Rose Swanger an advisor in Knoxville Tenn wants to grow by either buying a book of business or bringing on a junior FA

Rose Swanger, an advisor in Knoxville, Tenn., wants to grow by either buying a book of business or bringing on a junior FA.

Getting Beyond the $10 Million Plateau

Does a $10 million advisor grow by buying a book? By getting a junior partner? Or is there another way? Our panel of experts weighs in. 

Rose Swanger has run her own solo practice in Knoxville, Tenn., for four years. She wants to grow, preferably by buying a soon-to-retire advisor’s book or perhaps by bringing on a junior partner. But she hasn’t had much luck with either.

Swanger has a degree in medical technology and worked for the American Red Cross. After she and her husband, a physician, moved to Knoxville, they lost a lot of money in bad investments. “I learned physicians are not good investors,” she says. “They take advice from each other.” 

With that in mind, she threw herself into reading books on finance. She ended up getting an MBA in financial planning and, later, her CFP designation. In 2009, Swanger joined what she describes as an “insurance-based” firm. Two years later, she launched her own practice, specializing in physicians. 

Now, with about $10 million in assets, she wants to boost growth and is thinking of tapping the glut of advisors near retirement age by buying a book of business. She’s attended some Financial Planning Association chapter meetings but, generally, people brush her off or they aren’t the right fit. She hasn’t gotten very far asking her broker/dealer for a good match either. Plus, she finds the process uncomfortable.  “I feel like a shark, just looking for older people,” she says. Her alternate plan is to find a junior partner who would be on an ownership track, though currently she doesn’t even want to hire an assistant. “It would be like teaching my teenage daughter driving,” she says. 

What are her options?

Matt Lynch, 

Managing partner,
Strategy & Resources

A small practice without a staff—I’m not sure she has enough to offer a seller. I think she needs to have more of a proven track record.  Most sellers want to get paid but they also want to make sure their clients are taken care of. As a one-man band, it’s hard to guarantee that.

She needs to add to her staff so they can take care of client services and she can take care of rainmaking.

Actually, I’m not sure buying a book of business is the best option for her. Just having the capital doesn’t mean it’s a good idea. I think she would be better off joining a larger firm. Not being bought, but partnering with an ensemble practice, where she could learn how a bigger financial planning firm is run, from technology to support staff and workflow. She would look around her community for some of the larger places that can coach her in how to grow her business to something like $50 million or even $100 million. At that point, she’ll have more clarity around the client service experience. Once she gets exposure to a team-based environment and becomes more established, she can even buy out one of the people in that firm, rather than trying to do it on her own.

She can consider talking to her broker-dealer about what larger team-based organizations and branch offices she could join. She wouldn’t have to give up her independence. But it should be a collegial environment where she can learn directly from other people about how to grow.

I think physicians as a target market is too broad.  She would be better served by targeting specialists.

Brandon Odell

Director of business consulting,
The Ensemble Practice

Generally, if you’re looking to grow organically, having a strong niche is the way to go. You understand their life and their needs because you work with them all the time and referrals happen sooner.  But being in a niche raises certain questions. If she buys a book with clients from varying backgrounds, she dilutes her niche; she’s diversified her portfolio of clients but weakened her marketing value. On the other hand, it’s already difficult for her to find a seller and she’s looking at a broad market. That means it will be even more difficult to find someone in her niche.

I’m concerned that if she buys a book now, it will overwhelm her capacity and hurt her ability to focus on physicians. So I think she needs another advisor. Someone who could start as an assistant or paraplanner, perhaps sitting in on client meetings. Then if a good acquisition comes up, she can be confident she’ll have the capacity to handle the demand—and protect the crown jewels.  It would allow her to buy a book that’s outside her niche, thereby broadening her revenues and perhaps letting her expand geographically, and have the ability to handle the work.

If she wants another advisor, however, with $10 million assets she won’t be able to pay someone. So she’s probably going to have to find candidates who come with their own book.

As for how she looks for a prospective seller, it’s important to understand that not every firm is willing to be open about the fact they’re up for sale. Maybe they don’t want competitors to know or they’re not 100% convinced they want to exit. But if she keeps networking and they get to know her over time, someone might be willing to sell. At the same time, the firms that are the best at this actually do flat-out cold calling.

Finally, there’s the matter of timing. Firms have had good growth, and advisors who are getting up there in age may have just had a very good year—maybe one of the best.  It’s much easier to decide you’re going to keep on working if you’re making record income. Also, about feeling like a shark: You have to. There’s no answer to that.

Hellen Davis 

CEO and co-founder,
Indaba Global

She should know what she’s good at and stick to that, bringing in somebody to balance out the areas where she’s not as strong.  If you’re a good closer, you’re usually not good with details and if you’re good with details, you’re usually not a good closer. At the moment, she’s doing it all and that’s not going to make her attractive to a seller.

Also, she certainly needs to get an assistant, build an infrastructure, and prove that she can deliver a high level of customer service. A successful person with an established book of business would ask, who’s going to answer my phone? Who’s doing the paperwork?  I suspect people at her b/d would be more helpful if they were confident in her ability to service clients from another book. She can’t say “I’ll get an assistant once I buy a book.” That won’t work. It’s like saying “I’ll run a marathon before I learn to walk.” I’m not sure she understands what she’s up against.

This is also important for her clients. Physicians are used to having assistants make their appointments. Why should it be different for someone in financial services?

Ultimately, if I were in her place I would join a financial planning practice—set up something where I can grow my practice inside of an existing, bigger business. That’s her best move.

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