Bank/Credit Union M&A

Must Evolve and Separate Wealth Management

When community banks and credit unions (hereinafter referred to as FI’s) consider a merger, and that merger or acquisition (M&A) involves wealth management platforms operated by different broker-dealers (which they almost always do), there are several important factors to consider. Perhaps the most important factor is should the merger of the wealth platforms be run as a separate M&A event.  With few exceptions – emphatically, yes.

Here are some considerations when including wealth management in a bank or credit union M&A:

  1. Start Immediately: Today, very little effort is put into the merger of competing wealth platforms tied to FI M&A. This lack of interest or understanding is costing FI’s billions in AUM and millions in revenue. Communication with FI wealth management teams from both sides needs to start within 30 days of the proposed merger going public.
  2. Hire an External Specialist: Even the most experienced program managers have very little to no experience managing a merger or acquisition. Compass Consulting has developed a “blueprint for success” system that fits almost every conceivable scenario where two financial institutions with competing wealth platforms are merging. To learn more about this program, email hillary@compassconsulting.com or call 760-477-1299.
  3. Cultural and Strategic Fit: Evaluate whether the target FI’s wealth management business aligns with the acquiring FI’s overall strategic objectives. Assess how well the target FI’s wealth management capabilities complement the acquiring FI’s existing services and customer base (or vice versa).
  4. Client Base: Examine the target FI’s wealth management client base, including their demographic profile, assets under management (AUM), product mix, and level of client satisfaction. Determine if the client base aligns with the acquiring FI’s target market and if there are opportunities for cross-selling other banking products.
  5. Expertise and Talent: Evaluate the expertise and talent pool within the target FI’s wealth management division. Assess the experience and qualifications of the program manager, financial advisors, licensed bankers, private bankers, etc. Determine if there are any key personnel whose departure could adversely impact the business.
  6. Technology and Infrastructure: Assess the target FI’s wealth management technology infrastructure, including their CRM, reporting tools, and digital platforms used to manage client relationships and portfolios. Determine early where the landmines of platform integration lay and begin the process of addressing them.
  7. Regulatory Considerations: Identify any potential regulatory risks or challenges associated with the target FI’s or the acquiring FI’s wealth management operations. This is rarely if ever done in FI M&A. Keep in mind that the federal regulators who ultimately approve bank and credit union M&A know very little about wealth management.
  8. Synergies and Cost Savings: Identify potential synergies and cost-saving opportunities resulting from the merger or acquisition. Consider how the integration of wealth management services can enhance the acquiring FI’s overall profitability and operational efficiency.
  9. Brand and Reputation: Evaluate the target FI’s brand reputation in the wealth management industry. This applies to both the FI and their third-party broker-dealer. Determine if any negative associations or product emphasis could affect the acquiring FI’s reputation or client trust.
  10. Due Diligence: Conduct a thorough due diligence process to assess the financial health of both FI’s wealth management division. Review financial statements, AUM growth trends, fee structures, product mix, client retention, and acquisition rates, etc. Identify any potential liabilities or risks that may impact the valuation or success of the M&A.
  11. Platform Choice: Determine the best platform that will serve the needs of the combined FI’s clients currently and moving forward. It’s not always the acquiring firm’s platform.

By carefully considering these factors, financial institutions, their clients, and their respective advisors will have a much better experience, leading to a higher percentage of asset and talent retention.

About Compass

Compass is dedicated to serving community banks and credit unions, specific to supporting their efforts in offering comprehensive private wealth, securities, insurance, and other wealth management and advisory services. Central to our mission is bridging the gap between the major wall street firms and the banks and credit unions that serve the public at the community level. To learn more about Compass’s services, visit our website www.compassconsulting.com or call 760-477-1299.


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