Top Five Tips on Purchasing a Financial Advisory Practice

Top Five Tips on Purchasing a Financial Advisory Practice

September 25th, 2019 · 2 min read

Taking on board these handy hints will ensure you choose the right financial advisory practice – allowing you to build or grow your business the way YOU want to.

Generally, there are two reasons for buying a financial advisory business:

  • You do not want to build a practice from the ground up, and, therefore, you would rather purchase a ready-made business, so to speak.

  • You want to acquire another business with the purpose of increasing scale and revenue.

No matter what reason applies to your current situation, you need to have a proactive strategy in place to ensure that the purchase is a success. With this in mind, we offer some helpful tips to help you out.

  1. Ensure finances are sound on both ends

It is not enough to make sure you are in a healthy financial state in order to buy the business, you need to ensure you are not going to invest in anything that could cause you more trouble than it’s worth. This is why it is advisable to hire an accountant who can look for any red flags and assess the books, ensuring sustainable income. You also need to consider what-if scenarios. After all, it is probable that you may lose clients due to the takeover. Can you accommodate this? Also, look at expense growth trends and income, and assess how the firm makes money, i.e. do they charge an hourly rate or a percentage fee for managed assets?

  1. Take your time

Buying a financial advisory firm is not something to be rushed. An Aite survey revealed that the vast majority of successful acquisitions involved a lengthy vetting process.

  1. Perform a culture audit

Performing a culture audit is one of the most vital steps, but it is something that is often overlooked. All companies have their own culture, tactics, style of work, and values. If your business does not match this culture, and it is unlikely that you are going to be completely aligned, there will be some disharmony. Not to mention, you are going to have staff that did not sign up to work with you and will be worried about losing their jobs. If the cultures are worlds apart, don’t be scared to walk away from the deal. Otherwise, make sure you communicate effectively and take your time to ensure all parties are on the same page.

  1. Don’t get consumed by price

Looking for a cheap deal is not the way to go. Even if the price is right, acquiring a mediocre firm is not going to be worth it. You will lose money in the end. It is unlikely you are going to yield a deal with an exceptional practice if you have bartered down to rock bottom price.

  1. Make a transition plan

Last but not least, it is important to have a transition plan in place. This will ensure a smooth takeover. Aspects to consider include everything from hierarchy of workers, to revised business practices, to clear job duties. It is advisable to include all parties in this part of the process.