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22 Feb Boston Cardinal

Selling Your Wealth Management Practice? 5 Factors to Consider

When evaluating whether or not to acquire a new practice, buyers will consider a totality of factors in their assessment. Financial advisors thinking about selling their business often focus on the more obvious factors such as “total assets under management” or “top products held in the practice.” While these factors are important, there are less obvious characteristics of a practice that contribute to its total value. Remember that price is one thing, but value is everything.

Advisors know better than most the difference between growth and value stocks. When determining what to offer for a purchase price, a buyer will analyze a financial practice in the same way. Those advisors who prepare and strengthen the value of their practice for years leading up to the eventual sale will demonstrate the highest growth potential to buyers. Advisors can maximize their practice’s total value by prioritizing these essential, but less obvious factors.

Before we jump into the details, remember to keep the acronym TOP in mind as you begin your journey. Start by thinking about:

  • The Terms of a deal that matter most
  • Options for how much or how little you’ll be in the practice after completing the deal
  • At what Price range are you open to negotiations

Let’s take a look at the ways you, as an advisor, can both create and showcase value while demonstrating excellent growth potential:

1. Client Tenure & Retention

Evidence of prolonged client tenure and strong retention is like the goodwill on your company’s balance sheet. A long-standing business coupled with a well-established client base signifies great growth potential and instills a buyer with confidence.

A practice’s tenure and retention is indicative of an advisor’s ability to keep client satisfaction high for an extended period of time, while avoiding major mistakes that cause clients to leave a practice. You are selling not only your practice, but the previously set client expectations that must be met and even exceeded moving forward. Improving your practice’s ability to retain clients will keep you in business now and also help create value for an eventual sale down the road.

Looking to consult with an expert about the best way to communicate and retain clients? Let’s talk.

2. Recurring Revenue

The best example of a recurring revenue structure is a subscription-based business. When analysts evaluate these businesses, they are reviewing the number of new subscribers signing up for an ongoing monthly fee. As subscribers grow, the business is generating significant long-term income. Each consumer decision to participate is not a one time transaction; rather, it is an agreement for a long-term relationship.

In recent years, growth stocks like Amazon, Netflix, and Peloton have built loyal customer bases centered around offering subscriptions providing clients with ongoing access to a service. These businesses understood the importance of formalizing the client relationship, building a predictable cash flow, and making the pricing model easier to understand. A simple, transparent fee structure that is clearly presented builds client loyalty.

It may be time to assess the loyalty of your current clients, and consider whether there is an opportunity to strengthen the relationship by restructuring your pricing model. Utilizing some version of a recurring revenue model, similar to the subscription-based models mentioned above, could simplify your business for clients, foster client loyalty, and build significant equity in your practice for a future sale.

3. Distributed Leadership

Like any organization, a financial advisor practice thrives when leadership roles and responsibilities are shared across multiple team members. Potential buyers recognize the value of a practice that operates akin to a high-performance large business, with well defined processes and a sufficient number of expert advisors who have been empowered to strategically problem-solve. Practices overly reliant on one or two individual advisors are simply not as valuable. 

When a practice is too dependent on one or two individuals, production rates can rise and fall more sharply and with less predictability than a larger, more consistent practice. Potential buyers may be skeptical of too sizable an increase in production, questioning its sustainability over time. On the opposite end, a small, top-heavy practice can have multiple things go wrong. Someone may get sick, someone may take a vacation, or someone could simply not be reachable at an important time. These circumstances are offset in a larger organization with distributed leadership, but here they can result in a significant drop in production, raising alarm and causing others to wonder if the practice is on the cusp of a major downturn. 

Buyers are seeking steady production rates, looking at revenue in a practice like a 50-day moving average. Operating more like a high-performance business, with distributed leadership principles, advisors should aim to keep lifting the average up, consistently and gradually. As time goes on and your average increases, the share price of your practice should keep trending higher.

Pro Tip:
We recommend retaining proof of the last several years of your production reports to have at the ready when it comes to selling your practice. While the last 12 months of revenue is what most buyers give the most attention to, demonstrating long-term revenue stability is crucial. Reach out for a conversation with us about what other advisors wish they had done earlier before selling their practice.

4. Diversification of Client Age & Industry

Over the years, the “Buick” brand of automobiles has generally been associated with an elderly client base. For whatever reason, Buick cars do not seem to be as appealing to younger consumers or even people in their 40s and 50s. It may be time to take a look at your practice’s “brand.” Are you pigeonholing your clients by age or even by a single industry? Or is your brand diverse enough to appeal to a wide variety of audiences? Without sufficient diversity, an advisor’s practice runs the risk of being significantly impacted when the unexpected happens and something changes about your niche client group. 

