Are you considering buying a new book of business? With an aging advisor population, acquiring a new practice might be a great way to help catapult your business to the next level. However, there is often a disconnect between desire and reality; an acquisition requires having proper systems and processes in place well in advance of the actual transfer.

Below are some considerations to review as you plan for acquisitions and other critical milestones in your business. 

Having a solid foundation is crucial.

Without adequate resources, acquisitions can, in fact, be dangerous. Your existing practice represents the foundation upon which you are trying to build. If the foundation is unstable, adding on a few more floors above will not produce a favorable long-term outcome. Secondly, there’s a huge difference between “buying a book” and retaining those newly-acquired relationships over the long term.

Preparation is essential to ensure that the initial and ongoing experience for the newly-acquired clients meets or exceeds expectations. Otherwise, through attrition, you might end up paying for business that doesn’t end up staying on the books.

These transactions are about much more than the numbers.

Finding the right fit is often a matter of emotions and chemistry for the seller as much as it is about price. Assuming a buyer is qualified and does in fact have the capacity and structure in place to absorb another business, connecting with the seller’s values and philosophy on asset management and planning is critical. The acquiring advisor needs to have knowledge of the marketplace and the time and resources necessary to effectively execute the transaction. 

You have to be ready to hire “ahead of the curve.”

If you have an appetite to acquire a book of business, you have to be ready to hire “ahead of the curve." In other words, you are staffing your business and creating systems and processes not based on where your business is today, but where you hope it will be. This creates risk. If you staff up and invest in your infrastructure, you need capital. If you are unsuccessful in ramping up your revenues either organically or through acquisition, the excess overhead could create a significant drag financially. 

From a risk management standpoint, do not shortcut your due diligence.

Know what you are buying both from a revenue and compliance/regulatory perspective. A thorough examination of the seller is warranted as it relates to prior and open complaints. If there are areas of concern, you can either walk away or suggest that some portion of the sale proceeds remain in escrow for a period of time as a defacto “tail coverage.” Employment contracts, staff bonuses, real estate and equipment leases, etc., should be reviewed as well to ensure there are no surprises. It’s a good idea to ask for a credit report to make sure there are no financial obligations outstanding that could be attached to the business you are buying.

It’s also important to understand the deliverables currently provided to clients, including the frequency of reviews, performance reporting tools, planning software, continuity of administrative staff/relationship managers, events for clients, and so forth.  Assuming you’re buying a well-run practice, less change is better in the early stages until you develop your own rapport and can begin to make modifications to the service experience similar to what you provide to your legacy clients.

The success of the transition from seller to buyer is also greatly enhanced when the seller is willing to stay on for some period post-sale. This “soft hand-off” on the relationship side helps not only with retention, but also creates less stress for the clients as the person they’ve confided in slowly fades away. In the case of an abrupt departure of the seller, additional risk comes into play. 

The key? If you want to win, invest the time on the front end to understand what the seller’s key motivations are. Be a good listener and be willing to be creative in finding a solution that works for all parties. 



Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Stratos Wealth Partners, a registered investment advisor and separate entity from LPL Financial.