Financial planning firms: When to buy and sell

Whether you’re a potential buyer or seller of a financial planning firm, or you’re wondering whether to hold on to an existing business, there are some key factors to consider to ensure a smooth and successful transaction and outcome.

The business of buying and selling a business brings into play a range of emotions so the challenge is keeping calm and rational to the psychology of the sales process.

If you’re selling, you’ve likely developed a strong rapport with your clients and invested considerable time and money building your business baby. If you’re buying, you want to know that this acquisition hits all the right notes when it comes to culture, branding, markets, clients, employees, the bottom line and future growth.

Here’s 5 tips to help you make the right decision:

Think about the ‘why’

Why do you want to buy or sell? Or why are choosing to stay? Some of the reasons people choose to sell are:

  • Retirement: You’ve spent the best years of your life growing your financial planning firm and now you’re ready to pass it on to the next generation.
  • Tired of taking risks: You may have built a valuable company but as you get older, you don’t have the luxury to weather the storms and take the risks required to invest for future growth.
  • Business value: You’ve had a serious offer to purchase the business and there’s an opportunity for liquidity.
  • Time for change: Speaking with Forbes magazine, Cal Lai, president and CEO of Recom Technologies (who also is a Cerius advisory board member), points out that owners have many reasons for selling their businesses and the desire for change and new opportunity may well be enough. Lai says, “A good entrepreneur is always looking at their options going forward. Time is always a risk, and the more time your business is out there, the greater risk you have.”

Some of the reasons to buy include:

  • Scale: You want to acquire or merge your existing financial planning or investment business with another firm in order to increase revenue and scale, or
  • Hit the ground running: You want to start a financial planning business but you don’t want to build it from the ground up.
  • Strategic Opportunity: Your business or the acquired business has a service that can be cross sold into the other delivering greater profits from the existing client bases than currently each business generates stand alone.

Thinking about your ‘why’ as a buyer will help you decide what kind of financial planning firm to acquire and if you’re the seller, your motivation for transitioning out of the business will inform who you sell it to and when.

Know what you are buying or selling

According to Professional Planner, it is important to establish what’s involved in a potential transaction upfront.

For example, are you buying or selling the assets of the business or the company? Are you buying or selling a pure revenue stream or does it include physical items and inclusions such as equipment, furniture, office premises, hardware and software? And what about staff entitlements? Have you thought about the value of the goodwill?

Sit down at the very start and write down exactly what you are buying or selling – document it all clearly so you know what it is you’re getting into.

Don’t let emotions rule

All business owners have an emotional attachment to their business but it can really hold back if you’re not careful. Making heart-based decisions can prevent you from facing up to critical issues such as succession planning and exit planning strategies.

Baby boomer advisers are often reluctant to act and make hard decisions – they want the best price possible to reflect the hard work and time they have put into the business but this can mean you miss out on securing the right buyer for the business or you don’t achieve the best sale outcome.

Make sure your decisions are informed and practical and seek out advice from professionals who can help you navigate the sale transaction with a degree of independence and perspective.

Find the perfect cultural match

There’s a lot of talk about ‘a good strategic fit’ in the buying and selling space but you can’t underestimate its importance: culture and philosophical alignment is key to a great transition and crucial to client retention.

Two businesses may have very similar operations (products, clients, markets, etc) but completely different corporate culture.

Ask yourself these questions when you’re looking at the cultural fit:

  • For those wanting to purchase a financial planning firm, to find an affinity and strategic fit, search in your existing professional circles – search your LInkedIn groups, corporate network, common advisors and platforms – that’s where you’ll find sellers who are on the same page.
  • Do the businesses use compatible operating systems and technology platforms and systems?
  • Do they offer similar products and services?
  • What do the businesses charge for their services and how aligned are their client segmentation models?
  • What is the investment philosophy for clients, how aligned or different are the?
  • How will you manage existing employees entitlements and expectations?
  • What is their respective value propositions – are they a good match?
  • How well will they connect with, and work with, your existing clients? How will the buying/selling journey unfold?

Uncertainty about strategic fit can result in a lower priced deal due to the perception of higher risks which doesn’t bode well for any of the players involved. And remember: if the clients aren’t happy with the match, everyone loses – the client leaves, and both the buyer and the seller lose money and goodwill.

Do the maths

Do your sums! Both sides of the buy/sell transaction need to have sound finances. As noted in Investopedia, when you’re examining the firm’s financials, learn and understand how the firm makes money. Do they charge a percentage fee based on assets under management, an hourly rate, or are they compensated on a commission-based model? What is the fee collection model, frequency and cash flow position of the business?

As a buyer, you need to make sure the firm’s compensation structures, overhead and operating expenses are sound and well-documented – and make sure you investigate whether the deal will still be solvent if you lose some of the client based as a result of the sale.


Selling a company is not just about getting the best price. Factors such as the timing of the sale and the caliber, cultural preferences and reputation of the buyer all weigh heavily into the decision. And if you’re acquiring a financial advisory business, remember the bottom line and take your time. Do your due diligence, check the cultural fit and remember that you can always keep looking around for a better deal if you’re unsure about the acquisition.

Click here if you would like a copy of our Practice Valuation Guide.

Chris Wrightson. Founder and CEO at Centurion Market Makers, the industry experts in the sale, acquisition and management of financial planning firms. If you’re planning on selling your firm in 2017, we’d love you to call us for a confidential discussion, or continue browsing our website for more tips, tools and info on the steps to take when buying or selling your financial planning firm.

Share this Post