Buyers want to invest in a practice with broad appeal crossing over a variety of industries and ages, without just one typical client “type” or “persona.” The ability to attract clients from all different backgrounds and experiences is an overall reflection of the practice's skill and versatility. Rather than rely solely on its prior success, a diversified practice is nimble and adapts to new challenges brought about by a rapidly changing financial services industry and world. Buyers recognize the tremendous growth potential in such a practice. 

Are you unsure if you are appropriately diversifying your client base and adding value to your practice? Want to talk it through and get an unbiased expert perspective? Schedule a consultation now.

5. Timing & Retirement Optionality

When preparing to eventually sell your practice, it is important to consider how long you want to remain involved in the business and to what extent. This factor is often left out of early discussions between the buyer and the seller. Taking the time right now to think through your ideal retirement scenario when selling your practice will increase the likelihood of finding the right buyer in the future, in turn deriving the highest possible value for your business.

Here are are few popular ways to think about the structure of selling your practice:

Sell & Become Employee

Advisors seeking to limit burnout late in their careers are increasingly deciding to sell the equity in their practice and become an employee, entering a state of “Semi Retirement.” Although this is perhaps the least desirable option for a buyer due to the additional costs associated with still having to pay the advisor’s employee salary, it has become a popular option. Like a magnet, more and more flexible buyers willing to agree to this provision are attracting sellers who desire a change of pace.

Sellers who are not yet ready to fully retire, but feel nervous about how a market pullback would impact the value of their business should give this option some serious thought.  While it may be difficult to imagine something like this happening at your current firm, there are independent practices who do offer this level of flexibility. If you’re not entirely happy with your current situation and feel yourself slowly progressing toward retirement, this may be a great option to consider.

Equity Sale

Depending on the ownership structure of your practice, you may have the opportunity to sell equity in your practice to an outside partner. This has become increasingly popular for independent advisors, especially in the RIA space.

Selling equity in your practice can be done in a variety of ways ranging across a broad spectrum. On one end of the spectrum, the purchasing firm rebrands the practice and takes over all operations. On the other end, the practice looks and feels exactly the same, but the ownership has shifted on paper and the shares have been reallocated differently.

For an advisor who seeks to remain strategically involved in the business, but desires a change in ownership or new branding, this option may strike the perfect balance by both monetizing the business and capitalizing on its future growth potential.

Partial Sale

For advisors thinking about an internal sale or transitioning firms to form a strategic partnership, a partial sale is another way to start shifting your workload while still staying involved in your business. In this option, the purchaser acquires a specific portion of the practice’s client base. Although similar to the “Sell and Become an Employee” option explained above, a partial sale does not relieve the seller of the demands and challenges of business ownership. A market pullback can also seriously impact the future value of your practice. 

A partial sale is recommended for an advisor who wants to give a test run to a prospective buyer in the hopes that it will eventually lead to a full sale. 

Pro Tip:
When selling part of a book of business to a prospective buyer, establish a strategic communications plan to help explain the transition and alleviate confusion for employees and clients. A smooth and efficient transition gives your practice more value if you do decide to sell the entire book of business in the future. 

Are you a buyer on the opposite end of this question and considering acquiring a new book of business? Check out our article “7 Key Questions for Advisors When Offered a New Book of Business.”  

Full Practice Sale

The buyer demand for a full practice sale is far greater than any of the options discussed up to this point. While sellers can expect significant interest, prospective buyers will be less flexible in allowing the advisor to continue to work with clients. The most popular way for buyers to structure their offer is a 6-12 month period where sellers stay on board to ensure a smooth client transition. A strategic communications and transition plan should keep this time frame on the shorter end of the spectrum.

One point of caution: many sellers don’t anticipate how impactful and eventful this 6-12 month time transition period can become. A major acquisition can result in the advisor needing to learn new technology, requiring additional training, and adjusting to a novel work environment with unfamiliar coworkers. If the transition goes really well the seller may feel reluctant to leave at the end of the specified 6-12 month time frame. Make sure to discuss what provisions you want to include in the sale if you feel you have unfinished business or want to stay involved in some capacity, such as taking on a part time service role or extending the transition period if necessary.

For other tips and an in-depth discussion of retirement planning, check out our other article “Focus on your Future: Succession Planning for Financial Advisors.”


If you can’t see them, you can probably feel the changes unfolding across the financial services industry. At Vantage Impact we’re committed to guiding financial advisors on their journey to finding the right firm for their practice, and ultimately, who gets the honor of taking over your practice when the time comes to sell. 

If you’re wondering where to start, we recommend a 30-minute conversation with Our Team to begin preparing for an eventual practice sale. 

Are you overwhelmed by the idea of transitioning firms? Download our free  Transition Guide for Financial Advisors for over 150 helpful questions to ask  along the way ≫

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