Type: Gated

Selling Your Advisory Practice to a Friend | Financial Advisor Guide

A look at valuation risks, emotional dynamics, and why familiarity doesn’t ensure a smooth transition. Why Financial Advisors and RIA Owners Should Approach Friend-to-Friend Sales With Caution Among financial advisors, RIAs, and independent wealth management firm owners, one of the most common assumptions about succession planning is that selling to a friend—or someone you’ve known in the industry for years—will naturally produce the easiest, safest, most client-friendly transition. On the surface, it makes sense. This “friend-buyer” already knows you, understands your service model, and may share a similar philosophy. It feels familiar. It feels efficient. And perhaps most importantly, it feels safe. But as SRG has seen across thousands of advisory practice transitions, friend-to-friend succession is often more complex, more emotional, and financially less beneficial than sellers expect. Familiarity can make the process feel smoother, but it rarely makes the process smoother. For financial advisors and RIAs responsible for protecting clients, staff, and the long-term value of their practice, it’s essential to understand why. Why Advisors & RIAs Believe This 1. Trust Feels Like a Substitute for Due Diligence It’s natural to believe that trust eliminates the need for thorough vetting, formal valuation, or structured negotiation. But in most cases, trust fills the space where clarity should be. 2. Advisors Overestimate How Well They Know Their Friend’s Business Capabilities Knowing someone socially—or even professionally—is not the same as understanding: their financial capacity their operational readiness their leadership skills their experience with client transitions their ability to manage a mature book Are You Ready to Exit? Download SRG’s Seller Readiness eBook Selling your business can seem like a daunting task. Our Seller Readiness E-Book identifies crucial elements for you to think about as you begin the process of finding your successor. 3. Sellers Want to Avoid Conflict It feels easier to sell to a friend than to engage in a competitive buyer search. Many advisors fear awkwardness around pricing, financing, or negotiating. 4. The “Easy Path” Narrative Is Emotionally Appealing But the easiest path is not always the best path for your clients, staff, or family. The Reality: A Friend-Buyer Is Not Automatically the Best Successor Selling your financial advisory practice or RIA is one of the most important business and personal decisions you’ll ever make. It impacts: your retirement your family’s financial security your legacy your team your clients your community Choosing a successor based solely on familiarity can introduce substantial risks. Here’s what financial advisors need to understand. 1. Friend-to-Friend Sales Often Skip Critical Conversations — Until It’s Too Late Transitions fail when expectations go unspoken. Friend deals are notorious for: unclear valuation expectations mismatched client service philosophies unspoken assumptions informal negotiation inadequate documentation emotional sensitivity around terms SRG highlights that the biggest cause of seller regret is not price — it’s the lack of early clarity. Friendship creates comfort, and comfort suppresses necessary questions. 2. A Good Advisor Doesn’t Always Make a Good Successor The qualities that make a friend enjoyable do NOT automatically translate into: strong leadership practice management capabilities financial readiness client communication skill retention strategy operational discipline investment in staff Successions fail not because the buyer is a bad person — but because they are the wrong fit. 3. Selling to a Friend Often Results in a Lower Valuation This is the part most advisors don’t expect. Because both parties want to “keep things simple,” friend-to-friend deals commonly involve: softer pricing uncompetitive multiples extended seller financing minimal cash at closing high transition obligations longer earn-outs Why? Because the seller feels forced to treat the buyer as a friend rather than as a counterparty. Meanwhile, advisors who list their practice confidentially typically receive more offers, stronger terms, and higher valuation due to competitive market pressure. Friendly deals feel fair.Competitive deals are fair. 4. Emotional Dynamics Can Damage the Relationship Friendship does not protect you from conflict — it amplifies it.During the sale of a financial advisory practice or RIA, uncomfortable questions arise: Why is this term so strict? Why didn’t you tell me about this risk? Why is your attorney pushing for that clause? Why is the valuation higher than I expected? Why won’t you offer a longer note? These questions feel heavier when the buyer is a friend. SRG’s internal transition case files include examples where: friendships were strained team relationships were damaged deals fell apart late-stage client transitions suffered In nearly all cases, the breakdown occurred due to lack of structure, not lack of goodwill. 5. Many Friends Don’t Have the Capital to Execute the Deal Properly This is a practical but critical limitation. Friend-buyers often lack: liquidity financing acquisition experience personal credit strength operational capacity confidence with client retention strategies The result? The seller absorbs more risk. larger seller notes longer payout terms higher earn-out dependence longer transition involvement reduced valuation certainty 6. Staff and Clients May React Differently Than You Expect Financial advisors often assume, “My clients and employees will be relieved I chose someone familiar.” Sometimes that’s true. But often: clients question whether the friend is the best advisor staff worry about professional credibility the team is unsure about new expectations clients fear cultural mismatch When a successor is chosen through a formal, structured, well-communicated search, clients and staff gain confidence, not confusion. 7. Selling to a Friend Can Limit Optionality — Permanently A premature commitment to a friend-buyer eliminates: market pricing multiple deal structures diverse buyer types varied financing options culture-aligned interested parties timeline flexibility tax-efficient strategies Should Advisors Avoid Selling to a Friend Entirely? Not at all. Friend or colleague buyers can be excellent successors when the process is structured professionally. SRG supports many successful friend transitions both as a neutral facilitator and as a sell-side advocate. When executed correctly, familiarity enhances trust — it doesn’t replace structure. Conclusion: Friendship Is Valuable — But It Is Not a Strategy A friend may become an excellent successor. But they are not the best successor simply because they are familiar. Smart financial advisors and RIAs recognize that: value must be

