-­enhancement-­group-­ expands-­presence-­in-­new-­york-­with-­acquisition-­of-­rcl-­advisors.

7 Repeating the Cycle, and Applying Lessons Learned

Greg’s Perspective… For some firms, an M&A event may be a one-time deal. For others, like ours, it’s an ongoing aspect of our growth strategy. Our strategy, while definitely not a “roll up” firm, is that we ARE open and looking for like-minded advisors/ firms that might want to work together. A question we commonly get from advisors is, “What did you learn in previous deals that you would apply to future ones?” How can you ensure that current employees (including newly minted ones) don’t feel left out or minimized? How can you minimize unhappiness, dissatisfaction and isolation as it relates to continued change? These are all great questions to which there are no easy answers. I will say that through practice, like everything else, you begin to identify the pattern of potential issues you may face during these events. You also refine and further define the heart of your cultural values. One thing we have learned is that even subtle differences in culture, if not identified, can pose real challenges. Over the past decade, we’ve gotten very clear on what’s important to us, and we are able to communicate that with great clarity. This has proven helpful in finding firms that are viable matches, as we believe that if there isn’t enough overlap in those priorities, it can cause real problems for the future. That’s not to say that we always look for a completely identical culture—I have seen some of my peers in the industry who have taken a 1 + 1 = 3 approach to enhancing culture through expanded voices and experiences. We have done the same when it has made sense for us to develop in certain areas. Cynthia has said that at some of our most recent retreats, she’s seen a real growth in our culture through the addition of different people who have come © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6_7

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from different backgrounds. Like our clients, whose needs vary based on their demographics and location (e.g., San Francisco doesn’t look exactly like Seattle or Marin County), we’ve been able to learn from each other and make room for some of the nuances that cater to these locations and their own distinct cultures. The point is that with any M&A event, your culture will evolve and you can harness the strengths from that growth or you can ignore it and watch it splinter. What’s amazing is that given the right path with clear expectations that allow for some flexibility to contribute, you’re very likely to experience the best of people. And for those who don’t show up, it makes for an easier decision to part ways sooner rather than later.

Lessons Learned (That Are Easily Repeatable) Setting Clear Expectations  In any situation, when people understand the rules of engagement, including who is leading the charge and the benefits at the other end of the tunnel, they will be more open to change. Be clear when you define leadership roles and responsibilities. Give people a channel to communicate their opinions and concerns, but put up some guard rails to keep things from getting unruly. Articulate potential opportunities in the future, and stand by them. Reiterating Your Values  You cannot repeat these enough! If you have a mission statement, guiding principles or a set list of values that define your firm’s mindset and its culture, then share them again and again. Put them in your PowerPoint presentations. Send them in newsletters. Apply them to actions you see happening around you. Give people clear examples of doing what you say and saying what you mean. Normalizing Change  M&A events are tremendous examples of change, but day-to-day, people experience change all around them. Perhaps it’s a new process that is being adopted to streamline a workflow for clients. Or a new technology platform that, once adopted, will help save the firm time spent doing a task manually. However large or small the change, take a positive stance in addressing the disruption. At Private Ocean, we have created an attitude firm-wide that leaning in to a change—rather than retreating— means a better future for everyone involved. People are reminded constantly

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about a quote from Thomas Friedman: “Change either happens BY you or TO you.” The benefits of being the driver of change are repeatedly discussed. Enroll people in helping solve issues when change is on the horizon. Gather their feedback and address their concerns. The more people feel included in the conversation, the more assured they’ll feel about taking the necessary steps forward. Keeping Everyone on the Bus  Whether we like it or not, the world moves quickly—very quickly—and firms need to stay vigilant in every aspect of business from their operations to their services models to their technology platforms and recruiting efforts to stay competitive and successful in this market. That can lead to many factors that change a firm’s dynamics, whether it’s added locations, or new hires, consolidation, or M&A growth. These changes can feel like whiplash in a short amount of time, especially for our industry which is experiencing an unprecedented transition from the “old guard” to “next gen.” How can you ensure that current employees (including the newly minted ones) don’t feel left behind or not included? There are a number of ways to keep everyone on the same page, but it comes down to staying true to your future vision. Through strategic communications, you can consistently express your five- to ten-year goal for the firm, and to achieve that goal, there will inevitably be change. There will also be opportunity for individual growth (the “What’s in it for me” answer). By continuously reminding people where you’re headed, they’ll better trust and absorb the curves in the road to get there. Have Fun  It is no accident that one of our Guiding Principles is, “Life is short. Laugh.” It’s reflective of our culture in that we believe whole-heartedly that it is important to enjoy life! If we don’t stop and have a little fun along our journey, we might miss out on something very important in achieving personal fulfillment. We work hard, but we don’t take ourselves too seriously. We express this principle in our office activities and retreats, at our meetings, at volunteer days and even when we’re off the clock. We are not afraid to be silly and poke fun at ourselves. This message is intentional when we recruit, as well. Our industry has a reputation, at times, of being stuffy and overly buttoned up, and in my opinion it’s a dated perception. If that’s the culture you have created for your firm, there is absolutely nothing wrong with that. But personally, I want to work with people who share our values and our sense of humor. It’s lent itself to developing long-term relationships with employees

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who have been with Private Ocean since its inception and who are our biggest advocates in the marketplace.

Cynthia’s Perspective… Worksheets and Activities: Where to Go from Here We hope that you’ve found this book useful in helping you as both a cultural integration guide during an M&A event as well as a means of assessing your own unique work culture. As Greg mentioned previously, your culture is your calling card. The more work you put into defining your values and cultivating an environment that aligns with those values, the better prepared you will be to integrate new groups of people into the fold. As part of my coaching sessions, I often share easy activities for people to use when beginning the cultural assessment process. These activities are suitable for individuals and groups, and they are a great spring board for conversations on what people value most. It can help you uncover what motivates and de-motivates them, what their priorities are for the future and how they see themselves in their most productive role at the firm. I’ve included two cultural assessment activities in the Appendix, and here is a quick overview to get you started.

