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Paul Lally president of Gladstone Associates talks to attendees of FSI39s Advisor Summit
<p>Paul Lally, <span>president of Gladstone Associates, talks to attendees of FSI&#39;s Advisor Summit.</span></p>

Thinking About Buying a Practice? Talk to More Than One Seller

It’s a seller’s market when it comes to the merger and acquisition activity around advisory practices. For every 10-15 deals an advisor looks at, one may turn serious, Paul Lally, president of Gladstone Associates, told attendees of FSI Advisor Summit on Monday. 

But it may be even harder than that for some advisors to find a matach. Mary Sterk, president of Sterk Financial Services, finds for every 52 buyers, there’s one seller. Further, she says the average time of a practice for sale on the market is just 10 weeks. So talking to several potential sellers at once just makes sense. 

But where should advisors look to cultivate multiple leads? For advisors just starting the buying process, Sterk suggests looking within their broker/dealer. Many b/ds support succession or transition programs and may know of advisors looking to sell their practice. Also within the b/d, Sterk recommends the firm's internal recruiting team. 

Other resources are advisors’ local NAPFA or FPA organizations, FP Transitions and third-party search services, Sterk says. But for advisors seriously looking to buy a practice, Lally says firms need to have a constant pipeline of possibilities.

But while both Sterk and Lally believe that the number of deals will increase over the next year, Sterk says the current wave of M&A activity is only the first. She points to the fact that there’s only a 12-year age difference between today's buyer (average age 47) & seller (average age 59). 

“Baby Boomers are selling to Gen Xers,” Sterk says. Which means that this intense deal-making cycle will repeat when the current Gen X advisors start to hit retirement age. 

“For firms looking to do an acquisition, I tell them proceed with caution,” Lally says. “You’ve got to know exactly what you’re getting yourself into,” he adds, saying that firms who are doing successful acquisition have a process.

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