What prompts the principals of two successful planning practices to merge? Jayson Forrest caught up with Anne Graham CFP® LRS® and Sarah Leslie CFP® to discuss the motivation and processes behind merging their practices.

Professional Practice Profile

Directors: Anne Graham CFP^® LRS^®
Sarah Leslie CFP^®
David Graham CFP^®
Kara Treeby AFP^®

Practice: Story Wealth Management

Established: April 2017

Licensee: Securitor Financial Group

No. of practitioners: 4

No. of CFP® practitioners: 3

No. of auxiliary staff: 6

FPA Professional Practice: 2015 (under Sigma Wealth Management)

Why would two successful financial planning businesses – at the top of their game – change tack and merge into one? It’s an interesting question.

For some businesses it’s about scale, for others it’s about capabilities and resources. But for the partners of Melbourne-based Thinc Wealth – Sarah Leslie CFP^® and Kara Treeby AFP^® – the rationale behind merging their practice with a like-minded one, is intriguing.

Being two young women who had successfully grown their planning practice, they had reached a point where they were both starting families.

“When we looked at what the best options were moving forward, both for our business and for us personally, we wanted to continue to grow and drive our business forward. But that was going to be challenging with the two of us in the early stages of motherhood,” Sarah says. “So, that led us to explore our options.”

Both women decided on what their ideal business might look like. As it turned out, that business was Sigma Wealth Management – a practice owned and operated by Anne and David Graham, who they had known for eight years.

“They were also a licensee of Securitor, so, we decided to have a conversation with them, just to sound them out. And that’s how the process began.”

But for Anne Graham CFP^® LRS^®, the decision to possibly merge her business, which she had only recently started with David Graham CFP^® four months prior, was something not even remotely on the radar.

Anne approached the meeting with an open-mind and concedes her motivation to explore a possible business amalgamation with Thinc Wealth was much different to that of Sarah and Kara. For the owners of Sigma, a business merger was more about succession planning and introducing new “blood” into the business.

“At the time of our initial discussion, we had only recently started Sigma and succession planning was something we were thinking about. One of our objectives was to get a younger planner involved in the business,” Anne says.

“So, when Sarah and Kara approached us with the idea to merge in December 2016, we thought the idea had merit and was worth looking into.”

Processes

The prospect of merging any business is challenging and often fraught with difficulties and stress, and so it was with Sigma and Thinc Wealth. But astonishingly, it only took both parties five months to complete the merger, with the deal signed and delivered on 3 April, 2017.

But how were they able to navigate this difficult process in such a short period of time?

“Once the decision to merge had been made, we wanted to fast-track it,” Anne says. “That’s because Kara was due to have her baby and there were issues around office leases running out. So, we agreed to push ahead as quickly as we could, but not before the appropriate due diligence had been done.”

Both parties prepared a summary overview of their respective businesses, as if they were up for sale. This included details of: client profiles, business revenue, operating costs, supplier contracts, staff positions, systems and software used.

“We were both licensed through Securitor, so from that respect, we didn’t have to think about changing licensees. In fact, Securitor was very helpful in the facilitation of the merger,” Anne says.

There were a number of decisions both businesses had to jointly make. These included:

• which accountant to use;
• which lawyer to use;
• what systems to use;
• which bank to use;
• which suppliers to use;
• what corporate structure to have;
• what staffing and organisational structure to have;
• allocating responsibilities for the partners;
• what name to trade under; and
• the location of the business premises.

“Sigma’s premises were in Hawthorn, only 6km from the Melbourne CBD. The premises were big enough for the combined business, and because our existing locations were already fairly close to each other, moving to the Sigma office was quite straightforward,” Anne says.

In the lead up to the merger, the principals also allocated responsibilities for different parts of the merger process to each partner, which helped to evenly distribute the workload involved. An external valuer was also organised to work out the valuations of each respective business and the subsequent share holdings in the new venture.

Only once all the ‘i’s’ had been dotted and ‘t’s’ crossed, did the four partners sign the merger agreement, with a buy/sell agreement currently being finalised.

Communication

But throughout the entire merger process, clear and effective communication for staff and clients was a priority for the partners.

“The whole process was an enormous change for the staff. We found that when communicating, it’s important to say things more than once. You cannot assume that people always understand the message you’ve delivered in the way you intended it to be heard. We were mindful of this,” Anne says. “However, from the outset, we were very open with the team about everything we were doing.”

And what about the client communication?

“For Sigma clients, we simply informed them about the merger and why it was happening, which included a name change for the business and improved resources. Other than that, it was business as usual,” Anne says.

It was a similar message at Thinc Wealth, with clients reassured they would still be dealing with the same people, who had access to more resources, enabling the business to provide clients with an enhanced service experience.

“We didn’t take the merger process lightly,” Sarah says. “We even took the process one step further by bringing in independent consultants to make sure our implementation process was being executed correctly. This included ensuring that our communication lines were open and that staff could raise any concerns they had, which meant these concerns could be easily addressed and put to bed quickly.

“By doing so, we were able to offer our staff a clear vision of what their prospects were moving forward. They could clearly visualise where their career was heading in this newly merged practice.”

