Pretty Practice Prices

Selling prices for independent practices are on the rise.

If there’s any evidence that financial advisors with smaller practices are leaving the business, FP Transitions has found it.

According to the Portland, Ore.-based consulting firm’s annual survey of independent advisors, the concentration of small practices (less than $300,000 in revenues) for sale has increased to 68 percent in 2002 from 42 percent in 2001.

"The emotional and economic grind of running an advisory practice during a prolonged bear market has begun to take its toll on less seasoned advisors," the report says. The firm says the median selling price for a financial practice in 2002 was $432,000, compared with $409,000 in 2001 and $397,000 in 2000. In 2002, the ratio of buyers to sellers rose to 15.3 from 12.4 in 2001. The average down payment has increased 28 percent.

Fee-only practices have been more profitable and have attracted more buyers than commission-only or hybrid practices, the survey found.

"Average down payments are up across the board, but the increases for fee-only firms are double or more than their fee-based or commission taking peers," the report states.

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