If you don’t already have plans to sell your practice, now’s a good time to consider it. Nearly a third of advisors (29 percent) plan to buy another practice in the next one to five years, compared to 71 percent who have no acquisition plans. But only 15 percent of advisors said they expect to retire or sell their business over the same period, versus 85 percent who have no plans to sell, according to a recent Financial Services Institute survey of 2,300 advisors.

David Grau Sr., founder of FP Transitions and author of Succession Planning for Financial Advisors: Building an Enduring Business, suggests there are probably even more buyers to sellers out there than the survey shows. For example, a fee-based practice in Boston bringing in $250,000 in income and 70 percent recurring revenue would get between 50 to 70 interested buyers in less than a week.  

“It’s a seller’s market,” Grau said. “If that existed for a home, most of us would think seriously about selling our home because that’s how you realize value.”

Grau estimates that only about 8 percent of advisors actually sell their business at the end of their career.

“Our membership—and I think this is indicative of the whole industry—they’re not looking to get out any time soon,” said Chris Paulitz, senior vice president of membership and marketing at FSI.

The average FSI member is about 52 years old, Paulitz said.

Over a longer time horizon, more advisors plan to sell, and fewer plan to acquire. According to the survey, 29 percent of advisors expect to sell their business in the next six to 10 years, while 24 percent plan to buy or acquire another practice over that time period. 

Still, the number one exit strategy among independent advisors is attrition, Grau said, where a practice simply winds down to the point where the advisor can’t sell it.

Why aren’t advisors getting out?

“Most advisors a) love what they do; b) they’re married to the income; and c) they don’t really believe that anybody could do what they do for their particular group of clients better than they could,” Grau said. “As a result, they never sell.”

And some advisors need the cash flow. An advisor making $250,000 of fee-based income a year, for example, could sell for $500,000 and live off the proceeds, Grau said. Or they could take home $150,000 of that income every year for the next 10 years; that would equate to $1.5 million.

“The income added up over time is better than the sudden proceeds of the sale, assuming you live long and happy,” Grau said.

Phillip Flakes, manager and co-founder of Succession Link, said most valuations come in at around one to three times topline revenue. A lot of advisors have structured their practice as a lifestyle business—meaning they don’t have to work too hard, and can leave the office by 1 p.m. everyday.

“Advisors struggle with the idea of, ‘Can I work for another year or another two years? Versus the valuation I’d receive if I sold it today.’”

Many advisors are willing and able to work longer, said David DeVoe, an M&A consultant with DeVoe & Co. 

“The average owner of an RIA is estimated to be about 58 or 59 years old,” DeVoe said. “So the industry is moving toward retirement. That said, retirement is no longer 65 years old, especially for an industry like this. These are the types of businesses where the owners enjoy what they’re doing; they’re clearly healthy and have great intellectual horse power well beyond 65 years old.”

What does that mean for advisors looking to buy?

Despite the high ratio of buyers to sellers, practices are not going to go to the highest bidder, Grau said. Instead, sellers look for buyers who are as good or better than they are but are twice the size. They then look at best geography and lastly, price and terms of the deal.

“It has never been an auction process,” Grau said. “And that’s what’s so impressive about this profession. It’s almost always about best match.”