Buying a Book of Business in Ontario

Disclaimer: This article on buying a book of business is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

In many businesses, entrepreneurs have to face the question of succession planning. Will the business be sold to someone? Should it pass on to a family member? Will it merge with another organization? These are all important questions to consider, and having a plan in place can help ensure that the business continues to be successful.

Many professionals are getting older (for example, the average financial advisor is now in their 50s), with retirement looming on the horizon. For new professionals in the field, this may be the expansion opportunity that you’ve been waiting for. After all, what better way to expand than to acquire a well-established adviser’s clients and business?

Expanding your business this way is no small matter. Making sure that your interests are protected – whether you are the purchaser or the seller – requires legal expertise, good advice and a savvy business sense.

In this article, we will talk about buying this specific type of business and different areas that you need to consider.

What is a “Book of Business”?

When acquiring a financial advisor’s business, you will likely be purchasing the book of business. This is the advisor’s client list and their associated assets. It typically includes detailed information about each client (e.g., contact details, relationship history, and account balances).

However, buying a book of business is an intangible asset and can be difficult to value. It is much different than buying (for example) a retail location with merchandise, equipment and the associated liabilities. The right legal and financial due diligence is required when considering such a purchase and its potential for success.

Much of the value behind a book of business lies in its “goodwill” or the value of the relationships between the advisor and their clients. Factors like trust, satisfaction with services rendered, as well as reputation can have a major effect on whether or not a client decides to stay with the business after an ownership change.

Questions to Consider

When considering buying a book of business, there are many questions to consider, such as:

• How will you determine the value of the book of business? Will multiple appraisals be required? When should the seller provide a finalized list of clients and their assets?
• What will the transition period look like? How will the clients be informed? Will the seller make introductions and work towards a smooth transition? How will existing staff, if any, be retained and/or rewarded for their loyalty?
• What other financial obligations (such as taxes) need to be taken into account when making the purchase?
• What kind of non-competition clause should you include to ensure that the seller does not take business away from you?

Of course, each transaction is unique and will have its own specific requirements. It is important to have experienced advisors and lawyers on your side to make sure that you are getting the best deal possible.

Buying a financial advisor’s book of business can be an exciting opportunity for entrepreneurs looking to expand their businesses. However, it requires careful consideration and due diligence in order to ensure that all parties

Take the next step with Beeksma Law

Whether you are looking to buy another advisor’s book or sell your business, Beeksma Law can help. Our team of experienced lawyers can guide you through the process and make sure your interests are protected every step of the way.

With our experience and expertise, our clients can rest assured that the deal will be as hassle-free as possible. As entrepreneurs ourselves, we know what your business means to you and take it just as seriously as you do. To learn how we can help you buy or sell a book of business, contact us for a consultation today.