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Buy Financial Planning Practice



While the specific agreement and deal structure will depend on the situation, a strategic buyer, or advisor engaging in a practice acquisition, will consider a few common methods of ownership transition. These deal structures include:




buy financial planning practice



During these advisor-client conversations, clients may share more about their investing goals and discuss any operational concerns or comments regarding the future transition. Apart from client conversations, both current and incoming owners will discuss and address all staffing, real estate, and technology questions to name a few. Active communication and planning helps ensure a smooth transition in practice and day-to-day operations ahead of the final transition date.


An extended time of transfer also allows advisors to assess current client relationships, evaluate day-to-day operations of the firm, and have ample time for the process of financing the purchase. Unlike the outright purchase, the conversations and decisions that occurred before the sale date actually take place throughout the transition period of a gradual buyout. This allows much more financial flexibility for a strategic buyer and provides the selling advisor an opportunity to extend their working time prior to retirement.


The financing for this type of deal structure may resemble that of a gradual buyout since the seller may choose to continue receiving compensation. The agreed upon compensation varies and is usually based around a multiple on the earnings of the practice. In some cases, and depending on the nature of the relationship between seller and advisor, outgoing owners may continue nurturing relationships and supporting the practice through a more limited capacity and in a business advisory role.


For advisors seeking guidance in a potential sell of their practice, LPL has a team of experienced experts across valuations, deal structures and the best paths forward for your business goals. Learn more about Selling Your Business.


Those employed as financial advisors will likely come to a time in their career where they would like to make a vertical move. Once this stage is reached, there are few clear paths available. Some may decide to dig their heels in and open their own financial advisory firm, scrounging up clients where they can and providing the best possible service to ensure the success of their practice.


There is a great deal of risk involved in starting any financial planning practice from scratch, a financial advisory practice is no different. Another way for financial advisors to make the move from employee to the business owner would be to purchase an existing practice. While this decision can have risks and pitfalls of its own, it comes with the added benefits of existing clients, trained employees, and a proven history of service.


With more than half of all active financial advisors over the age of 50, now is a better time than ever for buying a financial advisory, while current owners are planning their own exits and retirements.


If you are currently looking to acquire a financial advisory practice, the process is fairly straightforward and can reap a great many benefits. With that in mind, it is incredibly important for you to do your research and take all factors into consideration so that you can protect your investment.


Before taking any steps whatsoever, the most important thing for you to do is to accurately and honestly assess your financial situation. Buying a functioning financial firm may not be as big of an investment as starting a financial advisory firm from scratch, but it is still important for you to clarify for yourself exactly what is within your reach.


Likely the most important factor to consider is the financial state of the business. There is no one-size-fits-all method for making this evaluation, but there are a couple of different ways that you can get a solid picture for yourself.


Gaining an understanding of the existing clients and their intentions is likely the most important part of this entire process. Retaining them is what your potential success hinges on, and client loss is one of the most common pitfalls when acquiring an advisory practice.


Bear in mind that most existing clients will have no obligation to stay with the financial advisory firm after it is transitioned to you as a new owner. Making sure that they are satisfied and comfortable should be your greatest priority.


No matter how good of a deal you think you have in front of you, the best way to decrease your financial risk is to take as much time as you need to determine the potential pitfalls. Rushing into negotiations without having enough information on the competition and similar practices can lead to some major issues down the line and major losses on your investment.


Speak with the financial professionals at Succession Resource Group to learn how to make the most out of your potential acquisition, and what steps you should take next. Get in touch today for a consultation.


In some important ways, owners of financial advisory practices are just like other entrepreneurs. Many have retirement in sight, or for a host of other reasons, are positioning their businesses for a sale.


It can be imprudent to discuss these plans with clients, who often expect a trusted advisor to remain with the firm for what essentially amounts to the advisor's entire life. Behind the scenes, though, the financial advisory industry is active with mergers and acquisitions.


Several years ago, Christy Aleckson, founder and CEO of Single Point Financial Advisors in Beaverton, Oregon, purchased a practice from an advisor with whom she was sharing office space. After about six months of co-locating, the advisor told Aleckson she wanted to plan her exit, and the two began discussions about Aleckson buying the business.


"Her practice was a nice match to mine. We had a similar style," Aleckson says. "Her clients had mostly come from her social circle and her previous employer, a medical facility, where she worked for 30 years. They were loyal and trusting. It was a great fit."


For advice on the valuation, Aleckson turned to an attorney, her broker-dealer's succession office and FP Transitions, a Lake Oswego, Oregon, firm that specializes in financial advisory mergers and acquisitions.


Although much went well, in hindsight, Aleckson says she would have handled some aspects of the transaction itself and the transition period differently. Her practice was relatively new at the time, and the business was far from being flush with cash. As a result, Aleckson felt she was in a weak negotiating position when it came to suggesting deal terms.


"It felt like the more educated I became, the more opportunities I started to see," he says. "My first actual experience was purchasing my mentor's practice. It was a good fit because we had a personal friendship and very similar financial planning philosophies."


"In the aftermath of the financial crisis and the Madoff Ponzi scheme, I expected the business landscape for small RIA firms would worsen considerably in the coming years," Sloan says. "Increased regulations plus growing technology costs for client experience and security were two significant infrastructure modifications that seemed inevitable."


First-time buyers and sellers are surprised by the many aspects of buying and selling a financial advisory practice. One of the largest, and sometimes most unpleasant, surprises they encounter is the tax implications the transaction has on both parties. Each situation is unique, and it is always best to consult with a tax professional who can review and understand your business, and structure the transaction in the best way to minimize the income tax implications. However, to provide you with a general sense of the income tax implications of buying or selling a financial advisory practice, we spoke to Alan Salomon, CPA/ABV, CVA to give us an overview of what to expect.


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