Advisors with fewer years under their belt undoubtedly have unique challenges when it comes to buying a book of business. Coming from the bank channel may offer some leeway, given that there’s a large institution ready to guarantee payment, but in general this advantage is largely underutilized in the market, and is an acquisition strategy that has lot of potential to grow.
For non-bank Advisors, the best stepping stone is experience. If you can secure a position as an associate within a more established practice, the years and successes will in time afford you an opportunity to buy a good-sized business.
One important thing to remember when buying a business is: don’t plan on making money from it for at least three years. During this period, you will be paying for the book; and you may even have to pay the seller’s rent if he has a lease and so on.
In other words, if you are buying a business to immediately increase your personal income, reconsider either your timeline or your expectations. Case in point: An Advisor with $100 million under management could buy a $50 million book, and still the chances are they will break even on that deal in three to four years. That would still put them ahead of the game, but it would take no small degree of patience and dedication. I always remind my clients that if it were easy, everybody would be doing it.
To summarize, buying or selling a book must be treated with the same care as you would ask of your clients when they sit down for financial planning. It is a highly involved process, far beyond the scope of a single seminar or workshop, and buyers in particular should be proactive in searching for opportunities. Most successful Advisors have someone in the team working on marketing; why not use them to find the aging set who may be looking to handover their book?
In many ways, buying a book is similar to prospecting, or taking advantage of a referral network, except your goal is to find the right fit, at the right time. If anything, your aim must be to build your profile, maximize the valuation, set the terms, and be ready to go in when the opportunity arises.