Broker Check

How to Maximize the Value Of Your Practice

August 23, 2017

How to Maximize the Value Of Your Practice

Thanks to an extended bull market, many advisors who were considering retirement have chosen instead to push out their retirement date.

However, with the uncertainty surrounding the current regulatory environment, an aging advisor population and the possibility of the bull market ending soon, you may want to start preparing for it now. By not allowing the right amount of time to prep your practice, you could leave money on the table at the time of sale. But by making small, manageable changes to your book and the way you do business now, you can increase the market value of your practice prior to a sale.

Consider these strategies to maximize your practice’s value:

Concentrate On Recurring Revenue Streams

In light of the recent regulatory changes, the industry continues to shift from commission based to fee-based business. Adding more sources of recurring revenue to your book can dramatically increase its value at the time of sale. Recurring revenue from sources such as advisory fee and trails are always appealing to a potential buyer because they provide consistent, recurring cash flow.

Deeper Share of Wallet

Gathering new assets doesn't only mean gaining new clients. It can also mean deepening the share of wallet with your existing clients. You can also expand your service offering to include products like insurance or income planning services, which may help bring more of your clients’ total portfolios under your management. Deeper relationships create more opportunities to monetize the relationship.

Enhance Client Lifetime Value

An advisors current client base represents its future potential earnings, and that has a direct impact on its value. A book highly concentrated in retirement-age clients offers few prospects for additional accumulation and growth, as they will be entering into the distribution phase of their lives. Engage in multigenerational planning to hedge against this.

The challenge is to avoid having your book die along with your clients. By positioning yourself as the trusted advisor to the whole family, you have the ability to build relationships with the heirs long before mortality is an issue.

Finding new ways to broaden the age range of your client demographic can also provide big returns. Younger clients are more likely to continue accumulating wealth for a longer period, thus growing their worth over time with the purchasing advisor.

Asset Concentration

Is your book top heavy or evenly distributed? A prospective buyer would much rather buy a book of evenly distributed assets, because a top-heavy book has more risk. Should one or more of the larger client not transfer, this will have an immediate impact on revenue. Buyers like to see books with high revenue per client and don’t like to see a large set of a few clients who control a disproportionate amount of revenue.


Technology can be a significant selling point for buyers as it often indicates the practice is built to scale and portable. Technology tools such as paperless processes and robust client relationship management systems create ease in transferring your book to a new advisor. The more you can improve your technology now the more it will positively affect your valuation.

Business Transition

When you sell your practice, are you prepared to stay on board during the transition process? Getting top dollar and simultaneously walking away from your practice is both unlikely and unrealistic.

The biggest risk to a prospective buyer is that the clients won’t transition successfully to the new advisor. To maximize client retention, it is not uncommon for the buyer to ask the seller to stay on-board for a specified period of time, typically 12-18 months.

Contact Iron Point to learn more ways to maximize the value of your practice.