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Strategic Steps to Prepare for the Sale of Your Financial Advisory Practice

In the dynamic world of financial advisory, preparing for the sale of your practice is a meticulous process that demands careful consideration of various factors. Whether you're planning for retirement, exploring new opportunities, or seeking a change, getting your house in order is key to a successful transition. Here's a comprehensive guide to help you navigate through the essential steps in preparing for the sale of your financial advisory practice:


Make sure you download our Practice Sale Preparation Checklist!


1. Get Your Financials Straight

One of the foundational aspects of preparing for the sale is having crystal-clear financial records. Your potential buyers will scrutinize your financials to assess the health and viability of your business. Utilize QuickBooks to maintain a clean set of records, including a detailed Profit and Loss (P&L) statement. Break down your revenue sources, such as asset-based fees, financial planning fees, commissions, and insurance.


Make sure to distinguish between business-related expenses and personal expenditures. Clearly demonstrate any add-backs that may not be considered ongoing expenses for the business. Ensure that your gross income accurately reflects the true revenue your practice generates, providing potential buyers with a transparent understanding of your financial position.


If you need help getting your books ready, please contact us for a complimentary consultation.


2. Skip the 1099’s

Having 1099 contractors in your organization can be a red flag for potential buyers. To enhance the appeal of your practice, consider transitioning to W-2 employment contracts with your staff. Establish solid employment contracts with non-compete and non-solicitation clauses to protect the continuity and integrity of your client relationships.

By streamlining your team under W-2 contracts, you create a more cohesive and stable structure, presenting a positive image to potential buyers. This move can alleviate concerns about the potential departure of key team members after the sale.


3. Exit the Money Management Business

Consider divesting from the money management aspect of your practice, especially if it's not a significant value driver. Transitioning to a Pure Registered Investment Advisor (RIA) model with negative consent can simplify the sale process. This strategic move not only makes your practice more attractive to buyers but also facilitates a smoother transition of client assets.


4. Focus on Net Flows and Lead Generation

Demonstrate the value of your practice by showcasing strong Compound Annual Growth Rates (CAGR) and a robust lead generation funnel. Net flows – the difference between new assets gained and assets lost – can significantly enhance the perceived value of your business. Showcase your ability to attract and retain clients, emphasizing a sustainable growth trajectory.


Invest in a lead generation machine that consistently brings in new assets under management (AUM). A solid lead generation strategy can be a key differentiator and a major selling point for potential buyers.


5. Have a Succession Plan (G2 Plan)

Develop a comprehensive succession plan, often referred to as a G2 plan. This plan outlines how your practice will continue to operate seamlessly after your departure. Include details on key personnel, client transition strategies, and any ongoing support you may provide post-sale.

Having a well-thought-out G2 plan demonstrates your commitment to the long-term success of the practice and reassures potential buyers about the stability and continuity of client relationships.


In conclusion, preparing for the sale of your financial advisory practice requires meticulous planning and execution. By getting your financials in order, transitioning to W-2 contracts, exiting the money management business, emphasizing net flows and lead generation, and having a robust G2 plan, you can enhance the appeal and value of your practice in the eyes of potential buyers. This strategic approach not only facilitates a smoother sale process but also ensures the ongoing success of your practice beyond the transition.


If you're ready to explore the opportunity of maximizing some or all of your practice, contact us for a consultation.

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