Transition and acquisition are two pillars that have supported tremendous growth at Merit Financial Advisors, RIA Intel Award’s 2022 RIA of the Year —More Than $1 Billion AUM. But founder and CEO Rick Kent says that relationships and partnerships are two other factors that could help his Atlanta-based firm go from $8 billion in AUM to north of $15 billion over the next few years.
Kent sat down with RIA Intel to talk about the lessons he learned growing his business.
Responses have been edited for length and clarity.
You’ve been doing business as Merit for 25 years. What are some of important lessons that you’ve learned over that time?
When I first got involved in the business, I identified a niche market, AT&T, and stuck with it. And that’s still a great niche market today. I think niche marketing has really allowed a lot of advisors to become successful. Another thing I learned along the way is how important building out a team is. As a lot of advisors evolve, they first try to find success as an advisor, and then they begin to grow their clientele. That’s when it becomes important to start thinking about building out a team. There’s only so much an advisor can do alone — it’s important to have a strong team behind you.
What do you focus on when thinking about team building?
It’s very important to lay out a vision. Where’s the team going? How are they going to get there? Success as an advisor is very different from building out a firm, building out a business. For a lot of advisors, it’s a real transition to go from just being an advisor to becoming a really good manager of people, to become really good at building relationships with people and to laying out a vision for them that will take them to the next level.
Your company has enjoyed tremendous growth recently. What do you attribute that to?
We’ve had a good run at Merit. Two years ago, we were projecting our growth and felt that it would be prudent to bring on a capital partner, a partner that could help us with business acumen expertise, a partner that has helped other large RIAs grow their business. We were really looking for somebody who wanted to get involved with us, who aligned with our goals and our vision and was comfortable being in a minority position with us as we grew the company. We weren’t necessarily interested in jumping out there and selling a majority stake in the business — we wanted someone who saw the value of what we were doing and wanted to participate in it. So, at the beginning of 2021, we found a great partner with Wealth Partner Capital Group. And since then, through this January, we’ve completed 14 acquisitions.
When you’re targeting an acquisition, do you focus on a specific niche market that you might not have a presence in, or is it based more on performance?
That’s a great question, because we do have a lot of niche markets today. UPS is one, AT&T is another, Toyota is another one. Duke Power in North Carolina is another one. We have a niche market for widows, for people who’ve lost a loved one, and for people going through divorce. Those are all niche markets, and we want to continue to develop those. But when we go out for acquisitions, it’s not, “Hey, do you have a niche market? If you do, we’re interested.” It’s really more about the quality and the culture of that business to make sure it aligns well with Merit. And if they do have a niche market, that’s great, but it’s not the criteria as far as acquisitions go.
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How big do you think Merit can get?
I just love where Merit is today. We’re going to continue to partner with advisors across the country in major cities and regions. And I truly think of it as a partnership. We’re acquiring these firms, but we’re not really looking for people who want to get out of the business, we’re looking for people who really want to grow. We use what we call the “hub and spoke” model, where we’re looking for leadership in a geographical location. Once we find that leadership and get it established, we put our resources around that hub and then begin to grow that region. So these are partnerships that we’re establishing across the country, and it’s working really, really well. We have a lot of younger advisors — and by younger I mean 30, 40, or 50 — who have a great business ahead of them.
With this influx of new talent, is it difficult to maintain the type of corporate culture you had when you were smaller?
When we do an acquisition and people really want to know what Merit’s all about, I say, “Look, I’m kind of biased. I love Merit. After twentysomething years, It’s like a child to me. So of course, I feel great about it, but I want you to go talk to the employees and see what they say.” We think that with our culture, relationships are really important, and respecting other people is very, very important. You have to really come down on rumors or gossip, which are the kinds of things that can really destroy an organization.
You’ve said that based primarily on technological advances, you expect massive change in the industry over the next five to 10 years. How do you intend to be ready for that?
Technology is changing all our lives, but I think the financial services industry is going to be more impacted than many by technological changes. If you don’t stay up with technology, you’re going to quickly be left behind. So I thought to myself, I don’t really want to just stay up with other firms, I want to be a leader in the industry. That’s when I decided to make a commitment to invest over $3 million and to put together a two-year road map that will make us one of the leading RIAs when it comes to technology.
What’s next for Merit?
I see a $15 or $20 billion firm, and I think that we’ll be there within two years. At that point, as you begin to grow, and to build out your team, and to get better-quality players, you kind of reach a plateau. That’s when you have to ask, “Okay, where do we go from here?” Then it’s just a matter of looking out for the next plateau.