Question for Independents

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Aug 27, 2009 12:29 pm

 
Hello all you indies,
 
I am currenly working for a firm that does not allow me to sell my book of business when I retire. I am young and not looking to leave the business any time soon. An indie was recently trying to recruit me  to work under him claiming that when you retire, you can sell your book for a lot more than my current firm gives me.
 
What is a realistic percentage for selling your book in retirement?
 
Thanks in advance for your input.
Aug 27, 2009 2:38 pm

There is no set formula.  Here are some of the variables.  If it is a sticky book, meaning assets that are likely to stay if you were to leave the firm, those assets are worth more to a buyer.   If someone that is a stock picker were to sell their book, those assets are with the broker because clients like the stock picking style and results.  When the rep steps out of the equation, it will be tougher to maintain the assets unless you are a solid stock picker yourself.  Assets in a mutual fund, are likely to stay, so expect to receive more for those assets.  The same goes for fee based business, which provides recurring revenue without being forced to make a sale.  If you are forced to make a sale to generate revenue, consider it non sticky assets and not worth quite as much to a buyer.  Also, the greater the assets per household, the more valuable the book is to a buyer.


In better times, people were starting to pay well over two times and even three times annual revenues.    You still can get over two times relatively easily.  One of the best resources out there for valuating and selling practices is www.fptransitions.com 
 
How one transitions a book also impacts the value.  In the independent world, firms will try to match you up with a buyer in the firm and transition your book over a period of time to make sure all of the clients stay.  You should get the book Going Independent at www.cantella.com because it discusses this stuff and all the other pros and cons about independence.
 
  
Aug 28, 2009 12:43 pm

Thanks for your help, I appreciate it.  

Aug 28, 2009 1:53 pm

FP Transitions is definitely worth examining but I wouldn't stop there.  I would also recommend investigating a firm called Adviser Xchange.  Their website is:  www.adviserxchange.com

 
Feel free to call upon me if you need more help in this area.  Best of luck to you!
 
888-579-8640