FINTECH VIEWS: Selling Your Financial Practice

A Guide to Ensure the Best Price for Your RIA


By Kristen Grau, CPA, CVA, CEPA, Executive Vice President

More than a third of financial advisors managing 40% of industry assets are projected to retire by 2032. Yet, a quarter lack a concrete plan for transitioning their business.

This gap in preparation can lead to a stressful and potentially costly process for both advisors and their clients. Selling your financial practice is a significant decision, one built on years of dedicated service to your clients. It’s more than just a financial transaction; it’s about finding the right partner to carry on your legacy.

But where do you begin?

This article provides a framework to navigate the sale of your practice to secure your best deal. We’ll share specific considerations for selling a financial services business to ensure a smooth transition for your clients and a secure future for you.

Valuation and Deal Structure

Our industry tends to emphasize valuation multiples over deal terms. This can distract from key deal terms directly affecting the seller’s final payout and long-term success. These critical terms include clawbacks tied to future revenue production and client retention metrics post-deal, and even account for retaining talented advisors within the businesses. All of these factors can impact the payouts, and therefore, the ‘revenue multiple’ being quoted publicly.

A Seller-Focused Approach

If you’re a business owner considering a sale of your life’s work, seeking guidance that prioritizes your best interests is crucial. You want an advocate who will help you assess and secure the most favorable terms for you.

Here are some seller-centric steps to get the best buyer, best price and best terms:

  • Value & Preparation: Conduct a thorough assessment of your practice’s marketability and financial health. Prepare for your post-sale life and communicate effectively with key stakeholders, including staff and clients.
  • Identify the Ideal Buyer: Define the characteristics of your ideal buyer, considering the needs of your clients, your staff, and your own long-term goals. While establishing some criteria is important, avoid being overly restrictive to maximize potential buyer matches. Evaluate all potential buyers objectively to identify the best fit.
  • Negotiate & Document: Work with a team to negotiate the sale. Rely on third-party reports to address all aspects of the sale and foster trust. Understand the tax implications of various sale structures. Negotiate employment agreements and consulting arrangements separately from the sale of the practice itself. Prioritize overall value and fit over simply pursuing the highest offer.
  • Sell-Side Representation: Partner with a sell-side representative. Seller advocates offer expert guidance, provide context and knowledge about various deal structures, streamline due diligence, navigate negotiations, and maximize the value you receive.
  • Ongoing Support & Transition: Develop a comprehensive plan for transitioning client relationships and business operations to the new owner. Effectively communicate the sale to your clients and ensure continuity of service.

Enhance Your Practice’s Value Proposition

Sellers achieve their best outcome by preparing the business well in advance. Consider the following tips to secure your greatest financial outcome:

  1. Plan Early: Take the time to develop your succession/exit strategies. While not every outcome can be anticipated, sellers can achieve the best outcome when a playbook has been established with an annual valuation, current performance metrics, updated coverages, and succession and transition plans in execution stages.
  2. Client Age & Diversification: Now is the time to deepen your ties within and across households, including strategies to attract younger clients and those in a wealth-accumulation phase. Buyers often prioritize the age of the eldest household member during valuations and not having a demonstrable strategy for capturing diverse clientele will hurt your value.
  3. Consider an Advocated Deal: Having a buy-side or sell-side intermediary helps offset the “playing field” and eliminates both buyer and seller being equal. Advocated deals ensure alliances are with the advocated party, allowing the intermediary to remain neutral to the broker-dealer, custodian, TAMP, coach, and buyer. Thus, advocated transactions help ensure the health and sustainability of the practice remain intact after closing because the best candidate was selected.
  4. Assess All Buyers: A thorough assessment of all buyers is imperative so that you and your clients know that the selected buyer is not only the best fit, but also the most qualified.

Don’t Miss Your Window

Is there really a ‘perfect’ time to sell your business? Yes, absolutely. There are definite moments when your business begins to decline in value. The ideal window is always before there are health concerns, exclusively elderly (or retired) clientele or a missed leadership succession transition period. Keep an eye open for red flags, which often include stagnated growth or a decline in referrals. Owners experiencing large client attrition periods, declining growth metrics, and an inability to attract or retain talented advisors should prioritize the health of their business. While not everyone has the benefit of time, financial advisory firms continue to drive milestone valuations and attract lucrative prices across the industry.

Kristen Grau, CPA, CVA is the company’s Executive Vice President and head of SRG’s Seller Advocacy listing program. Kristen has completed hundreds of valuations and sales, assisting advisors to sell their practice and single handedly increased values industry wide.