Banker Courtship for Wealth Advisors – Why it Matters for Today’s M&A - For many commercial property developers, seeking and receiving financing for an existing or future property is part and parcel to their business. Commercial developers allocate considerable time researching banks, building relationships with bankers, and preparing themselves in the most favorable light possible when it comes to requesting financing. Historically, independent and registered advisors have had very muted options for bank financing. However, as this marketplace for wealth management practices evolves rapidly, today’s enterprising advisor should assess their approach to retaining financing by looking at their current bank relationship first.

Build a Relationship

Most financial institutions do not want to be treated solely as a source of money and from a risk management perspective, it is in their best interest to create a full relationship with you prior to extending credit. The closer you work with your financial institution, the more they know about you, your business, and the intangible risk metric of “character”. A relationship with a financial institution is something that traditional borrowers (i.e. commercial real estate borrowers) have leveraged to receive better terms and funding that may not have been as attainable previously. They understand the value their depository accounts have to banks and allocate them accordingly to promote their financing initiatives.

Evaluating Your Current Commercial Bank Relationship

If you are anticipating a need for funding in the future, ask yourself, “Is the financial institution I currently have my bank accounts at willing to fund my business?” If the answer is no, moving your depository accounts to a bank that is actively funding the financial advisory practice industry should be considered. This starts your relationship off on the right foot by introducing your business to a future funding partner without the pressure of asking for funding during your first conversation.

Many financial advisory practices have the cash flow and business value that make advisory practice loans very enticing to banks. Where they may have some hesitation is in the intangible aspects of your business, including your personal character and how willing you are to be a partner rather than just a borrower. Your existing relationship can become a deciding factor when you request funding for an acquisition, succession, or debt restructure.

Account Transfer Process

Technology has significantly simplified the process of moving your deposit accounts from one financial institution to another. Financial institutions no longer require you to physically sit in the bank while they set up your accounts; rather, many have online forms that can be filled out in a matter of minutes in your office or at home.

There are other benefits that come from changing your financial institution; your new institution will review how you use your account and may offer additional banking products that streamline your business and take additional work off your hands. Your existing financial institution may not be as familiar with the wealth management industry or your practice, failing to give you suggestions as new products and technology become available.

The Real Benefit of a Banking Partnership

If you are thinking of buying or selling an advisory practice at any point in the next five to ten years, you should understand the importance of your bank partnership in relation to financing options. Buyers and sellers alike should be looking for financial institutions that are familiar with the wealth management industry. By working with a bank holistically, the benefit to buyers is the bank already knows you and your practice first, before you extend your hand for financing. For sellers, the benefit is that a bank partner who understands the wealth management industry will be more comfortable and likely extend more financing to that buyer. Ultimately, this may result in receiving a higher multiple and liquidity at close.

In a hyper-competitive M&A market, bank financing and the immediate liquidity it brings to it can be a major deciding factor in purchasing a practice. Any savvy buyer would want to do everything in their power to increase the amount of funding they can receive. Before even asking for financing, you can start off on the right foot by engaging a banking relationship with the right partner.

To view the original article featured in ThinkAdvisor, please visit: