Much has been written over the past five years about the climate for selling independent wealth management firms.  As markets rise and fall, the perceived promise for sellers to make a move tends to rise and fall as well.  For some wealth management advisors, the time for selling never feels right. 

Sellers come up with any number of reasons for kicking the tires and waiting:

“I’m going to hold off until the markets get less choppy.”

“If the business is worth a dollar now, I’ll wait until it’s worth a dollar twenty.”

“Nobody could run this firm except me!”

“The entire selling process is a mystery – I don’t want to make a mistake.”

“My daughter seems to like what I do -- she could very well be my successor.” (She’s in middle school now.)

The predicament is similar to that of a couple contemplating having their first child.  Waiting until the stars perfectly align with their careers, their finances, and their housing situation probably means they’ll be waiting for kids for a long time. (There may be some deep-rooted fear that they need to overcome too, but, as the saying goes, that is beyond scope for this article.) For that nervous or overly analytical couple, the soundest advice might be to prepare as properly as possible -- and then to get on with it.

The bottom line is that selling your wealth management business is neither a simple matter nor an easy choice.  And there is no cookie cutter formula to follow, no single white paper to read, no template to download.  No two deals ever look identical because no two advisors or advisory firms are the same.  But when it’s time to sell or to implement your transition plan, strategy should guide you and empower you to take action.  As one of our firm’s clients has put it, “Everyone has an exit plan; either you make it happen or it happens to you!”

Turning back to your decision:  practice what you preach.  When designing and investing client portfolios, your investment strategy supports your clients’ long-term financial goals, and you don’t pretend you have a crystal ball for timing the market.  The same should hold true when you plan for your own business’s future.

The purpose of this article isn’t to press the “cobbler’s kids have no shoes” argument, as much has been written about this already.  Rather, this article aims to demystify the selling process by placing everything in the context of you, your goals, and an ideal outcome for your practice.

How many buyers are out there?

If you believe what one prominent industry consultancy espouses, there are nearly 30 buyers for every seller.  It must be a seller’s market!  Dig a little deeper and you’ll see that this statistic is quite misleading.  If you operate a financial planning firm in Ft. Washington, PA, would you really consider selling to a large cap growth manager operating out of Phoenix, AZ?  Well, no.  If you are a fee only wealth manager in Miami, Florida, would you consider selling to an independent broker dealer in Portland, Oregon, who specializes in insurance products?  Again, not likely.  The consultancy that speaks of the 30:1 ratio only achieves this eye-popping statistic by mixing apples and oranges.  Statistics can be lovely, can’t they?

Am I worth anything?

According to another industry veteran, only 200-400 wealth management firms (out of 18,000-19,000) have any enterprise value, so the balance of firms basically have zero value at all.  From this perspective, there truly aren’t a lot of buyers for every seller, for if there were, the law of supply and demand would say that price (i.e. your firm’s enterprise value), should rise as high demand outstrips meager supply.  A logical extension of this argument would be that there must currently be no demand, explaining why those thousands of firms have no value.

So which one is it?  Are we really in a seller’s market or do sellers, in fact, have no value because there’s no demand for what they’re selling?  The answer is probably neither.  From experience, I know that selling a wealth management firm is no easy task.  In addition to handling the financial side of things, strategic and cultural hurdles have to be cleared—cleanly—in order for the right buyer-seller match to occur. 

The important point to remember is that you are a match for someone.  There’s another firm out there, a buyer who will value what you’ve built and will pay you for it.  And while it would be an ego boost to receive dozens of offers for your practice, you can only sell yourself once.  So focus on finding the right match and you should be able to uncover one to three potential buyers who truly align with your strategic vision, provide a great home for your clients and staff, and are willing to pay you a fair price for your business.

For Example:

A current sell-side case for our company involves an investment management firm that had no succession strategy.  The senior partners of this firm have been putting off succession planning for years, but they’re now ready to retire.  After learning about the personal and business outcomes they wanted, we soon understood that their top priority is to find a great home for their clients and staff, with financial considerations, although important, a secondary concern.  Since many of their clients have been with them for decades, the principals consider them to be not only clients but friends. 

We embarked upon a six month process with this firm that started with performing a valuation, analyzing each partner’s goals for the firm – in essence, the legacy they wanted to leave behind, and determining what type of buyer would be a good fit for their goals.  Much of this process we coached them on as they’d never engaged in this kind of analysis before, but by the end of this first phase, the discovery phase, each partner agreed that the sale process was on track, understood how long the whole process should take, and had an idea of what the ideal outcomes might be.

Our firm then developed a list of fifteen potential buyers who met our client’s stringent criteria.  Through a rigorous interview and assessment process, fifteen possibilities became seven, which became three (the short list), which, ultimately, became one.

By going through this process, our client knew they had found “the one.”  As their M&A advisor, we ensured that the buyer passed due diligence and that the transaction was properly structured.  The deal is scheduled to close by the end of the first quarter, 2011.

Preparing to Find Your Match

You can think of finding a match as a series of steps.

Step one is committing to making a sale happen, even without perfect data or ideal market conditions!  Remember the couple who is waiting for the stars to align before having their first child.

Step two is determining why you are considering selling or merging with another advisor.  Here are some questions to ask yourself: Are you looking to retire and need to find a good home for your clients?  Is your business stagnating and you seek to spark growth?  Are regulatory issues becoming overly burdensome?  Do you have health problems or is another life event driving your decision to sell?

Step three is surveying the landscape.  Do you know who might be interested in your practice?  Do you know who you’d want to be interested?  Who has the capital to actually do a deal?  Are you familiar the various models out there for selling or partnering with advisory firms?  Here is a partial list of firms to get familiar with that have well-crafted acquisition strategies; at the very least, by studying their models, you can get a sense of how deals are structured:  United Capital Financial Partners, Burns Advisory Group, Hightower Advisors, Concert Wealth Management, and Focus Financial Partners.

Step four is determining if you need your own advisor on the deal.  How much M&A experience do you have?  Do you have enough contacts at other firms in your area that you can engage with multiple potential buyers?  Can you remain dispassionate during a potentially emotional business transaction that has large personal ramifications?  Have you had a valuation completed on your business so you know what a fair sale price might be?  Have you compared the costs and timeline of going it alone vs. costs and timeline of hiring an M&A advisor?

Step five is following a disciplined process.  Hold yourself accountable to hitting key milestones and the timeline you set for yourself. 

Making it happen

Once you start down this road, you will quickly get an education on the potential market for your firm.  You will begin to realize how unique you are and how some possible options just don’t feel right.  Now you’re getting somewhere.  My advice to you is not to be discouraged and to recognize that this process can be a long one.  By starting and sticking with this process, you will learn something valuable along the way.  And eventually, you will find the right fit.


Five Steps From a Veteran M&A Advisor


1.      Commit to it!

2.      Focus inward: why are you selling or merging?

3.      Focus outward: who is doing the buying?  How are deals structured?

4.      Decide whether to hire an M&A adviser or to go it alone

5.      Follow a disciplined process and hold yourself accountable

David Selig is the CEO and Founder of Advice Dynamics Partners, a full-service mergers & acquisitions consultancy.  David has twenty years experience in strategy, consulting and financial services and works with financial advisory firms seeking to sell, to merge, or to grow through acquisition.  More at:


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