The coronavirus crash likely means many advisors nearing retirement will dash to the near-est exit. Let’s face it: It’s tough to be afinancial advisor when the markets aresavaging client portfolios.
For advisors looking to scoop up a practice for sale, now’s a time of unique opportunity. Not that it will be easy. Before thecrash, there were about 50 buyers to everyseller. That ratio has improved on themargin, but it is still a sellers’ market.
In my experience, most advisors scorea financial practice by buying it from anadvisor they already know. Third-partywebsites can’t always be counted on toproduce results. Selling advisors choosebuyers they like and are confident inhandling their valued clients and assets.
There are no shortcuts. Advisors needto launch a focused, dedicated marketing campaign to identify and cultivaterelationships. It’s like opening a newline of business. An advisor needs toset aside a given number of hours everyweek or month and pursue this goalwith the same passion and intensitywith which they’ve built and continue togrow their own business.
Also, an advisor should cultivate relationships with an older advisor who hasa business style that’s compatible withtheir own. For example, if a potentialseller exclusively uses ETFs and hastrained clients to view active managersas overpriced and destined to fail, thenacquiring advisor with an SMA-focusedbusiness may not be suitable. Clients inthat seller’s book are not likely to remainwith the buyer.
WHAT ARE SELLERS LOOKING FOR?
Prospective buyers need to show sellers
not only that they can retain existing
business, but that they can grow it. That’s
because, in addition to whatever monies
are paid up front for the practice, the
remainder of the purchase price is paid in
earn-outs based on assets under manage-
ment or levels of gross production. Sellers
want to be assured that they are handing
off their life’s work to an advisor who can
help them attain those earn-outs.
Buyers should consider these stepsto cultivate relationships with prospective sellers:
1. Get to know older advisors in yourbranch and in neighboring branches.You can review online profiles to figureout which advisors are likely to be worthyprospects. While this step might be easierfor wirehouse and other employee advisors, independent advisors can similarlyfocus on other advisors with their broker-dealer, especially in nearby locations.
2. Attend advisor conferences.These are excellent opportunities toforge alliances with successful producers already with your firm. Independentadvisors can attend conferences sponsored by custodians that attract producers from other broker-dealers or RIAs.
3. Discuss your plan to acquire a
4. Consider joining a branch with
book from a senior advisor with a
prospective firm, if you’re consid-
ering changing firms, and see what
resources they have to assist you.
You’ll need to carefully evaluate the
firm’s advisor succession program and
get a good grasp of the local managers’
willingness to assist you.
many older advisors.
5. Join and become active in advisor organizations like the FinancialPlanning Association or theInvestments and Wealth Institute.These are good places to forge newfriendships.
6. Talk to your firm’s successionplanning department if you’re affiliated with an IBD or RIA custodian.These departments are actively involvedin matching buyers and sellers becausethey want to keep customer assets within their firm.
7. Independents can seek out the
guidance of their custodian’s relation-
ship management team. Their job is to
service the needs of independent firms.
8. Product specialists, traders and
home office staff also can be good
resources. They’re likely to know older
advisors with a similar profile of business.
9. Talk to wholesalers and recruiters. Wholesalers know lots of advisorsand can be fantastic resources. Andrecruiters can be sources of referrals toadvisors nearing retirement.
10. Check out LinkedIn advisor
groups, which also can provide
another venue for making useful
As head of Mark Elzweig Company, a NewYork-based executive recruiting firm, Markbrings more than three decades of experienceto his work with advisors and writing forindustry publications.
10 Steps to Buying a Practice in a Pandemic
For advisors in the market for another practice, now’s a time of unique opportunity.
RIA LESSONS & LEADERS
By Mark Elzweig