Individual Discovery Worksheet There are many accredited personality assessment tools available to help people better understand their innate strengths and opportunities for growth. These are always interesting and in my opinion, an easy way to get to know someone while also assessing cultural fit. I’ve seen companies use a variety of these tools, including the Birkman Method, the Enneagram System [1], Myers-Briggs [2] and more. The difference between those tools and a simple individual discovery worksheet is that the person completing the activity isn’t answering questions that fit them into a personality archetype, but rather sharing their own personal goals and aspirations aloud. The categories of questions include: • Values and impact—what matters to you, why, and where in your life do you feel you make the most impact?

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• Goals—What do you want to achieve in this role? What do you think are the challenges on that path? How can others help you attain these goals? In my role as Chief Experience Officer, I work with our H/R team and direct supervisors to schedule these discussions with employees who perhaps need additional motivation to express their experience during this process.

Celebrating Achievements in Cultural Integration One of the most underrated elements of achieving goals is celebration. We are all driven by some form of reward when we set goals—whether we’re trying to lose weight, get more exercise, spend more time with family, getting an education, starting a hobby. It is no different when it comes to cultural integration after an M&A deal. Coming together is a process, and it takes effort and time to come together as one firm on one path to success. Recognizing those milestones you meet along the way only reinforce that you acknowledge that hard work and reward it in some form or another. This is an activity that can be done in a small group, one on one with a supervisor, or with the larger team as part of an exercise sometime after a merger or acquisition. Each individual answers a series of questions and reflects on their journey, and shares their experience and their hope for the future.

Greg’s Final Word Writing this book has been a great reminder of the journey so far. As I recall Private Ocean’s beginnings more than a decade ago, I wish that there had been a guide book like this one that covered those intangible cultural nuances that really impact a firm’s ability to come together after a merger or acquisition. Things seemed very straightforward back then, when a handshake and a meaningful discussion between leaders about culture was seemingly enough to cover what would inevitably play a key role in our future success. We stumbled heartily in those first years, and made a lot of mistakes that today we take for granted. Things like language that was divisive without any intention. New hires that didn’t fit and costly turnovers that left us reeling. It took approximately three to four years after the merger and high turnover in staff before we really

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found our footing and understood what it meant to create a work culture that was healthy, satisfying and productive for growth. If that statement sounds alarming, trust me when I say it’s much harder experiencing that than it is for you to read it. Culturally, I believe that we’ve greatly matured over the last decade. We’ve become much more polished and intentional in really defining who we are, who we want to be, how we want to work with people, and how we’ve structured the firm for success. Our intention from Day 1 was to be a premier firm with a strong West Coast presence serving clients who consider us trusted partners and who value our team as caring professionals. By all accounts, we have succeeded at achieving that goal, and it has only happened because of our diligence, hard work and relentless commitment to our guiding principles. A lot has changed since we first became Private Ocean, but our core beliefs have never wavered. It was only a few years ago that we finally put down in writing our Guiding Principles, but we articulated them in the same fashion since the beginning. Over time we have refined them as we have evolved, and this is a strong indicator of how something positive can continue to strengthen over time without watering down its original message. Today, every member of our team can proudly articulate what it means to work at the firm and why they believe they’re in the right seat on the bus. I’m very proud of this accomplishment, as its implications are far-reaching beyond my tenure here. If you’re considering your first merger or acquisition, there are a few things I would implore you to keep in mind as you dive in to conversations with potential partner firms. First, you should put about 80% of your energy, focus and time into understanding the firm’s culture and its people. Only 20% should be spent on deal structure and terms, finances, systems and services— and you can do that assessment relatively quickly to determine if you should move forward. What’s less easy to assess is what makes people tick. What matters to them and what motivates them. How they think about the things that matter the most to you. It’s easy, for instance, to say you serve high net worth people. What does that mean and what does service look like for clients worth $2M versus $20M? What does their client base look like? If you asked, what would their employees say about working there? Do they appear collaborative or collegial, or more independent and insulated? What’s the turnover like and how do people handle change? There are any number of questions to ask up-front, and they should be very specific to what matters to your firm and its people. How granular you get may be determined by how many meetings you have. The more you get to know someone, the more information they’ll offer. The best advice I can give is never to shortchange yourself on assessing cultural

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alignment. You can strategize the finances, which are definitive, but with culture, it takes time, consideration, and an intentional plan to integrate two groups of people into one cohesive, collaborative unit.

References 1. Enneagram Institute, The. “How The System Works.” The Enneagram Institute, 2019, www.enneagraminstitute.com/how-­the-­enneagram-­system-­works. 2. Myers-Briggs Company, The. Personality Assessment Inventory and Professional Development | The Myers-Briggs Company, 1942, www.themyersbriggs.com/en-­US.

8 Preserving Culture During Extraordinary Times

Greg’s Perspective … During the writing of this book, our industry—and the rest of the world— was greatly impacted by the outbreak of the COVID-19 virus. The market dropped significantly, recovered, and then climbed the “wall of worry” to the confusion of many. Cities across the country went into almost complete lockdown with shelter-in-place restrictions. Travel and tourism stalled and businesses were forced to close its doors. Life as we knew it had suddenly ceased, with no end in sight of this “new normal.” Suddenly our carefully nurtured culture based largely on face-to-face camaraderie and personal service shifted overnight to a completely virtual environment. The world seemingly stopped, and of course for the benefit of our clients we could not. And because of our culture and our people, we didn’t. Before Cynthia and I discuss how operations were managed during this time, I wanted to take a step back to the mid-2000s, when the housing market stalled and interest rates began to rise, leading to the 2008 financial crisis. Private Ocean was formed in 2009, which meant that just as we were coming together as one group and finding our cultural footing, we were thrown into chaos. Personally, the pandemic of 2020 is my third black swan event. I started my career in the mid-80s and experienced Black Monday in 1987. You could say I honed my crisis management skills at almost the very beginning of my career! What can be said for each of these events is though the circumstances may be different, the preparedness and response of your business doesn’t have to be. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6_8

