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The Hidden Value of a Financial Practice Listing

The Hidden Value of a Financial Practice Listing

On the surface, the true value of a listing that details a financial service practice for sale isn’t exactly obvious. But when we thoroughly analyze the market for financial practices, the value becomes much more apparent. The listing itself may not seem like much more than a mere description, but consider a couple fundamental principles that lend itself to value: supply and demand. The supply of listings goes hand in hand with the amount of practices for sale – and there aren’t a lot. The demand for listings goes hand in hand with the amount of advisors looking to purchase a practice – and there are definitely a lot of them. In any case, high demand and short supply means a high price, and therefore, the value of a simple financial practice listing is actually quite high, at least in theory. Why is demand high? Why is supply low? What contributes to the value of the kind of information contained in a listing? Well, you’d really have to look at the market itself to figure that out.

A recent study done by Fidelity Investments showed that two-thirds of advisors lack a formal succession plan, which actually represents an 8% improvement since 2011. But when the average advisor is 52 years old, most optimism regarding an industry-wide response to the succession planning issue is mild at best. So, while few disagree that succession planning is among the most pertinent issues facing the financial services industry today, seemingly fewer advisors are feeling the pressure of creating an exit strategy.

The term “succession plan” is a simple reference to the path a business takes when the owner decides to retire. As a result, succession “planning” encompasses a wide range of options for financial advisors to consider when that time approaches. While mergers and acquisitions comprise the area specifically dealt with at Succession Link, a succession plan takes on many, many other faces. Some broker dealers and RIAs are developing internal platforms to address the “crisis” of succession planning without sacrificing assets to an external source, while in other cases, friends or relatives may be the heirs to a book of business.

The point is, finding a financial service practice on the open market is rare; few advisors have a succession plan, and among those that do, not all of them plan on selling their book on the open market. In other words, out of all the advisors who should’ve had a plan in place a while ago, only a fraction of a fraction (yes, a fraction of a fraction) will sell their practice on the open market. Advisors looking to build their book through acquisition should take advantage of any opportunity they get to hear about new financial practices for sale.

The rare and infrequent use of a succession plan, bundled with the variety of succession planning options available, make it so that financial practice listings are fairly hard to come by. And so the information provided to registered buyers at Succession Link (both paid and unpaid users!) is worth far more than the cost of registration - $0, plus five minutes to fill out the registration form. Just by filling out a form at, advisors can receive updates notifying them of new listings, the listed practice’s location, and its production figures.

While finding newly-listed financial practices for sale can prove quite difficult, finding a service that notifies its users whenever a new listing is created (and at no cost) is an even greater burden. Succession Link solves both issues. So long as the individual fills out the registration form, even non-subscribing users receive updates from Succession Link that notify them of recently-created listings.

In the early 1960s, the great Chicago economist George Stigler wrote that acquiring information within markets comes at a cost to both producers and consumers. When the right “fit” of producer and consumer are matched, we call it “efficient”. Unfortunately, it’s not too difficult to decipher the relationship between the cost of information and matching efficiency; the more you pay, the greater matching efficiency becomes. When we apply this theory to the market of financial service practices, it works exactly the same; buyers with limited information on available practices are less likely to acquire the practice that suits them best. Generally speaking, technology has greatly reduced the costs of acquiring information, and has even improved matching efficiency – the extent of this effect is greater in more progressive and adaptive industries. Unfortunately, while financial professionals often use the latest technology to analyze securities markets, the market for financial practices (the M&A industry) has been slow to develop. Succession Link does its part to foster M&A development by improving matching efficiency through the provision of detailed listings and advisor profiles, which allows buyers and sellers to connect through an online marketplace.

Listings aren’t common, and the reasons are somewhat clear when we really think about it:

  • Not enough advisors have a succession plan. If every advisor over 55 had a succession plan in place, it would be a lot easier to find financial practices for sale.
  • There’s a handful of succession plans to choose from, and not every advisor sells their book prior to retirement. Among the small pool of advisors that actually have a succession plan, not all of them are selling their book on the open market.
  • The integration of succession planning within the M&A industry has been slow to develop, which has made it difficult to efficiently match the right buyers with the right sellers.
    • One reason for this may be the market’s dependence on advisors approaching retirement. Not only are many of these advisors slow to create a succession plan, but older generations are often more resistant to technology than younger generations. In the same way that technology drives matching efficiency, resistance to technology can inhibit it. Additionally, reluctance to technology can slow market development, which may help explain the imperfect integration of succession planning within the M&A industry.

In every case mentioned, if we ask ourselves “what if this wasn’t so?” we arrive at the same conclusion – there’d be more practices listed and they’d be really easy to find. But the reality of the M&A market, as it pertains to succession planning, is that listings aren’t so easy to come across. That’s why Succession Link provides an invaluable service to those who register, and even more so to those who subscribe. Even though it shouldn’t be the case, practice listings are in short supply, and the ratio of buyers to sellers disproportionally favors buyers by a substantial margin.

The scarcity of listed practices, the costs of acquiring information on practices, and the efficiency of matching buyers with sellers are all concerns to advisors engaging in the purchase or sale of a book of business. Succession Link is a multifaceted solution that addresses each of these concerns. Now it’s up to the industry to respond.


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