Three Key Steps to Follow When Buying a Financial Advisor Book of Business

If you’re considering buying a financial advisor book of business to expand your client base, three key steps will help you to identify the right firm for your purchase and have the best chance for success with your investment.

1. Conduct Due Diligence

When examining a book of business to determine whether it’s a good fit for you and your firm, take the time to thoroughly research and evaluate the business you’re acquiring to determine whether your business and the sellers are in alignment. 

Conduct a comprehensive assessment of each facet of the book of business, including:

  • the business’s overall financial health;
  • how the business is being run;
  • its organization and the method by which it houses data;
  • the nature and satisfaction level of its customers;
  • the owner’s reason for looking to sell; 
  • the expectations and objectives of its client base; and
  • the degree of attrition that you can expect upon acquiring the book.

By closely examining each aspect, you can determine whether it will be feasible to transition the book’s clients from the existing firm to your own while ensuring a low rate of attrition. 

2. Determine Its Value 

Upon completing your due diligence, enlist a professional to conduct a proper valuation of the business. Myriad factors affect a book’s market value, and each business is different. A proper valuation will account for revenue, client demographics, tenure, and numerous other factors. Once a comprehensive valuation is secured, a buy-sell agreement can be created and entered into by the parties.

3. Devise Your Transition Strategy

As soon as possible, you’ll want to secure a plan for transitioning clients. Work with the seller to determine a timeline for their involvement, support, and completion of their responsibilities and obligations to clients. Typically, the first six to nine months are pivotal when it comes to client retention. Meeting with each client with the seller present can foster trust and enable you to identify and address each client’s specific needs.

With some good due diligence, a solid valuation and buy-sell agreement, and a strong strategy and timeline for the transition, you can position yourself to successfully incorporate the new book into your existing business. 

AdvisorLaw provides valuation and acquisition lending services. Our Practice Purchase Network evaluates buyers and sellers to identify and initiate the most viable connections. Contact us for a complimentary consultation below:

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