10 Things to Consider when Selling your Financial Services Practice

Photo by FPG/Retrofile RF / Getty Images

Photo by FPG/Retrofile RF / Getty Images

  1. Fee Equivalency - Is the buyer willing to commit to charging your clients the same or less than what they pay today?

  2. Time to Final Cash Payment - All buyers are not created equal. Minimize your transition risk by keeping the timeframe short and insist on full payment within 6 months of closing. This is long enough to support a well-organized transition while protecting you as the seller.

  3. Post Closing Requirements - How does the buyer manage the transition process and what is required of the seller? Efficient buyers automate the process with pre-filled documents packages for each client; making the process easy on both advisors and clients.

  4. Acquisition Experience Matters - while the buyer down the street might seem attractive, you can increase the likelihood of success by choosing a buyer with an established acquisition process and track record.

  5. Insist on a Clean Sheet, Character Matters - check the ADV of the buyer. Look for any complaints or history of regulatory issues. A clean sheet will increase the likelihood of a successful transition.

  6. Speak to References - always insist on speaking with former advisors that sold their firms to the acquirer. You’ll be glad you did!

  7. Common Custodians Matter Less than in Years Past - automated transfers, pre-filled packets and rapid setup enable custodian changes to matter little in the acquisition process. Our rapid transition process ensures that advisors and clients experience the same quick turnaround whether they are staying on one of our existing platforms or transitioning.

  8. Minimize the Tax Impact - Agree ahead of time on the amount that will be allocated to the non-compete portion of the purchase consideration. Compensation for non-compete agreements is treated as ordinary income rather than capital gains.

  9. Be Flexible in Fit - it can be tempting to look for a buyer that looks just like you, but it’s most important to find a buyer that is easy to work with and able to support your clients.

  10. Don’t Let Size Limit You - large corporate buyers often pay a fraction for firms with fewer than 10 advisors. However, there are firms (like Selective) that specialize in acquiring and integrating smaller firms with excellence. The right buyer will pay you a premium, don’t let a large buyer dictate a lower price.

Learn more at https://advisors.selectivewm.com

Are you considering selling your firm? Setup a brief phone call with our CEO to review your options.

It all started with a conversation

The last company I sold started with conversations to get to know the buyer nearly 5 years before we were ready to sell.  While we received multiple bids to sell the company, we had one bid where we knew the principles because they had reached out every six months for years. Because of the conversations we were comfortable with the character of the buyers; we knew they demonstrated a pattern of doing what they said they would do.  Further, we knew that they would steward our clients in a way that would serve them well.  

 If you are within 5 years of selling your practice or within 5 years of wanting to simplify your current practice, it's the right time to start conversations.  While many would be sellers know what they want to achieve in a sale, often they fail to get to know the likely buyer pre-sale.  The best in-class buyers will have a success plan for both you and your clients.  

You can’t plow a field simply by turning it over in your mind
— Gordon B. Hinckley

Selective Wealth Management Featured in Barron's

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Selective Wealth Management continues to be recognized for its in-depth research.  Selective Wealth Management's Founder and Portfolio Manager, Chris Devlin (CFA), is currently #3 out of nearly 3,700 professional investors in the "Growth at a Reasonable Price" category based on verified performance.   Most recently our Bank of the Ozark Research Report was featured by Barron's.  Click here to view the full Research Report.