Most financial professionals want to add clients and assets to their practice. Referrals and traditional prospect marketing can be successful, but they can also be slow and time-consuming. Purchasing a book of business from another advisor can jump start growth, but it can be complicated and risky if not handled correctly. If you are seriously considering acquiring a practice, here are some considerations to help you research, evaluate and integrate a purchase.
Staging starts by identifying your must-have criteria. Purchasing a book with a similar business model, client profile and product mix will generally increase your probability for success, because it plays into your own strengths and service model. Consider whether you have the viable funds to purchase a practice as well as the staff to transition and service a new book of business. This is extremely important because it allows you to set realistic expectations on the size and scope of the purchase.
With the number of practice buyers drastically outnumbering sellers in the market today, finding a practice to purchase can be challenging. You will likely kick lots of tires before finding any you want to test drive, as you will have a different perspective of the practice than the seller. Starting with the basics – business model, client profile and product mix – can help you decide whether to ask additional questions. For example, how is the practice being valued and does your research support the valuation? Are the seller’s products and services available on your platform?
Acquisition is the final phase. This happens when you have identified your must-have criteria, conducted your due diligence, and are prepared to make an offer. This phase addresses questions such as how the deal will be structured and whether the seller is open to staying on board to help during the transition. Once the core terms and conditions of the sale are finalized, a legal binding agreement should be drafted by a qualified party to ensure buyer and seller clearly understand the terms, conditions and roles that have been agreed upon.
Having a resource or mentor who has been through the acquisition before can help you avoid potential pitfalls and maximize the value of your purchase. Iron Point Financial Advisors builds succession and acquisition support directly into its business structure, pairing advisors looking to grow with successful advisors preparing to sell. Contact Iron Point if you are interested in discussing how acquisitions can help you reach your practice growth goals faster.