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Succession Resource Group is a boutique succession consulting firm based in the Pacific Northwest, serving clients across the country. SRG was founded by David Grau Jr., MBA in 2012 after nearly a decade of helping advisors with valuation and succession planning. SRG's team of experts leverage their industry expertise, combined with best-in-class resources, to help advisors, agents, and accountants manage the equity in their businesses...

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5 min read

Buying a Book of Business

Jun 17, 2022 11:15:54 AM

Signing loan papers with banker

Whether you are just starting out as a financial advisor or you are simply looking to expand your established business, buying an existing book of business could be the right move for you. Opportunities for business acquisitions are becoming ever more common, as the average age of many financial advisors edges closer to retirement.

As straightforward as the process may be, you have to do your due diligence to determine if buying a financial advisor’s book is a good fit for you. Tracking down a business that properly suits your and your goals is not as easy as an internet search, and you will certainly have to do a fair bit of legwork to ensure you get a good deal.

There are a lot of factors to bear in mind before moving forward with any purchase agreement. You should ensure you have as much information about the seller and overall market as possible before entering into any negotiations.

Consider Hiring a Lawyer

While strictly a necessity for those with enough experience, getting legal advice before purchasing a book of business will almost never prove to be a bad move. Even if you have a straightforward verbal agreement, it is easy to miss the finer details in a written contract. Hiring a corporate lawyer can save you a lot of trouble that you might need to face if you only find these discrepancies after the fact.

Potentially saving you a lot of trouble and heartache, a corporate lawyer can also help make sure that the person selling the book of business is actually authorized to do so. Even if this is not the first time you have entered such an acquisition process, having a professional ensure that you are not getting worked over can be incredibly helpful.

Do Not Settle

While buying a financial advisor’s book can be a great investment, that does not mean you should simply buy any book with existing customers. Dig deep and do your research to make sure that the book in question is the right match for you and your interests.

While it is not a bad idea to diversify, the simplest and most efficient transfers of ownership will be with businesses that are similar to yours in terms of their business model and ideal clientele. There is no set rule when it comes to this, but you need to ensure that any transition periods are seamless for the existing clients.

Make sure that the book of business is actually worth your time and money before getting too far into the process. Just because you happen to have the energy and financial stability to make such an acquisition, that does not mean you should get ahead of yourself and make a bad deal with the first seller you meet.

Do Your Research

Man typing on calculator by laptop

As mentioned before, it is critical for you to do your due diligence before any business acquisitions. Learn as much as you can about the business, such as how the seller runs things. Working directly with the selling financial advisors can make all the difference, as they will certainly want their clients to be as happy as possible after the transition.

Likewise, it can be very beneficial to meet with those who may soon be your new clients, if possible. Try and find any pain points that they might have under current management, or if the clients have any succession plan for themselves. Regardless of what the seller may tell you is their reason for leaving the business, it is never a bad idea to get some more information from their clients. If the clients think that the seller is simply trying to jump ship, they will likely show it.

If you do decide that the financial advisor’s book and existing client base suit you and your needs well, have an appraiser help you assess what a fair price for the business would be. Review the financials and tax returns, and analyze the cash flow of the business. This will not only help you to get a better understanding of the book of business that you are considering purchasing but will also help you get a fair price when purchasing.

If you are having trouble finding a financial advisor’s book of business that is the right fit for you, make a MyCompass profile today and find sellers who have been thoroughly vetted by the experts at Succession Resource Group (SRG). Your buyer profile will match you only with businesses that suit yours and sellers who are serious about making their transition.

Make a Plan

While any transfer of ownership can be stressful both for the purchasing financial advisors and their new clients, having a transition plan in place can help you stay on top of the process. Ideally, the seller will be a happy participant, making introductions between you and their existing customers.

If the seller is unwilling to help you forge a connection with their clients, that is a clear sign that their client relationships are not in the best of shape, which does not bode well for you as the potential buyer. That said, if you did manage to get in touch with the clients before entering the purchase agreement, you may have formed enough of a relationship that you can move forward regardless.

Establish a timeline with the seller and existing client base that is amenable to all parties. Ensuring that you have a well-thought-out plan to support a smooth transition is crucial for client retention. Any steps on this timeline must be clear and simple enough for your new clients, keep in mind that they are under no obligation to stay with you after the transition period is over.

With that in mind, make sure that any websites or processes that you do intend to update slowly transition as well. You may have your own website with an entirely different look, but the existing clients are likely familiar and comfortable with whatever the seller was doing before. It is important to make that transition, but doing so too drastically can add more stress to an already concerned client.

Make it Personal

Couple making deal with banker

For the existing clients to stick it out with you through your transition plan, it is vital to keep your relationships personal. This starts with you and the seller. Learn as much as you can about them during initial introductions and take notes, having a good rapport will pay off in the long term and could make the seller more motivated to facilitate a smooth transition.

Having a good relationship with the selling advisor will also likely result in them making higher-quality introductions between you and the clients beyond a basic phone call or email. This is no small thing, as the more help, they give you in getting to know the clients, the more likely it is that the clients will stick it out with you.

If the seller is willing, try to set meetings with them and the clients to set goals and expectations for the process of shifting ownership. Having your transition plan mapped out also comes in handy here, as your new clients will feel far more comfortable with your expertise. Check-in with the clients throughout the transition period, and do whatever you can to keep them satisfied.

Once the book of business has transferred into your hands, set aside time to check in with your new clients in regular meetings. Avoid communicating with form emails and other cut-and-paste messaging, as this will shake whatever confidence the clients may have. Consistent personal communication is the best investment you can make at this stage. Whatever amount of extra time and work this may cost you is sure to pay off down the line.

Whether you are looking to jumpstart your career or grow your existing business by buying a financial advisor’s book, the professionals at SRG are here to help. Contact us today for a consultation and learn more about the opportunities available to you.

David Grau Jr.

Written by David Grau Jr.

David Grau Jr., founder and CEO of Succession Resource Group, specializes in succession and M&A consulting for advisors. As a leading M&A consultant with a history of service in the United States Navy, David is recognized as a thought leader and accomplished speaker. He is prominent in the financial services industry, especially on topics related to M&A and next-generation strategies, having delivered over 200 presentations for organizations like the Financial Services Institute (FSI) and FPA.