Selling your book of business

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Jan 23, 2010 11:10 pm

Hello,



I am an advisor actively pursuing a practice to purchase. Are you looking to retire or get out of the business? You owe it to yourself to explore all options. My primary concern is client service and I would love to find out if I can fit into your succession plan. I am located in NY and am looking for a NY based practice. Feel free to contact me with any responses, questions, etc. My email is [email protected] Thanks.

Jan 24, 2010 9:14 pm

+1 on the aol email. =)

Most people here are trying to build their businesses. You may want to contact a business broker.

Jan 26, 2010 6:00 pm

Try FP Transitions.

Jan 26, 2010 9:21 pm

Thanks for the advice guys. The problem with FP transitions is that there are so many more buyers than sellers at this point (for my area in NY). I figured I would try this forum because I know there are quite a few independent advisors regularly logging in.



As mentioned, if anyone is thinking about retiring or leaving the business (even if it is a 5 year time frame), I would love to sit down and discuss exit strategies. I am an experienced advisor simply looking to grow my book through acquisition. I am located in the NY metro area. Thanks!



[email protected]

Feb 18, 2010 10:03 pm

hey guys,



i didnt get too many responses as far as my previous post. let me ask a more general question. for the indys out there, what is your exit strategy or succession plan?





are most of you working with teams or junior reps to pass the business to?



are some of you already under contract to sell to someone at your firm?



how much do you value your business based on production and how did you come up with the number?



how about current values for practice acquisitions? currently i am seeing a range of about 1x-2x non-recurring revenue and 1.5x-3x recurring revenue (trailing 12) for sale price. any thoughts?





just curious as an advisor looking to grow through acquisition. thanks.

Feb 19, 2010 9:46 am

12,

 
Most on this board are more interested in buying practices, not selling them.
 
Some perspective:
In my area, we have several small indy practices.  I know most of these guys, and most have less than $20mm in AUM, and are basically content making 150K.  Not really growing.  50-75 clients.  They are far too young to be selling yet, adn their lifestyle is too easy to need to sell.
 
We also have a couple of huge ensemble firms ($750mm+ AUM).  One of them is being transitioned to family (son of founder is in his early 30's), and the other sold to a local bank about 3 years ago (but still operates independantly).  That one will last in perpetuity as a division of the bank.
 
I think the larger and more evolved the firm (have existing staff, a CEO, management, run like a business, etc.), the higher the multiple (maybe 2.5 - 3.0).  The little solo-indy "producers" I mentioned probably get 1.5 - 2.0 for recurring, and .75 - 1.5 for non-recurring/transactional.  One of the guys I know has about $20mm AUM, does ONLY American Funds A Shares, does everything fund-direct, has no staff, and just rents a little one-room office.  I can't imagine him getting anything over 1.0 times revenue.  In fact, someone might only pay him 1.0 times for the trails, which might only be 50-75K per year.  I don't know why you would pay someone for more than trails on A shares.  I wouldn't pay someone on a 250K account that he earned 2.75% on last year, and will only earn 0.25% this year.
Mar 1, 2010 9:00 pm

b24,
thanks for the insight. i agree that the more organization you have, the higher multiple. but as far as the guy selling the american a shares, i think there would still be some big value on that practice. first off, if it makes sense for the client, you can look to move these clients into a wrap account. secondly, if the advisor is truly only selling american a shares, i would assume there is a lot of business left on the table (old retirement plans, insurance, etc.). in some cases, a practice like this may be worth buying at a higher multiple.
any thoughts?

also, as mentioned, i am actively pursuing an independent practice to purchase. any thoughts on the most effective way to find a good practice. so far, my only gameplan has been prospecting independent broker lists over the phone and conducting seminars to advisors possibly looking to sell. 
any insight?

Mar 2, 2010 9:06 am

Exit strategy is to have my heir(s) sell the company when I die.

Mar 4, 2010 10:46 am

You may try solicting the rookies at the wires! Let them know you will give them a pay out  over a two years or so.
If they fail at the wire they get nothing,
I would pay them for what ever assets they bring over. 
A rep under me is doing this with a ML rep. The rep should bring over 10 to 20 million not huge but better then nothing! 
It might not hurt to ask them before they fail.  

