January 9, 2023
Louis Diamond Quoted
By Mark Schoeff Jr.
If advisors who have less than a certain ownership threshold are free to leave an acquired firm, it could give buyers pause.
A federal ban on contract clauses that bind workers to employers could affect how acquisitions of investment advisory firms are structured and influence financial advisor moves between firms.
This could give pause to private equity firms and other entities that buy RIAs, which often seek to keep the firms’ advisors onboard. If advisors leave, part of what acquirers were purchasing walks out the door.
“It does reduce the attractiveness of an acquisition because the buyer sees some risk in advisors leaving,” said Louis Diamond, president of Diamond Consultants, an advisor recruiting firm. “There could be some adjustment in the ways an acquiring firm might structure a deal or write their employment contracts.”
If minority owners and other advisors leave, they take some value of the deal with them.