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2008–2009 Lessons Learned This was a whirlwind time for my firm, Friedman & Associates. We had just merged with Salient Wealth, and we were on the journey to identify ourselves as one new firm. We had branding exercises and held retreats and team building events. We poured over processes and approaches and worked hard to find common ground. What was happening at the same time was a brewing storm that started slowly, under the radar, until it gathered speed and the bubble burst on the housing market. For a few months, things were tense, to say the least. We had planned for a great many things in our plans to merge, but not a financial crisis or a recession! The biggest thing that changed for us in the short term was our frequency and our methods of communication and outreach to each other and our clients. We were already a firm that communicated often, and this was like taking the next natural step. We kept an eye on the markets and we consulted with real estate professionals and attorneys on the best steps for our clients to take. We were transparent in our investment approach with clients, and we collaborated on every move so that nothing would be left open for confusion. While we were candid in our conversations, we felt it was better to be honest and open than to keep details in the dark. Though the crisis had long-lasting repercussions for the U.S., including a deep recession where millions of jobs were lost, housing prices fell nearly 30%, household net worth declined nearly 20% [1], and the stock market dropped by 50% in early 2009 [2], our clients and our business were able to weather the turbulence with patience and diligence, and if there was any silver lining, it was that the experience forced us to come together as a firm more quickly than we expected.

2020: A Case Study in Crisis Management Looking back at how 2020 unfolded, there were differences and similarities between the housing crisis and the outbreak of the COVID-19 virus. The most striking differences were that the outbreak and its impacts on the economy happened in weeks, not months. If 2009 was mainly a financial crisis with consequences, the virus added a terrifying level of healthcare anxiety for ourselves, our loved ones, and everyone around us. In 2009, we had at least a little runway to prepare for something that we saw coming and had time to put together a plan to act and react based on the outcomes. The 2020 pandemic was far more like a freight train coming full speed and you barely had

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time to get out of the way. Every day was unexpected, and rather than be able to come together in a room quickly and discuss what needed to be communicated and done to best serve our clients, we were locked in our homes with apprehension of an unknown future. If 2020 has taught us anything collectively, it’s that we must remain diligent, keep an open mind and be willing to change. That can apply to the markets and the economy, the state of society as a whole and our professional and personal lives. The first half of the year was certainly challenging, but I am proud of our team’s efforts to step up in times of crisis and uncertainty. As a result of those efforts, Financial Planning recognized Private Ocean with its first-ever Visionary Leader Award for its innovative response to running a business during the COVID-19 outbreak. What we did wasn’t rocket science, but it definitely hinged on the commitment of our people and, you guessed it, our cultural values. Here was our approach in those months and how culture played a role in making it happen.

Business Continuity: In Full Affect Private Ocean uses a Business Continuity Plan which regularly monitors emergency situations that may disrupt business operations. We regularly review our processes based on the issue at hand to ensure ongoing operations and to limit the impact on our clients and staff. The COVID-19 virus outbreak was a perfect example of why we have business continuity plans in place. While we hope never to use them, history (and nature and biology) have taught us to hope for the best but also plan for the unexpected.

Going Virtual Overnight At the end of February, we had already begun to monitor the situation and shared our approach with our clients that we were minimizing face-to-face meetings and offering employees an option of working remotely. In mid-­ March, right before Washington and California implemented their shelter-in-­ place guidelines for non-essential businesses, we were proactive in switching to an optional remote environment. While financial services is considered “essential,” we did not want to jeopardize the health of our clients and our employees in any way, especially since many of our team commuted by public transportation methods. The move was nearly seamless, in large part due to

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our focus on a secure, cloud-based technology approach, which we had implemented a number of years earlier.

Client Communications Just as we had done in 2008–2009, the firm went into communication overdrive. We kept in regular contact with investment managers, custodians and other partners on the impact of the virus on the markets, and we communicated often with clients. In the beginning, we sent business continuity updates to share our evolving approach to operations and we began offering economic and market insight more frequently as it became available. Simultaneously, our advisors began one-on-one outreach to clients to discuss their personal situation and what steps they could take to preserve and protect their portfolio. We used an online calendaring system to allow clients and even their friends and family to schedule time with our advisors for consultations. We curated content and sent newsletters, we held webinars on the impact of the virus on the markets, and we made ourselves available nearly all hours of the day to be there for our clients. We even did a number of client webinars on COVID-19 by one of the numerous research non-profits, and particularly popular was a “pandemic relief concert” with classical musicians to bring a little “normalcy” to our clients!

Internal Operations and Outreach A crisis will definitely shine a light on your culture. After an acquisition or a merger, you are typically moving along on a planned path to integration and you might be extra considerate and thoughtful during this process. Suddenly you are faced with a business imperative that supersedes everything else— what do you do? You either step up and move quickly, or you struggle. For us, it has always been the former, and that really speaks to the values and the commitment of our people. We’ve viewed these crises as a common cause that we must address together. Little issues fade away, and in its place is a drive for consistency, for process and for clarity. Decisions are made quickly, and changes soon follow. Our internal communications during this time were strategic and tactical. We stripped away formality in favor of straightforward messaging. We increased transparency, walking the line between honesty and generating alarm (I have always believed that if you withhold information in times of

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crisis, people will create their own version of the facts, which is often far worse than reality). We asked for feedback and ideas when issues arose, knowing that the more people felt involved with the solution, the more inspired and empowered they felt in the face of the unknown. We also offered constant words of encouragement and sent frequent tokens of our gratitude. In particular, for those working long hours to take care of clients, we sent gift baskets and grocery cards and other gifts. We acknowledged these people in our meetings and called out their actions using specific examples of service. While it was certainly not an easy time, we found that most people adapted well to the changes and overall kept a positive attitude in a challenging and stressful situation. For those who struggled more than their colleagues, we offered more time with supervisors and leaders to discuss what they were experiencing and how we could help alleviate their issues. For some, it was isolation of living alone with no social interaction. Others had technology or work station issues that impeded their ability to work from home. Parents were home-schooling children and daycare closings meant younger children were home all day in need of care. Each one of these situations was addressed on a case-by-­case basis and our leadership team stepped up to take care of everyone on the team.

Giving Back and Seizing an Opportunity Prior to the pandemic, we had a strategic video and podcast strategy ready for rollout in 2020. This included setting up a dedicated studio, equipment, schedules, you name it. We quickly realized that with shelter-in-place guidelines going into effect for the foreseeable future, our best-laid plans would need to be postponed for the short term. However, we also recognized that we still had an immense opportunity and in our opinion, a responsibility, to communicate and offer our guidance to the public at large. We felt it was critical to help inform and educate people on financial topics that were top of mind in those first few months. We pivoted our video and podcast strategy and envisioned what it would look like if it were produced in a completely virtual environment. The result was the launch of our virtual content initiative, the Ocean Current, which included ongoing webinars, podcasts, “live” virtual events, e-newsletters and in-depth guides on financial and non-financial topics. We secured a highly respected economist for our first live event who addressed both the economic impact of the virus and what we could expect with an upcoming Presidential election. We made the event

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public and complimentary to everyone, and in the end, we had nearly 500 people attend the event. With this new virtual platform, we were able to expand our reach and offer timely responses on financial topics almost as soon as they arose. We received tremendous praise from our clients and appreciation from our partners and others in our communities. We also had another outcome in the form of new business largely from client referrals.

Cynthia’s Perspective…  rivate Ocean’s Approach to Preserving Culture P During the Pandemic Like many firms and businesses during this time of sheltering-in-place, we’ve had to get creative about coming together. Our culture has always placed such a high value on face-to-face interactions and in all honesty, we didn’t know how we would respond to a completely remote work environment that had no set expiration date for when we would be able to return to our offices. Add to that the general feelings of stress and uncertainty about our current global situation, and we knew we needed to be proactive and relentless about staying connected with each other. While much of the planning of these activities were a bit of touch-and-go until we knew what path lie ahead of us, we did implement some quick ways to come together and have an outlet for communicating with our colleagues. Here are some of the things we put into place quickly.

Weeks 1–4 • Daily “Silver Linings” emails. To offset the headlines and media coverage of the virus, we sent a daily morning email to staff that shared positive news happening at the time. This was not meant to distract from or avoid what was happening in the world, but rather offer an alternative perspective about the situation and how people were rising to the challenge. • Weekly and bi-weekly social hours. Typically held at the end of the workday, we would encourage people to set aside their work and socialize via video with their colleagues. • Zoom chat channels. The firm has used multiple platforms in the past for instant messaging, chat and video conferencing. We set up multiple Zoom

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chat channels for people to share specific fun content throughout the day; recipes, pet stories, book recommendations and fitness goals were some examples. • End-of-week all hands. Our executive leadership team held brief 20-­minute all-hands meetings each Friday to keep the team up-to-date on the latest developments and also gauge how people were doing and if they felt connected or were overwhelmed and needed guidance.

Weeks 5–9 • Communication outreach session. At the beginning of the second month, Greg and his team hired a communications coaching firm which held a virtual session for the team broken into two groups. The coach offered exercises for confronting and dealing with the stress many of us were feeling. We were able to share our personal challenges and our victories, and it gave us an opportunity to better understand our colleagues’ situations as well. • Summer fitness challenge, trivia night and watch parties. We implemented both mental and physical challenges to keep people engaged and moving. Colleagues encouraged one another to meet fitness goals and the company held virtual trivia nights to keep our friendly spirit of competition alive. Streaming services offered us a chance to watch shows together and chat about them the next day. • Coffee with colleagues. As we typically get together twice yearly for offsite retreats, we often take that time to get to know colleagues with whom we rarely have a chance to interact. The leadership team organized 30-minute “coffee” breaks for three employees at a time who worked across departments and asked them to “break the ice” with fun conversation starters. These are just some ideas that we used to remind people that they are a part of something special and that they are appreciated. More than anything, we wanted to help people stay motivated, focused and healthy. To help accomplish this, we offered the following overall tips to employees with reminders to reach out if they needed more guidance or assistance. • Keep a regular schedule. This may seem simple, but maintaining an overall healthy rhythm of life: sleep, nutrition, exercise and meditation, can help you stay focused.

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• Stay in touch. We recognized that this experience was very isolating for some of us. Taking advantage of phone calls and group video chats, even to talk about your favorite TV shows or share a recipe you’ve whipped up can help people stay connected. • Set personal goals. This is a unique situation for everyone; acknowledge that and ask yourself, “What do you want to have accomplished when life goes back to ‘normal’?” • Get moving. Getting regular exercise indoors may seem more challenging, especially being so close to the snacks in the home! Many fitness providers are offering online and virtual options to stay fit, which both supports local businesses and keeps you moving! • Take time to learn something new. We often wish we had more time, to learn a new hobby, to finish a crafting project, read a book, try out a new recipe, learn a foreign language or play an instrument. • Get organized. From closets to files to a garage in need of some de-­ cluttering, this was a great time to get your home in order. We often feel a great sense of accomplishment when we are able to organize some aspect of our lives. • Dream outside the box. Speaking of time for yourself, why not let your creativity flourish by doing some research on a dream project—perhaps a new business venture, a talent you’ve considered turning into a career or a book you’ve always wanted to write? • Think of ways to give back. In times of crisis, we all want to contribute and help people and communities in need. Why not research non-profits who could benefit from your support? Just One Thing While we all acknowledge that 2020 presented some incredibly challenging times for everyone (for some more than others), we believe that there are always lessons to learn. One exercise that the Private Ocean team did recently had each of us identifying one thing that has changed during this unusual time that we would like to adopt permanently as we move forward. For some, it has meant spending more dedicated time with family or gratitude for a spouse or partner’s hard work in the home. For others it meant re-committing to doing something that they are passionate about, whether that be a hobby, an aspiration or charitable work. What we took away from this activity was that each one of us found something in our lives that was an improvement over how it was before. Yes, this is a “glass half full” outlook, but part of our culture has always been to look for solutions and to recognize valuable lessons from all of our experiences. Depending on your culture and communication style, it may be a helpful exercise to share with your team and identify each person’s “One Thing.”

