TRANSITION TALK

Acquiring a wealth management practice brings immediate growth and is an alternative to spending money and time on marketing to find new clients. That’s why there is currently an average 75-to-1 buyer-to-seller ratio. If you’re going to succeed in this arena, you need to stand out from that crowd. If you don’t have the cash on hand, one of the best steps you can take is to become prequalified for a conventional or Small Business Association (SBA) loan.

Twenty years ago, most acquisition deals consisted of a down payment of around 30% with the balance seller-financed through an earn-out arrangement. As fee-based practices became more prevalent, buyer demand increased. The combination of recurring revenue and increased demand pushed values higher and, in time, strengthened the underlying deal terms as well. Gradually we witnessed a shift to the use of performance-based promissory notes in place of earn-out arrangements. And, in the last seven years or so, the landscape changed yet again when the availability of bank financing entered the picture. This has afforded younger, smaller buying firms the opportunity to compete financially with larger, more established firms.

A place to start accessing this financing is to prequalify for a loan. A bank will review your finances and give you an estimate of how much they will lend to you. A bank’s prequalification tilts the acquisition playing field in your direction; you can knock out 90% of the competition. Sellers like the security prequalification brings to the transaction. In addition, you’ll be ready to move quickly if there’s a new opportunity or if a seller has a short time horizon.

Completing an annual valuation on your business is the financial service industry equivalent of undergoing your annual physical. I’ll turn 55 this year and I have resigned myself to the fact that prescription medications have officially become their own food group and an annual physical is no longer optional. My annual pilgrimage happens to take place in the spring tucked neatly amongst the sporadic appointments to see specialists for knees, elbows, near sightedness, far sightedness, rotator cuffs and something about my lumbar.

Now, the key word here is annual. If I had my cholesterol checked 10 years ago and then never again how am I going to know if what I am doing is working? An annual examination provides a historical record of your overall health including your vital signs enabling you to make changes in order to perform at your best. The good news is that, unlike my annual physical, your valuation results should get better as your business matures.

Your business is a living, breathing entity. Just like the investments you make on behalf of your clients, it needs to be nurtured, protected, and developed in order to realize its maximum value. It’s important that your valuation be updated annually. The monetary value of your practice is just one of many pieces of information to be gleaned from a professional business valuation.

Even with market volatility over the past few months, the marketplace for financial advisory businesses has remained strong. FP Transitions is pleased to announce the recent sales of financial services businesses in the following areas :

• Palm Beach, FL  |  $6,000,000
• Houston,TX  |  undisclosed
• North Carolina  |  undisclosed
• Rhode Island  |  $1,500,000
• San Francisco Area, CA  |  undisclosed
• South Carolina  |  $3,600,000
• Sacramento Area California  |  undisclosed
• Atlanta Area, GA  |  undisclosed
• Miami Area, FL  |  $350,000
• Lafayette Parish, LA  |  undisclosed
• Rhode Island  |  $700,000
• Houston, TX  |  $1,100,000
• Chicago Area, IL  |  $120,000
• Northwestern, TX  |  $450,000
• Boston Area, MA  |  undisclosed
• Florida Panhandle  |  undisclosed
• Tampa Area, FL  |  $750,000
• North Carolina  |  $450,000
• Michigan  |  $1,200,000

VIEW CURRENT LISTINGS HERE 

LIST YOUR PRACTICE WITH FP TRANSITIONS

Sold announcements include all closed third-party transactions facilitated by FP Transitions, including private listings, pre-arranged matches, and those listed on the open market. 

For many financial advisors, it has become commonplace to receive unsolicited offers in the mail. The offers to buy practices usually promise a competitive valuation and purchase price, great terms and future opportunities, and are backed by private equity, bank financing, or other cash reserves. More than anything, these letters bring hope, choices, and affirmation that an advisor has built something valuable and transferable.

Some of these letters arrive from well-known firms but many are from smaller, previously unknown suitors whose marketing strategy is to grow rapidly through practice acquisition. The advisors we talk to on a daily basis tell us about these letters dismissively at first, but they also say they keep the letters for future reference–just in case. Hope and choices are good things, even if they’re not needed today.

It is always flattering to be recognized, wanted, and valued, even if your name comes from a purchased mailing list. The more important point may be that these letters get many independent advisors, like you, thinking and wondering about the future. Questions arise: What is my value? What options do I have? Is this the best offer, or maybe the only offer, I’ll ever get? Can I sell my practice and keep working, given that I’m not ready to fully retire right now?