Learnings

Having successfully navigated the processes involved in merging two distinct businesses, what were some of the key lessons the partners learnt along the way?

For Anne, one of these revolved around ‘timing’. The fact the partners undertook the process of amalgamation over Christmas and New Year, reduced their merger timeframe by about one month.

“This meant that the timeframe we had to complete everything was quite tight,” Anne says. “It really meant that from the time we agreed to merge and begin the process, right through to completion, was about three months. By anybody’s standards, that’s a very tight deadline.”

Sarah agrees. “There was also a timing issue in the lead up to the end of the financial year.

“As a business, actually coming together and merging wasn’t too difficult. But during the process of merging, business didn’t stop. We were trying to bring together two teams to function as one, whilst at the same time still managing all of our clients and the processes of running a business. We definitely didn’t want to be two separate businesses operating under the one roof.

“But as we were bedding down our new business, we had the 30 June deadline to deal with, too. And from a planning perspective, 2017 was a particularly busy year, with all the changes to superannuation that we also had to contend with.”

Anne concedes that the timing of the merger process wasn’t ideal.

“From Sigma’s perspective, we had only recently taken up the XPLAN software in February. So, we were dealing with new software, the approaching end of the financial year, locking down two businesses under the one roof, and initially dealing with two different internal processes and systems. So, that’s where effective management and communication becomes critical.”

Both partners agree that if they had the chance to do things differently, they would definitely extend the time period required to merge their practices, and undoubtedly, do it well before the 30 June deadline!

Opportunities

However, amongst these initial challenges were opportunities. Having two different internal systems allowed the partners to cherry-pick the best from both systems. Anne also adds that getting the best out of their team was also an opportunity for the business.

“Both our teams have come together extremely well,” Anne says. “They work well together and are respectful of each other. The teams have coalesced seamlessly, which has been enormously pleasing to see.”

Sarah also doesn’t sidestep the fact that having four directors share in the management and leadership role of the business is a tremendous advantage.

“The merger has enabled the four directors to bring their different skill sets to the table, which is a huge advantage. It’s great being able to divide out the leadership part of the business, whereas before, it would have been just Kara and I, or even just one of us, in the event of maternity leave.”

And from a team perspective, Sarah is confident that Story Wealth is an employer of choice, by offering its 10 employees workplace flexibility and parental leave, demonstrating the importance the business places on work/life balance.

“Half our team are part-time employees and we’ve got flexible work arrangements in place. We’ve also introduced paid parental leave, which is unusual for a small business,” Anne says. “I think this really sets us apart from many other practices and small businesses.”

Philosophy

For the partners, it was important that the name of the new practice was reflective of the combined businesses, while placing clear separation between the old businesses and the new.

So, why name the practice Story Wealth Management?

Sarah explains: “We decided on Story Wealth Management because we believe everybody has a story to tell. When you’re talking to clients, it’s all about their story, where they want to go and whether we can help them.

“So, the decision to name our new business Story Wealth Management, ties in quite nicely with that story piece – of bringing clients’ stories to life through great financial advice and management. We’re giving our clients the confidence to write the next chapter of their story.”

Today, Story Wealth’s philosophy is firmly built on assisting clients in their journey to financial independence. It specialises in providing advice and assistance with wealth creation and management for those clients seeking a personalised financial plan to help them achieve their goals.

“Our philosophy is not only about educating clients around the advice we provide and enabling them to make informed decisions, but it’s also about working with our clients on a collaborative basis to achieve their financial and lifestyle goals,” Anne says.

“We have built our business on the delivery of comprehensive advice, so it’s not just about investments or super or debt management. It’s about taking a complete approach to advice that enables our clients to enjoy life today, while having confidence in knowing that tomorrow will be even better.”

FPA Professional Practice

So, with their business only seven months old, what does it mean for Story Wealth to be an FPA Professional Practice?

For the partners, it’s more than just third party validation of service quality and planner experience. The FPA Professional Practice brand is their commitment to the profession’s highest ethical and professional standards.

“As a group, we have decided to continue to be an FPA Professional Practice,” Anne says. “For us, it clearly shows our commitment to professionalism in advice. If you hold yourself out to be an FPA Professional Practice, it means you hold yourself and your team up to certain professional standards.”

Sarah adds: “I think from a financial planning perspective, it also shows that we’re active advocates of the profession. As planners, we want to be viewed by the public as being a profession, and not as an industry. Being an FPA Professional Practice helps us promote that to the broader community.”

“In the end, it’s our financial and market knowledge, our extensive experience, and our genuine interest and concern for all our clients that earns us our success,” Anne says. “And being an FPA Professional Practice helps to reinforce that.”

FPA Professional Practice criteria

In order for a financial planning practice to be recognised as an FPA Professional Practice, it must first meet four criteria. These are:

1. A financial planning practice must have at least 75 per cent of practitioners registered as FPA members.
2. At least 50 per cent of the practice’s planners are either a CERTIFIED FINANCIAL PLANNER^® professional or are in the process of achieving the 3. CFP designation (within three years).The practice must be prepared to uphold the FPA’s Code of Professional Practice.

4. The practice agrees to conduct a three yearly review to confirm adherence to the licence criteria described above