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Buying a book of business

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Jan 21, 2010 2:56 pm

I met with two CPA's. One of the partners is the "investment adviser" has $50 million under management. He is looking to either sell his book of business or have a strategic partnership where he would eventually phase out with a small override while in semi retirement. His business partner is not retiring and wants to continue to gather assets.

I have to structure a deal. Has anyone done this before? I'm looking for ideas.   My initial idea is to have the CPA receive a high payout and then scale down the payout over time.   Any thoughts? 
Jan 21, 2010 3:13 pm

If you are managing the money, you could act as a subadvisor at first. Then slowly do the transition to make him a solicitor and he can earn a solicitor fee for the life of the client.

Jan 21, 2010 3:28 pm

I will be managing the money.

He would have to be our cheerleader and help with the transition. What would be a fair payout?   Thank you for your comments.   WB
Jan 21, 2010 3:30 pm

I should also mention that he has to pay back what is remaining from a signing bonus of approx $20k to his current broker dealer if he was to leave. Should we pay it for him?

Jan 21, 2010 3:34 pm

Are both of you set up as an RIA?

If so, you can add yourself to his custodian. Then he gives you trading access to his accounts. At first you may want to be paid 50bps (standard for sub advising). No transition at this point, clients are still technically his.

After the clients get comfortable with your investment style, have him start making the introductions with the idea that down the road the CPA is going to retire and you will be taking over.

Once he leaves, the he get the the 50bs (or whatever you guys agree to) to act as a solicitor. As a solicitor, he can decide how much interaction he wants with the clients.

The eliminates the need for upfront money, and if the market continues to recover, he may make more money on the long run and you will have an easier time keeping the clients.

Jan 21, 2010 3:38 pm

Not sure how this would work with a b/d. You may not be able to use my idea unless you are at the same b/d.

I’m not sure what the rules are under a b/d with solicitor agreements.

In terms of the note, you can always take over the payments, or pay the full amount. Just take it out of his back end. But for 50 mil, you may want to just pay it out of pocket depending the revenue he was generating from the book.