One way to significantly build an advisory business is to acquire another practice, though it isn’t always an easy road.
It is estimated that for every financial advisor seeking to sell his or her practice, 50 potential buyers are in the market for it. In such a sellers’ market, it can be a challenge to differentiate a firm.
Firms beginning the process of pursuing another practice must be prepared.
Here are five important aspects that should be in place:
- Prove that the firm has the capacity. Make sure that onboarding systems are in place to incorporate new clients and employees so that the transition is predictable and smooth. It is also helpful to show that the firm’s team is engaged and excited to welcome new clients and staff. At the same time, it is important to continue delivering superior service to existing clients so that the transition doesn’t put them “at risk” of leaving, defeating the purpose of the acquisition.
- Manage workflows. Well-established processes should be in place and the roles of each team member clearly defined so that work continues to flow without interruption. This is important to a seller who wants to be assured that clients will enjoy a smooth transition. It also can help increase new client engagement and retention after the transition begins.
- Think about reputation. It is helpful to have an established presence in the community. A strong reputation can help a firm connect with a selling advisor. Understanding strengths and being able to clearly define the mission and vision for the future can assure the seller that it is doing what is best for its clients.
- Review real estate needs. Make certain that there is room for new employees and that the firm can accommodate client needs. Be aware that the design and look of the firm’s office space may affect how the seller feels about the practice and whether the brand coincides with that firm’s personal style, beliefs and values.
- Maintain a sustainable practice. Be positioned to weather any storms while continuing to grow. Advisors selling a practice want assurances that clients who trust them will continue to be taken care of for the long run. Incorporating multiple generations of advisors can help in doing intergenerational planning for clients and families for years to come.
Finally, while all these pieces are important, one of the most critical aspects of a practice acquisition is finding someone who shares an advisory firm’s same values and goals, both personally and professionally.
Anthony Rizzuto, a certified financial planner, is a financial advisor and the chief operating officer of Rye Brook, N.Y.-based Pell Wealth Partners, a private wealth advisory of Ameriprise Financial Services Inc. He has been coaching advisors on mergers and acquisitions for the past 20 years. He can be reached at firstname.lastname@example.org.
This story is part of a 30-day series on how to prosper as an advisor.