Mar 4, 2010 11:55 am

You may try solicting the rookies at the wires! Let them know you will give them a pay out  over a two years or so.
If they fail at the wire they get nothing,
I would pay them for what ever assets they bring over. 
A rep under me is doing this with a ML rep. The rep should bring over 10 to 20 million not huge but better then nothing! 
It might not hurt to ask them before they fail.  

 
I don't understand how this would work.  Are you saying hire someone from a wire and give them an upfront payment, and keep them on?  You would still have to pay them for production, so how would you benefit?  Or are you saying bring them on just long enough to transfer their book, and then they walk away with the payment?

Mar 4, 2010 1:11 pm

Bring them on with them knowing upfront they will be transferring their book. Make the payout based on assets transfered, and pay them 50% or what ever you think it is worth over the time frame chosen.  

Apr 12, 2010 2:58 pm

I saw a comment on "having my heir sell the company when i die." I have heard many horror stories of spouses running into major problems trying to sell the business because of licensing issues, not having any idea on valuation and not finding the proper buyer because no exit plan was in play.

For the independents out there, does anyone actually have a written succession plan? do you already have someone in mind of who you would like to sell to? many firms right now are looking to purchase independent practices (ameriprise, ed jones, etc.). What do you guys think of the idea of selling to another firm if you were comfortable with the actual advisor?

Apr 14, 2010 9:29 pm

Advisor12-

I came across your thread, and I thought I would let you know that you are incorrect in your statement about the sellers vs buyers associated with FP Transitions. I know David Grau of FP Transitions well, and actually the seller to buyer ratio is 40 to 1. Hard to believe but true!!!! I wish you the best of luck!

Apr 14, 2010 11:00 pm

[quote=rmarcus79]

Advisor12-

I came across your thread, and I thought I would let you know that you are incorrect in your statement about the sellers vs buyers associated with FP Transitions. I know David Grau of FP Transitions well, and actually the seller to buyer ratio is 40 to 1. Hard to believe but true!!!! I wish you the best of luck!

[/quote]

We appreciate you sticking up for your friend... but maybe you should check his website first...Went there just now.. a whole 11 listings... that is insane... how do you get 40 to 1? just curious..

Apr 15, 2010 9:36 am

I always heard that there were far more buyers than sellers.  40 to 1?

Apr 15, 2010 10:12 am

I am not sticking up for anyone guys. The plain facts are that they have 40 sellers to every buyer. Regardless of what you see on their site. All information is not posted, and their are many different circumstances that are associated with FP. Sellers who have buyers, sellers who are looking for buyers, buyers who are looking for sellers etc.

Apr 15, 2010 10:12 am

I am not sticking up for anyone guys. The plain facts are that they have 40 sellers to every buyer. Regardless of what you see on their site. All information is not posted, and their are many different circumstances that are associated with FP. Sellers who have buyers, sellers who are looking for buyers, buyers who are looking for sellers etc.

Apr 15, 2010 10:17 am

If they were smart they would post all information. Not require a $150/fee and then charge another fee for simply connecting people..

Apr 19, 2010 11:19 pm

RM79,

I must respectifully yet adamantly disagree with the numbers you posted about FPTrans being a 40 - 1 ratio of sellers to buyers.  I was a member of FP, but cancelled when LPL brought on FPT as part of their service to advisors.  Nowhere..anywhere...either through FP or FP via LPL have I ever seen a ratio anywhere remotely close to 40 - 1 sellers.  Buyers to sellers...maybe. 

If they have some secret information as you say that is "not posted" then I seriously want my money back for my membership.  Either way...since it was that information showed up, I would again have to disagree with those very very very far fetched numbers.

Apr 20, 2010 8:37 am

I agree. My firm offers FP to the advisors and FP states "New Ameriprise Listings Coming Soon!" This post is going on six months now with the same two books for sale and three sold books. If it is sold why leave it on the site?