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• Be patient with yourself and others. If you’re used to working or spending time outside the home, suddenly spending more time with those closest to you or time alone may seem like a blessing, but also cause added stress. Remember that everyone else is experiencing similar emotions and be kind and patient with yourself and your loved ones. • Taking time to reflect. Lastly, consider making a list of thing you are grateful for and what you may want to change. Reflect on what you are learning through this process and how it can help serve you once this time has passed.

Greg’s Perspective… Responding to 2020’s Second (and Third) Acts In the midst of sheltering-in-place in our homes and watching as a global pandemic unfolded in front of us, the United States also witnessed a surge of protests in the summer of 2020, which brought to the surface the long-­ standing effects of racism on the country. We all felt the impact from our homes with little immediate outlet for communication. With emotions ranging from sadness and grief to shock and outrage, there was a continuum of how challenging and personal this period was for each of us. As a firm, we had a responsibility to reach out to our clients and our staff and communicate that while we may feel helpless in these situations, we can all make a difference with our voices. Personally, I look throughout history at some of our greatest advancements and positive changes, and it always seems that these steps were the result of significant unrest. From some of our darkest times, we have taken the largest leaps forward. This historical moment was a wake-up call for us to revisit our diversity and inclusion policies, and see where we could make a difference. We hired a dedicated human resources professional to help us ensure that our hiring practices were inclusive, and we educated our team about how we can all work together to fight injustice and racism. We then took things a step further, with ongoing work with Diversity/Equity/Inclusion professionals to assess our current work environment, address any unspoken biases, and see where we could improve in our work practices to create a welcoming and supportive culture for everyone.

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We also let our clients know that we were beside them in this experience and that we would use our platform to educate, but also to listen. We encouraged communication with our clients and I had a handful of meaningful conversations with clients who wanted to share their experiences. As summer led into Fall of 2020, we saw the country’s dialogue begin to shift sharply toward the upcoming Presidential election, one that will arguably go down as one of the most contentious and polarizing in our history, and certainly the most I have seen in my lifetime. Our communication strategy during this time was twofold yet again—we had a responsibility to reach out to clients and partners about our stance in how we intended to manage any outcome of the race, and we were also very sensitive to how our employees were handling this time. With clients, our advisors again went on the offensive, proactively having conversations with clients to address their questions and concerns about the possible outcomes. They spent countless hours understanding how the election may be affecting individual clients and their investment approach, and they even talked philosophically about how our country is shifting and adapting in these challenging times. And while each advisor is as unique as the clients they serve, the bottom line message from the firm was consistent and communicated repeatedly: • That our portfolios are engineered in anticipation of periods of uncertainty. • That we diligently communicate with money managers, economists and institutional partners to assess the impact of various scenarios and possible modifications to our strategy. • That we are confident that the structure of our portfolios is still the most effective way—without perfect foresight—to navigate through times of great uncertainty. This type of message, clearly communicated externally, will certainly impact the mindset of your employees. In our case, it offered a sense of clarity, transparency and confidence in our investment team, our advisors and our leadership.

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Client and Employee Feedback During Crisis: An Unusual But Perfect Time to Assess Culture Timing is rarely ever perfect, and by circumstance, Private Ocean had timed its outreach to clients for feedback during the third quarter of 2020. There were several branches of this outreach, including a brief satisfaction survey, more engaged feedback meetings with select clients, and the development of a client advisory board. If crisis teaches us anything, it’s that people are far more vulnerable, honest and aware of their situation when times are uncertain. Undertaking this process meant opening ourselves up to many possible situations—and we welcomed it completely. A driving part of our culture is open and honest communication, and while pushing this initiative during a sensitive time could be seen as risky, we felt it was the perfect time to gauge how our clients felt about their experience working with us. What we received overall was appreciation for our efforts and thoughtful opportunities to improve. We applied this same mindset to ongoing employee surveys about how the firm was doing to take care of their needs, from remote workstation setups and technology to work/life balance concerns and overall satisfaction. When red flags were raised, leadership rallied to address the issue quickly with empathy and support. What we learned from both clients and employees during these exercises is that challenging times sometimes offers us the opportunity to drop a perceived veil in favor of staying connected and helping others.

Greg’s Final Thoughts I don’t have to stress enough the challenges of 2020—we all experienced them firsthand and in our own unique ways. As advisors, we had the added responsibility of caring for our clients during a very uncertain time when answers were sometimes hard to come by. But this is what we do. We are here to steady the course, to help our clients make informed decisions. It’s an opportunity to remind people of not just what we do and how we do it, but why we do it. The same goes for our employees. As a business, we have a responsibility to protect our employees and make decisions that are in their best interests. In times of great crisis, compromises and sacrifices may need to be made, but they are made with the intention of safeguarding the livelihoods of those who rely on us and trust in our values. Crisis is the ultimate acid test for your culture. It can bring you closer together, or it can drive a wedge. Throughout the first half of the year, I have been inspired by our team’s continued commitment to each other and to our clients. We have all had to make changes quite quickly to our schedules, our work setups and our lives in general, and each and every one of our people has stepped up to the challenges with enthusiasm and positivity.