Contingency Planning Resources for Financial Advisors

Plan for the Unexpected Creating a contingency plan is one of the most important — and most overlooked — things you can do as a business owner, especially in a highly regulated industry. We create simple yet effective turnkey solutions for financial services professions (independent RIAs, financial advisors, accountants, and agents) looking to protect their clients, family, and their business by leveraging years of experience, industry-specific form agreements, and strategic planning resources from SRG. Learn more about our Contingency Planning Services Contingency Plans for Financial Professionals 3‑minute read A quick overview of the main types of contingency agreements (buy‑sell, reciprocal, retainer) and when each structure makes the most sense. Read the Overview Death/Disability Considerations – Ep. 21 30-minute listen A candid discussion on what most advisors overlook in their death and disability planning, and how to avoid leaving your clients and family with chaos instead of a clear plan. Listen to the Episode Contingency Planning FAQs for Finical Advisors 5‑minute read Straightforward answers to the questions advisors ask most: partners, valuation, discounts, funding, taxes, and what happens if your chosen partner can’t follow through. View the Top FAQs Protect Your Loved Ones Plan for unforeseen events such as death, disability, and loss of license. Ensure your legacy is passed on to those for whom you have worked so hard. Protect Your Business’ Value Whether you have identified a contingency partner or not, we can help you create a written plan to ensure the business and clients are taken care of and your family receives value should something ever happen.

Merger Support

A Landmark Merger in the Ameriprise Network  Learn how SRG helped make it happen → Related Resources Merger Checklist View the checklist today  → Thinking About a Merger? Start Here Read SRG’s top teaming advice for advisors preparing to merge → The Fine Print Podcast: Strategies for Building Enduring Wealth Leadership lessons for building a firm that endures → Grab A Valuation We offer a variety of solutions and turnaround times to fit your needs. Join myCompass Our membership club grants you inside tips and opportunities to grow. Review our Seller Services We’re here to ensure you secure the best buyer, price and terms.

Deal Support

Watch the Replay Related Resources The Succession Resource Group 2025 Advisor M&A Report Read our press release → 2025 M&A Infographic Download this infographic → Seller Readiness E-book Download this guide → Selling Your Practice with Expert Advocacy  Hear real stories from advisors who’ve been there → Inside a Real-Life Succession Plan See how other advisors navigated their transition → Grab A Valuation We offer a variety of solutions and turnaround times to fit your needs. Join myCompass Our membership club grants you inside tips and opportunities to grow. Review our Seller Services We’re here to ensure you secure the best buyer, price and terms.

Deal Support

Related Resources 2025 M&A Infographic Download this infographic → Seller Readiness E-book Download this guide → Due Diligence Checklist Start Your Due Diligence the Right Way → Selling Your Practice with Expert Advocacy  See how other advisors navigated their transition → Inside a Inside a Real-Life Succession Plan Explore Real Advisor Journeys → Grab A Valuation We offer a variety of solutions and turnaround times to fit your needs. Join myCompass Our membership club grants you inside tips and opportunities to grow. Review our Seller Services We’re here to ensure you secure the best buyer, price and terms.

Valuation

Related Resources Six Events that Require a ValuationSee if it’s time to value your firm → Your Guide to Increase the Value of Your BusinessStart growing your value today →  2025 Advisor M&A Review Check Out the Infographic→   Grab A Valuation We offer a variety of solutions and turnaround times to fit your needs. Join myCompass Our membership club grants you inside tips and opportunities to grow. Review our Seller Services We’re here to ensure you secure the best buyer, price and terms.

Protecting Your Practice Against the Unexpected – David Grau Jr.

Access the Slides From the Session Download View our 2025 M&A Infographic Download Schedule a Call With Our Team  Download Founder / CEO Paper-plane Linkedin-in Twitter Areas of Expertise: Advisor SuccessionSmall Business SuccessionFamily Business TransitionM&A Tax Strategies, NegotiationFinancing, Financial AnalysisRIA and IBD Rep Valuation, Continuity/ContingencyAdvisor M&A, Business PlanningRIA Buy-Side & Sell-Side Representation David Grau Jr., MBA David Grau Jr. is the founder and CEO of Succession Resource Group, a succession and M&A consulting company for advisors. Prior to launching SRG, David was the leading M&A consultant for a well-known succession planning firm to advisors where he led and developed numerous programs for RIAs. Prior to this role, David served in the United States Navy. David is a published author and accomplished speaker and has been interviewed and cited in dozens of publications over the last decade. He is currently one of the leading speakers in the financial services industry on M&A and next-gen building strategies, with over 200 presentations to his credit. In the past five years, he has spoken at a variety of the industry’s leading firms, including LPL Financial Services, Wells Fargo, Ameriprise Financial, ING, Independent Financial Group, Geneos, Swan Global, Advisor Group, Fidelity, Jackson National, Prudential, Raymond James, and regularly volunteers his time speaking for the Financial Services Institute (FSI) and FPA chapters around the country. David holds a Bachelor’s Degree from Portland State University and has a Master’s Degree from Willamette University’s Atkinson Graduate School of Management. David, his wife Kristen and their three children are long-time residents of Portland, Oregon, but take every opportunity to travel. Fun Facts: David enjoys spending time with his family, reading, running, is an avid wine enthusiast and developing a taste for cigars, loves traveling, reading, he also enjoys snow and water sports and loves basketball (playing or watching). Prior to having three children and starting a business David had a beautiful head of hair. Now he doesn’t.