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.