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As of this writing (August 2020), we continue in our remote work environment and have found our momentum working together virtually. Cynthia and I, along with the rest of our leadership team, continue to work hard at keeping our employees connected to each other so that they have what they need to feel effective, efficient and secure. It is of great importance that our employees feel camaraderie and collaboration as close as possible to being as if we were under one roof, and this doesn’t happen by accident. It takes effort, dedication and creativity. It also takes knowing that the people you chose to work alongside you are truly invested in the journey and believe in the vision you helped to create. I am reminded of a conversation that I had with one of our employees a few months ago, just as we were facing a particularly difficult period during the pandemic. He asked me, “Do you think we’ll be okay after this?” And the question gave me pause. In my opinion, we will all come away from this time with a new appreciation for the things we took for granted and a new perspective on the future. As a business, we will be smarter, stronger and more streamlined in getting things done. That is what I feel often comes from these situations. We learn, we grow and we take big steps forward. I have no doubt that we won’t just be “okay,” once this crisis has passed; we’ll be better, and we’ll be better together.

References 1. Federal Reserve Bank of St Louis. “Households and Nonprofit Organizations; Net Worth, Level.” FRED, 21 Sept. 2020, fred.stlouisfed.org/series/TNWBSHNO. 2. Federal Reserve Bank of St Louis. “S&P 500.” FRED, 2 Oct. 2020, fred.stlouisfed. org/series/SP500.

Afterword Cynthia Greenfield

One key takeaway both Greg and I have shared through our process of merging cultures is that it can be difficult to separate business needs and demands from caring about the well-being of the people we work with every day. I can say from experience that even though it may get easier, you will always encounter issues when two cultures come together, no matter how many transitions you go through and how many precautions you take to avoid previous mistakes. That being said, we’ve also had many pleasant surprises that continue to inspire us. We’ve watched as people began as skeptical challengers on two sides of the fence only to become incredibly collaborative partners who brought the firm to a new level. We’ve seen people grow as leaders or into leaders. We’ve seen people rise up to an occasion with courage and empowered confidence. It has been incredibly rewarding to watch Private Ocean evolve and improve organically over time, due in very large part to the dedication and loyalty of its people. Those people were hand-selected over the years as much for who they are as for- what they bring to the table, and it truly reflects in the firm’s alignment and productivity. I reflect on my own hiring experience at Private Ocean, and I knew immediately that the culture and care of its people was different than anything I had experienced in my past jobs and it made me want to connect more and contribute to making Private Ocean a special place. My own journey and career path at Private Ocean has not been a linear path, but rather a route where I have been offered many wonderful

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6

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opportunities to explore, grow and develop my interests and talents—eventually creating my dream profession. I started with Private Ocean organizing the firm’s events, being part of the marketing team, facilitating employee retreats, and soon I began accompanying Greg to industry conferences as an Institutional Relationship Manager representative of his fintech firm, Junxure CRM.  Eventually, I worked for both companies simultaneously—Private Ocean and Junxure. Over time, things started to fall into place. At Junxure, I organized large client conferences and began building countless relationships with industry leaders. With Private Ocean, I planned employee, client and prospecting events, I helped facilitate team-building activities and I also began assisting Greg during the M&A process. I experienced the inner workings and leadership of running two separate firms, in different industries and almost 3000  miles apart. I learned a lot about how to not only nurture two companies but also to actually foster success for two very different firms. It was the best of both worlds and enhanced my experience in the financial services industry. It’s often said that the road to finding your professional calling is rarely a straight path. I’m pretty certain no one in second grade ever raises their hand and says that they want to be a leadership and change management coach when they grow up! Strangely, or perhaps fortuitously, though, the traits that best suit someone who is dedicated to helping others find success through change have long been a part of my foundation. I have always believed that if each person could overcome their obstacles and harness their personal best self, there was no limit to what they could accomplish. In 2019, I decided to put that belief to the test by starting my consulting firm, In the Momentum. It was the culmination of something I had long been passionate about—helping others—combined with what I had evolved into in my role at Private Ocean. As a coach, I am a partner to my clients. My role is to create a safe space for people to feel trusted and supported where they can self-reflect and share what they want to do differently in their lives and in the workplace. I bring no judgment, agenda or bias, and success is defined by the individual, leader or team. My purpose is to support and encourage through listening, through positivity and through working with people to identify their challenges so that they can overcome them. I am a support system and a partner in finding solutions. In early 2020, I was also honored with a new title at Private Ocean: Chief Experience Officer. Greg and I had long agreed about the importance of having a cultural advocate at Private Ocean, someone who could represent both our internal and external clients. Employee care and satisfaction is as high a priority for the firm as its service to its clients, and this was a way to ensure

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that both were protected and supported. In this role, I am able to take everything that I have done—whether it be creating client events, facilitating employee retreats, or serving as a community liaison—and see how I can elevate every element of those pieces. Culture is at the heart of what I do in both roles, whether I’m consulting clients and helping them through transitions or I’m setting up the firm for a retreat designed to build new bonds among integrated teammates. I am often asked for advice about culture—how to identify it, protect it, communicate it and adapt to its needs. If you are a culture coach, an advocate or simply a champion, I can tell you that your journey will always be different, and so will the challenges. Greg often speaks of the importance of one’s vision and how we should always hold fast to our core values. Growth happens—it doesn’t just stop when you avoid it or shut the door on it. The key is having a strong understanding of your work culture, its strengths, its opportunities and a strategy to get where you need to go. If you have those things at your fingertips, you won’t feel hindered by growth. Lastly, as we found ourselves writing this book in 2020, when our industry and the rest of the world was turned upside down, we considered it an opportunity to offer some insight into how businesses must pivot in times of crisis to meet their clients’ needs and their business needs. It was also a test for us to put our money where our mouths are! Often during challenging times, culture is one area of business that usually takes a hit (it’s hard to gather for team pep talks when the market is fluctuating and everyone is on a video screen from their living rooms!). During the first half of this year, I became so inspired by our teammates and how they have stepped up to deliver on our Guiding Principles for each other and our clients. Like everyone, this was not an easy time. It was rife with uncertainty and chaos and many of our families were impacted by the pandemic. There were days of seven-hour video conference calls and fatigue from holding the line for our clients. At the end of the day, though, I often found great comfort in sharing with the team that while we all have bad days, good days and trying days, we face these challenges together. We also all shared a sense of gratitude that our families are safe and healthy and that we have this incredible opportunity to serve others. Just as every advisory firm is unique in its culture, the same can be said for our industry. It has been truly inspiring to see how firms communicate with each other, sharing issues and brainstorming solutions that serve our clients and each other. At every conference or event, I’ve gotten to know so many professionals in our industry, and it’s become almost an extended family of peers who share respect, trust and support for one another.

