Buying a book

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Jan 12, 2007 9:37 pm

I read a statistic a while back that half of the country's FA's are boomers and will be retiring in coming years.  Maybe I'm a little naive, but in my opinion this presents a great opportunity for growing a business through acquisitions.  I'd love to hear some ideas about ways to position ourselves to get at these. 

Jan 13, 2007 1:45 am

Good idea. A senior generation of planners is retiring. Many were career changers, former teachers and such - many have established practices using their liberal arts education and career experience.


The younger generation of planners comes from more of a finance and business background - generally. They are well equipped and motivated to take over.


Unfortunately, right now, there are about thirty potential buyers for every single practice seller.


Generallly, you can expect to pay about two times gross earnings multiple. Likely, 20 -40% of the sale price down, with about a three year payout to the seller on the balance. The seller will have to help with client retention and transition.


It will be easier if you are registered with the same RIA or broker dealer affiliates as the seller.


As far as positioning is concerned, a lot of advisors have the same idea. You need to have financial strength and experience. Check out Financial Transitions or similar outfits.

Jan 13, 2007 11:07 am

Makes sense.  However, from what I can gather many of those retiring want to hire someone they can trust their clients with.  They look at newbies as money grabbers until that trust can be built.  Here is my next question.  With 10-20 such idependent brokers in our town that will look to retire over the next ten years do you think it's would be worth spending valuable time building strong relationships with them for the chance that when they hang it up I will have the inside track on taking over their books?  More specifically, I'm going independent soon, at least three of the outfits I'm condsidering have a soon to be retiring broker who is looking for a replacement.  After I choose the best situation do you think I should keep ties with the others and even possibly seek out additional candidates?  Of course the thought is stay with one B/D and bring them to me.  Is my whole idea a long shot and waste of time?  


Additionally, I think if the transition is handled correctly and the business model is a fit then 2x revenue is a very attractive price as a buyer.     

Jan 13, 2007 3:16 pm

I think your are being smart just to be aware and open for the long term. "Fit" is one of the most important considerations to sellers. If you know and be known a little in your professional community, like attending the local FPA chapter for CE credit and so on, that would be efficient.


But I would not put too much energy into relationships, versus just being in a strong postion yourself, in terms of money, experience, your own practice staffing and so on. If you are in a strong position in all respects, and aware of opportunities, a good personality fit might seal the deal.


I understand the "average" seller is a male in his late 50s. There are always unplanned sales. Ironically, many planners have no succession plan.  I have come close to buying a couple, but never actually aquired another practice.


I don't think I would go to an Indy based on the loose prospect of doing a buy with future retiree. If you started the transition under formal agreement now, that would be different. This is a lot like a partnership, at least in the emotional ship, and partnerships are difficult under any conditions.


Being affiliated with Ameriprise Financial, I was pleased to discover this week that we have an online business transition plan available through a company called Financial Transitions. (I think they take 2% from the buyer and 2% from the seller if they do a deal).


If I die, my wife calls them up and "switches on" the profile of my practice - potential buyers can see into my practice numbers, and the negotiatons begin. Experience is showing that Ameriprise franchises are selling at higher than the industry multiple. Since I am solo with no plan, this is a huge franchisee benefit. I am tempted to just sell my practice and pay capital gains plus regular income taxes on the consulting payments, but then I would have cooked and eaten the golden goose.


Jan 13, 2007 11:54 pm

I think you are right but I'm not about to tell you (and all the others who read this) what MY plans for capturing a large chunk of that pie is. Not for FREE!


If you would like to know, PM me and we'll start the process through which you'll pay me for this secret to amazing success!


Mr.A

Jan 14, 2007 2:26 pm
planrcoach:

I think your are being smart just to be aware and open for the long term. "Fit" is one of the most important considerations to sellers. If you know and be known a little in your professional community, like attending the local FPA chapter for CE credit and so on, that would be efficient.


But I would not put too much energy into relationships, versus just being in a strong postion yourself, in terms of money, experience, your own practice staffing and so on. If you are in a strong position in all respects, and aware of opportunities, a good personality fit might seal the deal.


I understand the "average" seller is a male in his late 50s. There are always unplanned sales. Ironically, many planners have no succession plan.  I have come close to buying a couple, but never actually aquired another practice.


I don't think I would go to an Indy based on the loose prospect of doing a buy with future retiree. If you started the transition under formal agreement now, that would be different. This is a lot like a partnership, at least in the emotional ship, and partnerships are difficult under any conditions.


Being affiliated with Ameriprise Financial, I was pleased to discover this week that we have an online business transition plan available through a company called Financial Transitions. (I think they take 2% from the buyer and 2% from the seller if they do a deal).


If I die, my wife calls them up and "switches on" the profile of my practice - potential buyers can see into my practice numbers, and the negotiatons begin. Experience is showing that Ameriprise franchises are selling at higher than the industry multiple. Since I am solo with no plan, this is a huge franchisee benefit. I am tempted to just sell my practice and pay capital gains plus regular income taxes on the consulting payments, but then I would have cooked and eaten the golden goose.




It's a "huge benefit" that they will SNAG 4% from the round trip saleof your practice?

You need to take a look at the bigger picture.....

Jan 15, 2007 3:56 pm

It's a "huge benefit" that they will SNAG 4% from the round trip saleof your practice?

You need to take a look at the bigger picture.....


Tell me more about the bigger picture. Maybe I am missing something here.


If you use their services, they snag 4%. Of course, that's optional.


Like any transaction, if it's not a win-win, don't do it. Either you have an alternate plan already in place, (might even have buy-sell insurance, etc.), then you have a natural market of people who know about your practice and work by word of mouth, perhaps in conjuction with the services of your branch manager (you would need to pay for his time, I would think), or use the financial transitions services.


If you are dead or disabled, I doubt if many people would do quality work on your behalf for free. If the financial transitions service are totally contingent on your incapacitation, it might end up being free insurance. Not a bad deal, considering most advisors (ironically0 have no practice transition planning in place.