Selling A Financial Advisory Practice – What Do Buyers Want?

Selling Financial Advisory Practice

So you’ve decided to move ahead with the sale of your financial advisory firm. To get to this point, you’ve probably had to overcome a lot of concerns about retirement and your future plans. After many discussions with family, friends, clients and advisors, you’re ready to take the big step. While focusing on your decision to sell, you probably haven’t spent much time thinking about what your prospective buyer might be looking for in a business acquisition.

If you’re planning on selling a financial advisory practice to an outside buyer, investing the time and money to make your business “highly marketable” can pay off in a big way.

Continued Growth

First, and most importantly, most buyers are looking for a financial advisory business that will continue to grow after you retire. A firm where personal allegiance is spread across a team of individuals is far more attractive than a business tied to one individual. Potential buyers are looking for a business where clients have been made aware of the owner’s plans to retire, and have confidence that other advisors in the firm can do as good a job as you have.

A Unique Niche

Most buyers are interested in finding a financial advisory practice with a unique niche in a specific market. This will help ensure limited competition and above-average barriers to entry. Purchasing a business that has an established, recognized high-profile position in a smaller regional market may be preferable to most buyers. Buying a financial advising firm that’s low-profile and one of many financial advisors in a larger, metropolitan area or adjacent suburb is far less desirable. Improving your marketing profile and firm recognition can help offset competition and location.

Motivated and Exciting Team

Buyers want management and employees that are motivated and excited about their work. They’re looking for financial professionals committed to the business, its clients and interested in growing with the firm – rather than building a client roster and moving on. The buyer views these types of employees as the “glue” that will help maintain the core client base and the cash flow of the company. They will also provide stability during the ownership transition. As N.R. Narayana Murthy, founder of IT company INFOSYS, said “Our assets walk out the door each evening. We have to make sure they come back the next morning.”

A Strong Infrastructure

A strong financial systems infrastructure that supports efficient internal and external reporting is highly desirable. Your potential buyer wants a comprehensive list of past clients, firm historical financial records, tracked changes in historical growth, client retention, new clients, portfolio activity, client reporting and communications, etc. If your financial advisory firm is technologically efficient, it’s much easier for the buyer to understand the business model quickly and maintain the management and oversight of its vitality.

Highlighting the Underlying Growth

Potential buyers are looking for an economic climate that favors the underlying growth of the financial industry overall. While margins in the financial advisory market continue to expand, some buyers may see risk in an industry where stock market valuations (one of the primary drivers of revenue growth) have been in an upward trend for many years. To allay this concern, you can review your experience with the loyalty of your clients and their willingness to re-allocate portfolios, to shift away from overvalued asset categories to undervalued opportunities. Taking another look at your client portfolios may indicate that your firm’s clients have lower exposure to equities today. In the end, timing the purchase of a financial advisory practice may be just as difficult as timing the stock market.

Selling this type of company to an outside buyer usually takes 6-12 months. The data covered in the chart below includes a wide range of industries, but gives you a general idea of the length of time from listing a company to the close.

Elapsed Time Chart - Listing to Sale


Selling to a current employee may offer another path to selling your firm. This option makes for a smoother transition and allows you to negotiate a level of involvement that fits your personal goals. In addition, internal sales may offer the chance to structure a more tax-efficient purchase contract. Your current employees also offer you a better chance to see your legacy persist over time, They’ve been on your team for a long time and bought into your views of how to approach the financial advisory business. But, typically, current employees are unable to offer the same price or deal structure as an external purchaser.
Current employees will be looking for the following:

Help With Arranging Financing

Most employees do not have the resources to arrange financing a company purchase on their own. Consequently, they need your support to arrange a financing option. Some of the most common arrangements include:

  • Cash sale – buyers get financing (often using the current owner as guarantor or the business as partial collateral) and buy the owner out upfront
  • Buy-back contract – the seller agrees to be paid the purchase price in installments over time
  • Combination contract – some cash upfront with agreed-to annual payments

Keep The Buying Process Objective

An employee will want a buy-sell agreement that spells out all the specifics covering a variety of after-sale issues and objectives. These agreements keep the process objective and may include specifics like structuring the deal with the tax status of the business in mind.

Continued Involvement

While selling your business to an employee can be much quicker than selling to an outside buyer, you will need to continue being actively involved in the business for some time.

Before you put your financial advisor firm on the market or sell the business to your employees, talk to a business sale advisor. Intermediary firms, such as Succession Connection, can help you evaluate what needs to get done to make your firm more marketable and more valuable to today’s buyer. You can also learn a lot about other trends in recent financial advisor business transactions.

Making informed decisions about selling your business will allow you to retire with peace of mind, knowing you’ve committed the resources necessary to getting the most from your years of commitment to your financial advisory business and clients.

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