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I hope you found this book to be a useful guide in your work culture journey, whether it’s through M&A activity or otherwise. While you may at times find yourself disheartened in your progress, I will remind you that just because you may have hit a speed bump, it can only slow you down if you allow it. You’re also not alone in these situations, and I encourage you to take comfort in that many firms have been where you are, learned from their mistakes and risen to the challenge. Success is always possible with determination, persistence and patience.

Appendix

Worksheets and Checklists • Individual Discovery Worksheet • Blueprint for a Company Retreat • Celebrating Achievements in Cultural Integration

I ndividual Discovery Worksheet Intro text: To prepare for our first meeting, please take time to think about the following questions. They are intended to begin the process of understanding what motivates you in your personal and professional lives and how you might achieve your goals. There are no “wrong” answers here—please share as much or as little as you like.

Discovery Session Questions 1. Where do you think you are making a big difference in your life right now and where do you want to have greater impact? 2. What works for you when you are successful at making changes? 3. Where do you usually get stuck? 4. How do you deal with challenges and obstacles? 5. How do you recharge? What do you do for fun?

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Values 1. Tell me about a moment in your life when life was good, and you felt content and fulfilled. Be specific, tell me where you were, who was there with you and what you were doing. 2. What about that experience was important to you? 3. How did you show up, what part of you came out? 4. Tell me about a moment in your life when things were not going well. 5. How do look back at that time today? What did you learn about yourself? 6. How do each of these experiences shape your values and who you are today?

Goal Discussion 1. What one goal, if you were to achieve it in three–six months from now, would make a BIG difference to your life? 2. If you could have MORE of one thing in your life right now, what would it be? 3. What are the three biggest things you are tolerating or putting up with in your life? 4. What do you want to be different in your life a year from now? 5. Can you express or identify reasons and behaviors you want to work on here in our coaching sessions?

Blueprint for a Company Retreat Below is a recent retreat agenda that we employed with the goal of both assessing and promoting our culture. It was designed to be a hands-on workshop with ample opportunities to connect with colleagues. Mid-year retreat August 2019 8:30 a.m. 8:40 a.m.

Welcome and Ground Rules Ice Breaker Exercise: Ask a teammate—“What did you want to be when you grew up?” 9:00 a.m. 2019 Firm Overview: How have we done so far? 9:45 a.m. Introducing “The Wave”—a recognition program for outstanding efforts by our teammates who have exemplified our Guiding Principles 10:00 a.m. Break

Greg Cynthia/ Susan Greg

10 minutes 20 minutes

Cynthia/ Suzanne

15 minutes

All

15 minutes

30 minutes

 Appendix  10:15 a.m. Accomplishments and Future Plans   • Name three accomplishments your team is proud to share   • What are three challenges or projects you have yet to finish? 11:45 a.m. Exercise and acknowledgment: How does each department serve our clients? 12:00 p.m. Lunch 12:45 p.m. Communication Exercise—Blind Drawing In this activity, one person is designated the artist with a flipchart and markers. The rest of the team sits opposite the artist and instruct him/her to draw an item without revealing what it is. The team is not able to see what the artist is drawing, and at the end of the activity, the team whose drawing is closest to the actual item wins. 1:15 p.m. Team Time: What are we doing now that supports our growth and our vision for the future? What obstacles do we see in our path? One person does a brief report out of the exercise. 2:15 p.m. Break 2:30 p.m. Team Time: Clear Conversations and Commitments Each person in the group shares what they learned from the day and what they will do going forward. 3: 15 p.m. Wrap Up and One Word—each team member shares one word that they feel best represents the day’s event and how they feel moving forward.

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All Depts

90 minutes

All

15 minutes

All Cynthia/ Susan

1 hour 30 minutes

60 minutes Directors Moderate and Record

All 15 minutes 45 minutes Directors Moderate and Record

All

15 minutes

Celebrating Achievements in Cultural Integrations Intro text: Reflect on your work, effort, learning, challenges, successes and accomplishments. Review and complete the following questions. Be prepared to present them at your last session. 1. Tell the story of your journey here. (a) What are the highlights? What would you describe as your champagne moment(s) during this process? (Include as much detail as you can in your story, including where/when was it? What was happening? Who was involved? What were people doing in the story that made this a

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high point for you? What were you doing? What impact did you have? What was the impact on you… and on others?) 2. Upon reflection what are the three things that you learned about yourself that you are really proud of? 3. What three surprises did you have? (b) What did you expect to happen that didn’t? What happened that you didn’t expect? (c) What are your insights? What will you do to incorporate it? (d) How would someone else (a close friend, colleague, spouse, family member) describe you, your growth, changes and successes? 4 . How will you stay connected to this? 5. What is next for you? What will you do to support yourself going forward? 6. How will you celebrate?

