Small Independents Selling Out

For small independent financial advisors, it's getting tougher to make a living. At least, that's one way to interpret a survey by FP Transitions, a Portland, Ore.-based consulting firm. Its annual survey of independent advisors found that of all practices for sale, the majority (68 percent) are small practices (less than $300,000 in revenues). In 2001, just 42 percent of all practices for sale were

For small independent financial advisors, it's getting tougher to make a living. At least, that's one way to interpret a survey by FP Transitions, a Portland, Ore.-based consulting firm. Its annual survey of independent advisors found that of all practices for sale, the majority (68 percent) are small practices (less than $300,000 in revenues). In 2001, just 42 percent of all practices for sale were small.

“The emotional and economic grind of running an advisory practice during a prolonged bear market has begun to take its toll on less seasoned advisors,” the report says. According to industry sources, the size of the brokerage force has shrunk by 10 percent since 2000.

FP Transitions says the percentage of small practices that are for sale is up sharply from a few years ago, when the majority of practices for sale were those of advisors with fatter books. Often, sellers were veteran reps looking to retire.

Generally, a practice is valued at 2.1 times fee-based revenue and 1.1 times commission-based business, minus whatever the broker/dealer removes from your paycheck, according to David Grau, president of FP Transitions. Median selling prices for a financial practice rose in 2002, to $432,000, compared with $409,000 in 2001 and $397,000 in 2000.

Time to Go

Percentage of practices for sale with less than $300K in revenue
2000 55
2001 42
2002 68
Source: FP Transitions
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