So in March 2005, when Nulsen called Roberts and told him that he had sold Viking to Financial Solutions Advisory Group (FSAG), a larger firm in Chicago, Roberts did not know quite how to react. "I had a significant amount of anxiety because I had chosen him very carefully," Roberts says. "Because of him, I was sleeping well at night."

Though Roberts says he trusted Nulsen and knew that his advisor would not dump him with just anyone, he did not like the fact that the new firm was located more than 200 miles away or that each of FSAG’s three partners was younger than Roberts’ son. But when the partners met with Roberts and Nulsen in Indianapolis and reassured Roberts that Nulsen would remain involved for at least a year, it did not take long for Roberts to start feeling a bit more comfortable.

Today, increasing numbers of affluent investors, many with the same firm for decades–dating to the time the modern-day wealth management business really began–suddenly find themselves summarily passed from their familiar firm to another. Over the past few years, merger mania has shaken the financial planning industry, creating many frustrating changes for clients. In some cases, small independent firms like Viking are selling to larger independent firms like FSAG. Meanwhile, larger independent firms–including those with $1 billion or more under management–have been acquired by even larger trust companies or regional banks intent on expanding into the wealth management business.

In part, this trend toward mergers and consolidation is driven by the demographics of financial managers. "A lot of [advisors] are mindful that when they approach their 60th birthday, the value of their practice begins to decline," says Elizabeth Nesvold, managing director at Berkshire Capital, a New York firm that provides merger advisory services. The age of the advisors comes into play because the purchase price is usually based on how many clients make the move to the new firm. Conventional wisdom holds that older advisors are less likely to stick around the new firm than those in their 40s or even 50s, which means their clients might not stay either. Recent research by JPMorgan Asset Management found that more than half of advisors working with affluent individuals are 50 or older, one indication that the move to merge is likely to continue–and possibly even accelerate.

Exit Strategies
Of course, many clients are not even aware that they stand the risk of being wedged between two merging firms; few of them find out that their advisor plans to sell before a deal is signed. At that point, investors have essentially two options: move their money and wait while a new firm gets up to speed on their various assets and investment strategy, or keep their wealth in place and risk equal frustration if their current advisor exits the scene and the merged firm struggles to get up to speed.

TOP VIEW: With more than half of all financial advisors nearing retirement age, the current pace of mergers and acquisitions in this industry is likely to accelerate. But even a firm’s most important clients may not learn of a merger until after it closes. Small changes in a client-advisor relationship can signal an impending merger and spur smart investors to prepare for the worst. But not all mergers are bad for clients; some provide additional resources and scope without reducing personal attention.

The best approach is to be prepared for such a contingency. A typical merger or acquisition can take as long as two years to consummate. During that period, most advisors tend to be reluctant to say anything to their clients, primarily out of fear that the client will bolt before the deal is done. Clients, especially those tied to older advisors, should learn to read the signs: their advisor becomes easily distracted; he suddenly takes more time to return calls or emails; or a normally talkative advisor becomes very reserved, as if trying to hide something. An advisor who displays one or more of these signs is at best failing to serve a client’s needs and may be planning a sale.

Entrepreneur Howard Marks had been a client for several years of myCFO, a wealth management firm launched in the late 1990s by Netscape entrepreneur Jim Clark to provide comprehensive services for wealthy families, when he noticed such changes. A cofounder of the video game company Activision, Marks sensed that his advisor, Rob Francais, whom Marks says he trusted completely, was acting differently; he never told Marks what was really going on. As it turned out, myCFO was suffering serious problems, and partners like Francais were planning to leave to start their own firm. At the end of October 2002, myCFO was sold to Harris, a wealth services conglomerate based in Chicago. Francais and three other partners in the Los Angeles office left to start Quintile Wealth Management, which now has about 30 clients–including Marks–and manages about $1.4 billion.

"When I first heard about the situation at myCFO, I was out of there. No question about it," Marks says. "But Rob knew my affairs very well, and I trusted him to make the right decisions. So it didn’t bother me that it was a new firm. Of course, it would have bothered me if I didn’t know Rob before."