References

1. American Society Interior Designers. “First WELL & LEED Platinum Space in World Showcases Impact of Design.” American Society of Interior Designers, 13 Dec. 2017, www.asid.org/news/asid-­releases-­comprehensive-­research-­study-­on-­ the-­impact-­of-­design-­in-­the-­workplace. 2. Birkman Method, The. The Birkman Method, 28 July 2020, birkman.com/ the-­birkman-­method/. 3. Enneagram Institute, The. “How The System Works.” The Enneagram Institute, 2019, www.enneagraminstitute.com/how-­the-­enneagram-­system-­works. 4. Federal Reserve Bank of St Louis. “Households and Nonprofit Organizations; Net Worth, Level.” FRED, 21 Sept. 2020, fred.stlouisfed.org/series/TNWBSHNO. 5. Federal Reserve Bank of St Louis. “S&P 500.” FRED, 2 Oct. 2020, fred.stlouisfed. org/series/SP500. 6. fi360. “fi360 Acquires IPS AdvisorPro.” PR Newswire: News Distribution, Targeting and Monitoring, 29 June 2018, www.prnewswire.com/news-­releases/fi360-­ acquires-­ips-­advisorpro-­228166891.html. 7. Groysberg, Boris, Jeremiah Lee, Jesse Price, and J. Yo-Jud Cheng. “The Leader’s Guide to Corporate Culture.” Harvard Business Review, January – February 2018, https://hbr.org/2018/01/the-­culture-­factor. 8. Janowski, Davis. “Private Ocean Acquires Fellow Bay Area RIA to Create $2.2 Billion Firm.” WealthManagment.com, 25 Sept. 2018, www.wealthmanagement.com/ industry/private-­ocean-­acquires-­fellow-­bay-­area-­ria-­create-­22-­billion-­firm. 9. Myers-Briggs Company, The. Personality Assessment Inventory and Professional Development | The Myers-Briggs Company, 1942, www.themyersbriggs. com/en-­US. 10. Prochaska, J. O., and DiClemente, C. C. “Stages and Processes of Self-­Change of Smoking: Toward an Integrative Model of Change.” Journal of Consulting and Clinical Psychology, 1983, 51, 390–395. 11. Prochaska, J.O., DiClemente, C.C., & Norcross, J.C. (1992). “In search of how people change: Applications to the addictive behaviors.” American Psychologist, 47, 1102–1114. PMID: 1329589.

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126 References

12. Robbins, Christopher. “Majority Stake In $11.8B Wealth Enhancement Group Sold To TA Associates.” Financial Advisor, 31 July 2019, www.fa-­mag.com/news/ lightyear-­capital-­sells-­majority-­stake-­in%2D%2D11-­8b-­wealth-­enhancement-­ group-­to-­ta-­associates-­50840.html. 13. Seivert, Dan. THE 2019 ECHELON RIA M&A DEAL REPORT, Jan. 2019, https://f.hubspotusercontent30.net/hubfs/7475083/ECHELON%20 Partners%20-­%20The%202019%20RIA%20MA%20Deal%20Report.pdf. 14. Tibergien Mark, “Does Culture Really Matter in M&A?” Thinkadvisor.com, 27 June 2018, https://www.thinkadvisor.com/2018/06/27/does-­culture-­really-­ matter-­in-­ma/. 15. United States Department of Labor. “Reiteration of Existing OSHA Policy on Indoor Air Quality: Office Temperature/Humidity and Environmental Tobacco Smoke.” Reiteration of Existing OSHA Policy on Indoor Air Quality: Office Temperature/Humidity and Environmental Tobacco Smoke | Occupational Safety and Health Administration, 24 Feb. 2003, www.osha.gov/laws-­regs/ standardinterpretations/2003-­02-­24. 16.  Wealth Enhancement Group. “Wealth Enhancement Group Announces Acquisition of JOYN Advisors as Firm Expands National Growth Trajectory.” 21 Feb. 2020, www.prnewswire.com/news-­releases/wealth-­enhancement-­group-­ announces-­a cquisition-­o f-­j oyn-­a dvisors-­a s-­f irm-­e xpands-­n ational-­g rowth-­ trajectory-­301,008,872.html. 17.  Wealth Enhancement Group. “Wealth Enhancement Group Announces Acquisition by Leading Global Growth Private Equity Firm TA Associates.” Business Wire, 31 July 2019, www.businesswire.com/news/home/20190731005226/en/ Wealth-­Enhancement-­Group-­Announces-­Acquisition-­Leading-­Global. 18. Wealth Enhancement Group. “Wealth Enhancement Group Expands Presence in New York with Acquisition of RCL Advisors.” Wealth Enhancement Group, 31 Oct. 2019, www.wealthenhancement.com/news/wealth-­enhancement-­group-­ expands-­presence-­in-­new-­york-­with-­acquisition-­of-­rcl-­advisors.

Index

A

E

All-hands, 62–63

Employee surveys, 21 Expanded leadership, 12, 61 Expanded Leadership Team, 76 Expectations, 98

B

Black swan, 105 Body language, 35 Business continuity, 107, 108

F C

Champions, 50 Change, 97–99, 102 The Client Experience, 19 COVID-19, xxv, 105–108 Cultural fit, 22 Cultural values, 43–44

First impressions, 36 Friedman & Associates, xxiii G

Goals, 77 Group activities, 77 Guiding Principles, 20, 98, 99, 102

D

DeVoe, David, 68 Dickson, Susan, 57 Dunstan, John (Mac), 25

H

Hiring & recruitment, 77 Hussey, Channing, 56

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Friedman, C. Greenfield, Integrating Culture in Successful RIA Mergers and Acquisitions, https://doi.org/10.1007/978-3-030-62444-6

127

128 Index I

R

In the Momentum, 118 Initial Discovery, 31

Remote, 107, 110, 115, 116 S

J

Junxure CRM, xxiv, 13 K

Kapusinski, Shaun, 48

Salient Wealth Management, xxiii Sequoia Financial Group, xxiv Social culture, 49 Stages of Change Model, 5 Stone, Richard, 9, 33

L

Lakeview Financial Group, 24 Leadership, 77 Lowell, Sabrina, 56

T

Tichnell, Kevin, 48 Titles, 43 Transparency, 54 Transtheoretical Model, 5

M

Mission statement, 20 Mosaic Financial Partners, 56 Moss Adams LLP, 10

U

O

V

Offboarding, 44 Onboarding, 44, 56–60

Values, 97–100, 102 Virtual environment, 105, 109

Us vs. them, 55

P

Pandemic, 105, 106, 108–113, 116 Physical space, 77 Private Ocean Wealth Management, 9 Professional culture, 49

W

Wealth Enhancement Group, xxiv Worksheets, 100–101