Buying A Financial Advisor Practice

A growing number of advisors believe that the greatest opportunity to grow is to acquire or partner with another practice. The process of buying a financial advisor practice can be complex. The market is extremely competitive, with some studies suggesting that there are over 50 buyers for every one seller. There are also a number of to-do items that need to be attended to. If you are interested in buying practices and haven’t independently assessed your readiness, Bridgemark Strategies can help you assess your strengths and weaknesses and work closely with you so you can get the edge in this competitive market.

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The Importance of a Self-Assessment

For advisors interested in buying another practice, one of the first steps is to self-assess to better understand your readiness. This assessment is critical, because it is a seller’s market and you will likely be competing with a large number of other buyers including some institutional buyers. Your assessment will not only help you distinguish yourself but will also better position you to be able to sell your value as to why someone should choose you as their succession plan.

Buying a Financial Advisor Practice To-Do List

Check off as many of these items as possible before you start searching for the right advisory practice to buy. There are plenty of sellers out there, so it is wise to spend more time in the preparation stage. Our experts here at Bridgemark Strategies recommend the following:

Why do you want to buy a financial advisor practice? This is important. Purchasing another firm for the wrong reasons will almost always result in failure. Make sure you are certain this is the direction you want to go in.

There are a variety of ways to structure an acquisition. Financial advisors are generally skilled at analyzing the numbers but may not have the legal expertise to work up the final contracts. Hire someone to do that for you.

Take stock of all your assets and cash on hand to make an acquisition. Do you need a loan? Can you do this yourself or should you take on a partner? Make sure you have the resources for a purchase before you proceed.

Set a maximum spending limit and hard cap it. You might also want to set a minimum number. Paying too little for an advisory practice is a red flag. Dig deeper before you make that deal.

Changes will likely need to be made to the acquired practice after you close the deal. You should at least have the framework of an integration plan in place before negotiations begin.

Advisory firm purchases are complicated enough without last minute changes or uncertainty. Do the prep work so you can negotiate in good faith.

Sometimes the best deal made is the one that isn’t. You have to recognize when it is not the right acquisition.

Don’s settle for less. No business venture will be successful if you settle for less than what you truly want. This is a common mistake. Waiting for the right deal to materialize may be difficult, but it’s worth it. 

Common Mistakes to Avoid

The acquisition process can be complex, with many opportunities for missteps. Here are some of the most common mistakes to avoid when buying a financial advisor practice:

  • Deal fatigue: Buyers and sellers sometimes make the mistake of getting emotional at the end of negotiations, requesting last minute changes. Don’t put the deal at risk by doing that. Engaging with a consultant or M&A broker can help.
  • Misunderstanding the Contract Terms: Your attorney is there for a reason. Make sure you get your legal partners to read all contracts thoroughly and explain anything to you that does not look clear. You may have to discuss terms in detail with the seller at some point.
  • Negotiating Tone: If the conversation becomes challenging, have someone else negotiate on your behalf. Sellers usually have a strong attachment to their firms and will look for reasons to back away. Don’t give those to them.

Knowing the Right Time to Buy

The proper timing for an acquisition of any kind is determined by need, funds availability, willingness, and price. All of these have to be in alignment for a deal to be successful. To confirm whether the time is right for you, ask the following questions:

  • Do you need to buy a financial advisor practice right now?
  • Are the funds available to make an acquisition?
  • Is there a target firm willing to make a deal with you?
  • Are you getting the price that you want?

Buying with the Intent to Sell

There’s a viable business model in purchasing advisory firms, growing their AUM/client base, and then selling them within a certain timeframe. This takes experience and the help of someone who’s done it before. If you are interested in this model, our experienced consultants at Bridgemark Strategies can help.

Let’s Get Started

If you are interested in buying a financial advisor practice, the market is far too competitive to go it alone. Bridgemark Strategies can help you discover viable opportunities and work closely with you to ensure you are well-positioned to beat out the competition and win the deal that is best for you. Contact us today to set up an initial consultation.