Surviving Due Diligence: 10 Tips for Advisors

By Barbara Herman

The due diligence process can be a daunting, however necessary, task. Here’s how to get through it efficiently.

It’s quite evident that the industry landscape has expanded dramatically—and an advisor in exploration mode has more to consider than ever before. As a result, it may be a daunting task for most to face the prospect of performing due diligence. Nonetheless, there is value in periodically exploring to gain an understanding of the legitimate options that exist—whether you’re thinking of moving or not.

However, the value you receive from the exercise exists only so long as the process is strategic, efficient and isn’t allowed to overwhelm. Based on my experience of having helped advisors navigate through this journey many times over, these 10 steps have served as a practical guide to “surviving” the due diligence process.

1. Develop a strategy for exploring.
   It’s essential to start with a solid understanding of the landscape. What options will you consider and what is the timeline? How much time and effort are you willing to devote to this exercise?
2. Create a list of what you are looking to solve for.
   What are your drivers—both frustrations and goals? Separate the “must haves” from the “wish list.” Don’t leap into identifying solutions or problem solving until you have developed a priority list. And revisit this list frequently, solutions aside, and modify as appropriate.
3. View everything from your clients’ perspectives.
   What’s in it for them? Think about the message you will deliver to them citing the benefits they will see.
4. Evaluate your business.
   What clients will follow you? Who would you prefer to leave behind? Assess what you need to replicate your current business and identify what may be hard to move or require special considerations.
5. If in a partnership, make sure everyone is on board with the plan.
   Identify what goals are specific to each partner – such as retirement – and determine if they can be aligned with those of the rest of the team. How will decisions be made and what happens if there isn’t a consensus?
6. Get – and stay – organized.
   Develop a process for keeping track of open items, questions, and who is responsible for follow-up. Is it better to take a “divide and conquer” approach or must every partner participate in everything as a team effort?
7. Keep your circle close.
   Limit who knows of your plans. Avoid openly discussing your thoughts and actions outside this circle.
8. Maintain the status quo.
   Don’t alter behavior such as printing reports, sending material to clients, absences from the office. Avoid any actions or attitudes that are uncharacteristic.
9. Speak with an attorney.
   Legal advice is a vital step to understanding and remaining in compliance with Protocol and/or employment agreements and new or potential regulatory requirements (such as Reg. BI). Review your compliance history—as this can impact and possibly complicate a move.
10. Keep your current firm at the top of the list of possible choices.
    Everything else you evaluate must be compared to what you already have—and be “better enough” to justify the hassle of a move.

Keep in mind that the goal of the due diligence process should be to find clarity that will allow you to make an informed decision. Ultimately, you’ll walk away – at the very least – with an enhanced understanding of the evolved landscape in which you’re working. While you may start out considering a move, the end result may be that you stay put. The bonus is that you can move forward with a renewed commitment and a newly acquired position of strength.