Buying a book

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Jan 14, 2012 1:15 am

I tried posting this in another area, and did not get a response.

I was offered a book to buy (advisor is retiring).  I'm wondering how to "value" the book?  I read somewhere it is 2 to 3 times what they make in a yr.  Does that sound correct?  Is this usually paid in a lump sum or over a period of time?

I also know to have something written in the contract about accounts staying with me, but how long should that be?  1 yr?

The book has everything, including fee based.  I am not sure on the breakdown yet.

THANKS in advance!

Jan 14, 2012 1:39 am

I also just read some ask for 1-2% of their AUM (will be adjusted for accounts leaving).  Thoughts?

Jan 14, 2012 1:39 pm

This must be structured properly, or there may be regulatory consequences.

Jan 14, 2012 2:54 pm

I'm not worried so much about that, more so on how to value the book.  

Jan 14, 2012 4:51 pm

I would say one to two times trailing twelve, depending upon the clientel etc.

Jan 14, 2012 9:52 pm

icebear, have you bought a book before?  

Jan 15, 2012 11:44 am

Yes, I have, but never in a single upfront payment.  $? upfront, then some percentage on a monthly or quarterly basis for whatever time frame is agreed upon.

Jan 15, 2012 9:44 pm

Icebear, that is what I'm thinking.  And I'm sure they would like a pension like income in retirement. How long did you set up the payment plan?

Jan 16, 2012 12:46 pm

Big Ticket, that is a matter of mixing the sellers desires and your judgement concerning the "worth" and longevity of the particular book.  From a regulatory standpoint, a payout over time amounts to a sharing of fee and / or comission income with an unregistered person.  This can be done, but it must be structured through a brokerage firm within the confines of the regulation.  Finally, I believe there is (may be) a client notification requirement.

Jan 24, 2012 2:21 pm

Other than knowing a specific FA that is retiring, what's the best way to find a book to buy?  

Jan 27, 2012 11:15 pm

[quote=LaFA]

Other than knowing a specific FA that is retiring, what's the best way to find a book to buy?  

[/quote]

Yes Im curious if there is another way

Jan 28, 2012 9:12 am

I believe I have seen ads in swome publications,and I suppose there are some industry head hunters who do that sort of thing.  Maby send an email to Larry Pipike at Cross Search.  If anyone would know he would.  The problem with this method is that the "book" will cost quite a bit more.  If it were me, I would identify those in my area (or an area where I did business) who may be intrested in retireing.

Jan 28, 2012 5:07 pm

[quote=harkkam]

[quote=LaFA]

Other than knowing a specific FA that is retiring, what's the best way to find a book to buy?  

[/quote]

Yes Im curious if there is another way

[/quote]

I wasn't actively searching for a book, a CPA recommended me to this FA and that started the process.

Also, a wholesaler I know made sure everyone he called on knew he was interested in taking over an office (had sold his book a few yrs ago and wanted back into the biz). He was in my area for 1.5 yrs before buying into a $190mil book with a partner. So make some calls and let people know if anything changes, you're interested. You may be surprised what's out there.