Selling a financial advisory practice – a guide

Selling a financial advisory practice isn’t always an easy task.

A year ago we acquired clients from a financial advisor who sold to us. That was our first deal, despite being in the market for years.

This year, we are also in negotiations for similar deals.

Many people don’t know how to value a financial advisory business. This article will discuss how to value your business and find a buyer

If you are looking to sell out don’t hesitate to contact me, email ( or use the WhatsApp function below.

Firstly, decide whether you want to sell the assets or the company

Some people decide they want to sell the whole company and associated assets, such as licenses, domain names and anything which is relevant.

Others decide that they want to keep the company, but sell the assets only.

Next, make sure your valuation is reasonable

People are strange when it comes to money. We aren’t rational. Numerous studies have shown that we are more likely to overvalue something we already own.

For example, if we own a house and do an extension, studies show we overvalue the re-sale price.

We assume because the house is now worth more to us, it will be worth more to other people and the market more generally.

That is one reason why many firms do “free trials” as a marketing ploy – they understand that we value something we have more than before.

When it comes to financial services businesses, many people have unrealistic valuation metric, which aren’t in line with the market rate.

The typical market rate for selling assets under management is two years worth recurrent income. Let’s give a simple example of an advisor that has twenty million under management, which is yielding $200,000 a year in fees.

That business would be valued by most people in the market at $400,000 – two years worth of fees/recurrent income.

With that being said, there is a second way to value a financial advisory business. That is, selling out for a percentage of the total assets.

This is typically 2%-3% of the total assets under management. In this case, the selling price would be $400,000-$600,000.

The above rates are what I have seen in the overseas financial advisory market. In some local countries, valuation metric might be different.

What others things can impact on those valuations mentioned above?

The speed of acquisition can impact on valuations. Two years worth of recurrent income is standard, but that typically comes with half the payment upfront and half after a number of years.

Quick acquisitions where the seller sells out within months and years, and therefore gets all the money more quickly, often result in one and a half years recurrent income being paid.

Conversely, if a sale is more gradual and takes many years, you can expect to receive a higher payment than two years worth of recurrent income.

If you are selling a business with licenses, domain names that are generating leads and other assets, you can expect to sell for more than recurrent income, because the buyer is interested in your assets beyond the assets under management.

Getting a license can take a year or even years in some countries, and therefore some buyers are willing to pay for the convenience of having a ready made license.

Another thing which can impact on valuation is what kind of assets your clients are in.

Some firms, such as our own, aren’t interested in acquiring pension business, as an example.

What are the risks and how can these be managed?

In most business transactions, the buyer has more power. In financial advisory acquisitions, this isn’t always the case.

The reason is simple. In a multi-jurisdiction world, there is nothing stopping the selling advisor taking the money and then transferring the clients back to their ownership.

What is more, even if the seller is honest, some of the clients might not like the new relationship and advisor, and some of the investment providers might also refuse to deal with the new owner.

This risk can be managed by having a transition period where the advisor is involved with the client and helps manage the transition.

It also helps if the buyer knows the seller well. Our acquisition last year was done with a gentleman I have known for a decade.

If both advisor firms are in the same jurisdiction this also makes things easier.

What is the right time to sell out as an advisor?

Everybody is different. Some people never want to sell, and even plan to pass on the business to a child.

For others, ill health, losing love for the business or a stagnating practice can all be signs that the time is right to sell out.

It is all too common for advisors to hold onto their books for too long.

What mistakes do sellers make?

The biggest mistake sellers make is wanting a price which is out of line with the market. You shouldn’t assume that using a broker that specializes in acquisitions will help here.

Ultimately, most buyers understand the market rate and won’t overpay, even if a third-party is involved.

Second, they don’t always focus on the indirect benefits of selling.

If you are selling out for two years worth of recurrent income, you can use that money to make more money elsewhere.

Therefore, the math isn’t as simple as thinking that you could just hold onto the book for another four or five years and make more money.

Lastly, it makes no sense to care who the buyer is (within reason), and to get emotionally involved in the process.

If I sold you my house, I would understand that it is up to you what you do with that house. You can even burn it down if you want and build again! 99.9% of home sellers think in the same way.

The same should be true in business. What a buyer plans to do with “your clients” and “your business” shouldn’t be the major concern.

As soon as you sell, they are your ex-clients.

Pained by financial indecision? Want to invest with Adam?

Adam is an internationally recognised author on financial matters, with over 668.8 million answer views on, a widely sold book on Amazon, and a contributor on Forbes.

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