Fifteen years ago, Nesvold notes, there were roughly four mergers a year in his industry. In 2005 there were 65, although those numbers are likely significantly understated because Berkshire only tracks firms with at least $200 million under management; a relatively small deal like FSAG’s purchase of Viking would not be included. Indeed, merger activity is so strong that services have sprung up to match buyers and sellers. Charles Schwab, for example, launched a service for wealth managers two years ago that uses custom software to pair wealth management firms looking to sell with those looking to buy. That is how Viking and FSAG found one another. In November, Schwab Institutional’s Advisor Transition Support website showed listings from 250 firms that were intent on buying, and approximately 80 firms (with about $7 billion under management) that wanted to sell, according to David DeVoe, director of the Schwab division. Unfortunately, investors are barred from peeking to see if their advisor is on the site; it is password-protected and only available to the advisors themselves.

If and when an advisor completes a merger, his clients sometimes find themselves thrust into a personal, often complicated bonding ritual with someone they have never met. Because many clients consider their wealth manager to be among their most trusted advisors, any change, let alone multiple changes in that relationship, can be as unsettling as a nasty divorce. Clients of J. Bush & Co., a Connecticut wealth management firm founded by Jonathan Bush, the president’s uncle, have seen the 35-year-old firm change hands three times since October 1997. Few advisors, and even fewer clients, would be eager to put up with that kind of upheaval.

"The major mistake that tends to get made is that new owners get rid of the relationship manager, which means that the firm will probably lose the client," Nesvold says. Other problems crop up when an independent entrepreneurial firm merges with a large established firm. Marks, for one, says he never would have been happy winding up at a large firm. For him, working with a boutique was critically important.

Straight Talk
Even if a client has no control over his advisor’s decision to retire or merge, an investor can steel himself against upheaval. He can have one last face-to-face meeting with his advisor to get a clear picture of whether his advisor will be staying with the new company. He can discover what prompted the sale in the first place (although getting any candid answers may not be particularly easy) and research the acquiring firm. Keep in mind that most deals are structured so that a selling firm is paid for each client who switches to the new firm. Clients should not be reluctant to use this leverage with a long-standing advisor to obtain some straight answers. Investors should insist on as many details as possible about proposed changes in the structure of the new firm. Any type of significant change, such as an office closing or an advisor leaving, and even cosmetic shifts, such as the old firm’s name coming off the door too quickly, can cause anxiety.

"The biggest line in any merger is that things will always be the same."

However, when a firm decides to merge in order to be able to offer additional services, clients can actually be left with the best of both worlds: the same advisor with supplementary tools to help investors manage wealth more efficiently. This happened several years ago at Atlanta-based Balentine & Co., a firm with some 44 clients and $4 billion under management. An entrepreneur who had sold his business for several hundred million dollars in cash was planning to move to a company that offered fiduciary services. Determined not to lose that client, Robert M. Balentine, who established the firm with his father, Bob, in 1987, sought out a partner and wound up merging in 2002 with Wilmington Investment Management, a unit of Delaware-based Wilmington Trust. But Balentine says he was adamant about keeping the Balentine name on the door, in part to reassure existing clients that, despite the new owner, the firm felt strongly about maintaining its former identity.

Of course, even the smoothest mergers are likely to yield their share of problems. Changing the infrastructure of a firm, from computer systems to corporate policies, will cause frustration for at least some clients, not to mention the firm’s employees. And any change presented in the fee structure–a common occurrence in most mergers–is likely to prompt at least a few angry phone calls. But, as with most issues, fees can be negotiated, particularly if the firm is eager to retain existing clients. "The biggest line in any merger is that things will always be the same," Balentine admits.

The upside for most clients is that after both companies work out their details, investors often wind up with access to a greater number of services and, in the best situations, a more diverse group of wealth managers who are familiar with a wider range of products and strategies. When Nulsen was trying to convince Roberts that the change was good, he stressed that his client would now be able to communicate with four experienced advisors instead of one. Last May, when FSAG’s three partners came to Indianapolis to meet with Roberts and his wife at their home, Roberts grilled the younger men. He came away satisfied and has remained so. "They were very articulate, very concerned and did a great job of convincing me," he notes.