How financial advisors can buy a wealth book of business
Are the expectations and culture compatible? This question has confronted Derrick Alexander, owner and lead financial advisor at
"Recurring revenue is good," he said. "Profitability is great. But successful relationship transfer? That's priceless. To sell a practice effectively, you really need all three. If you're lacking in any one area — recurring revenue, profitability or transferable relationships — it will likely impact
One of the more eye-opening experiences Alexander had was with an older advisor. He said it was, on paper, "a near-perfect fit."
"But what I learned is that many sellers want to pass their business on to someone who reflects their identity or who offers a similar, or broader, scope of services," he said. "In this case, the advisor told me, 'You're a great advisor. The only difference is that you're Black, and I'm Irish.' Crickets on the phone. I didn't expect that to be a deciding factor, but it was an important, and frustrating, lesson. … Make sure the seller's culture, values and client expectations align with your vision."
Client count and structure matter, Alexander said, and that while two firms might generate the same revenue, "they're not always equal in value."
"If I bring in $500,000 from 50 clients and you make $500,000 from 120 clients, your practice may be more time-intensive and operationally complex," he said. "For an acquiring firm, that means a lower value per client and more hours required to maintain the book — possibly turning what looks like a good deal into a bad one."
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