As we jump into 2020–a new decade!–we are proud to look back and see so much success in growth and transitions for our clients. In 2019, FP Transitions facilitated a variety of business growth goals for our community of advisors through strategies that Included internal succession, enterprise structuring, sustainable business growth, mergers, and external sales.

We'll soon be releasing our M&A data and observations from 2019, so stay tuned!

Over the last year helped facilitate external and internal transitions all over the country, including in : 

We're also pleased to announce that we closed out the year with sales of financial services businesses in the following areas!

FP Transitions is pleased to announce the recent sales of financial services businesses in the following areas :

• Northern Kentucky  |  $600,000
• Northern Michigan |  $795,000
• Sacramento Area, CA  |  undisclosed
• Washington D.C. Area  |  $1,200,000
• Eastern Pennsylvania  |  undisclosed
• Dallas, TX  |  undisclosed
• Sacramento Area California  |  $1,100,000
• Washington D.C. Area  |  $565,000
• Richmond, VA  |  $920,000
• Santa Cruz, CA  |  $345,000
• Dallas Area, TX  |  $3,700,000
• Northeastern Pennsylvania  |  $535,000
• Palm Beach, FL  |  $880,000

VIEW CURRENT LISTINGS HERE 

VIEW COMPLETE LIST OF PRACTICES SOLD 

LIST YOUR PRACTICE WITH FP TRANSITIONS

Sold announcements include all closed third-party transactions facilitated by FP Transitions, including private listings, pre-arranged matches, and those listed on the open market. 

FP Transitions is pleased to announce the recent sales of financial services businesses in the following areas :

• Central California Coast  |  $1,200,000
• San Francisco, CA  | undisclosed
• Central Michigan  |  $87,000
• Baton Rouge, LA |  undisclosed
• Boston Area Massachusetts  |  undisclosed
• Delaware  |  $200,000
• South Dakota  |  $600,000
• Orlando Area Florida  |  $700,000

VIEW CURRENT LISTINGS HERE 

VIEW COMPLETE LIST OF PRACTICES SOLD 

LIST YOUR PRACTICE WITH FP TRANSITIONS

Sold announcements include all closed third-party transactions facilitated by FP Transitions, including private listings, pre-arranged matches, and those listed on the open market. 

Acquisition strategies are varied and diverse; how an advisor or a firm pursues acquisitions will depend on their business model and philosophy. While the approach to acquisition should be personalized, it is a mistake to do it alone. In addition to the successful transactions presented in this report, FP Transitions works with many advisors who have endured failed sales or stalled deals.

The story of a failed transaction often begins with one or both parties hesitating to hire a mediator, the perception being that their deal is “simple,” and that buyer and seller can save money if they do it themselves. The information we gather from these clients about their failed sales gives our consultants broader perspective on what works and what doesn’t in an evolving marketplace. When we combine this information with the data gathered from successful deals, it is clear that investing in a mediator improves results for both buyers and sellers in terms of success rate, speed, and value.

One misconception advisors often share with us is the belief that one-on-one negotiations are easier and brokers will just get in the way of a personal connection between buyer and seller. This perception is understandable, as it is essential that buyer and seller have a mutual affinity and have aligned interests in order to transfer and retain client relationships after the deal is done. However, mutual affinity is not sufficient to get buyer and seller over basic negotiating factors, such as valuation, deal structuring, and tax allocation of the purchase price. These are complex topics where a mediator can provide expertise and perspective to both sides and advance the deal forward.

Financial services is such a regulated industry, with the added complexity of requiring a long transition, that it is common for a sale to get bogged down in “paperwork.” So, while each party does need representation, there also needs to be a knowledgeable and neutral mediator who can be responsible for keeping everyone on track, offer solutions, and has data to show why one side’s objection is or is not valid.

FP Transitions is pleased to announce the sales of financial services businesses in the following areas during the month of July:

• Seattle, WA  |  $780,000
• Central Coast New Jersey  |  $630,000
• Fresno Area California  |  undisclosed
• Kansas City Area Missouri  |  $1,300,000
• Southern Illinois  |  undisclosed
• Portsmouth, RI  |  $2,450,000
• Orange County California  |  $260,000
• Philadelphia Area Pennsylvania  |  $460,000
• Central Colorado  |  $880,000
• Upstate New York  |  undisclosed
• Philadelphia Area Pennsylvania  |  $1,770,000

VIEW CURRENT LISTINGS HERE 

VIEW COMPLETE LIST OF PRACTICES SOLD 

LIST YOUR PRACTICE WITH FP TRANSITIONS

Sold announcements include all closed third-party transactions facilitated by FP Transitions, including private listings, pre-arranged matches, and those listed on the open market.