Financial Advisors: What you need to know before selling a book of business 

Disclaimer: This article discusses selling a book of business.  It 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.

Are you a seasoned financial advisor looking to retire and transition your practice? Have you thought about selling your book of business to a newer advisor looking to expand strategically?

This is an exciting time in your career. You put in a lot of work to build your business, and how satisfying to find the right advisor looking to buy your business and carry on your legacy of excellence. 

While this can offer a significant opportunity and help advisors on both sides, it’s essential to approach the process with caution and carefully evaluate various factors before moving forward. 

In this blog post, we’ll delve into what you need to know about listing your financial advisor practice for sale and provide valuable insights to help you make informed decisions.

Understanding the Unique Nature of Book of Business Acquisitions

Unlike a transaction to buy a business like a café or a store, your book of business entails dealing with predominantly intangible assets such as client relationships and revenue streams. This presents a unique set of challenges, including how to assign value to these intangible assets and plan for a smooth transition post-acquisition.

The Buyer’s Due Diligence When They Find a Book of Business for Sale  

When we assist buyers who want to buy a book of business, we outline the due diligence that we recommend, listing the items below and many others. 

The buyer will consider how bringing on the new business will impact their financial advisory practice. 

The buyer must first consider if they can handle the influx of new business without neglecting their existing client base. They’ll also consider whether they have the financial resources and cash flow to afford the purchase price and sustain the business post-acquisition. 

Expect a valuation as part of the selling process.

A savvy potential buyer will want to have a professional valuation of the sale to make sure that the value of your book of business is clear. 

Start building your plans now if you’re looking to sell a financial advisor book of business 

The foundational work that you need to do before selling your business should begin years before you actually find someone to buy your financial advisory practice. 

For example, it’s a common misconception that ownership of a book of business automatically transfers with a share purchase of a corporation. However, this assumption often overlooks important regulatory considerations.

The Canadian Investment Regulatory Organization (CIRO) prohibits corporations from receiving income generated by investment portfolios. Instead, this income must be allocated to the individual licensee who holds the revenue rights. Consequently, selling the shares of a corporation does not necessarily entitle the buyer to your income stream without careful planning.

While certain strategies can be employed to address this issue, it’s noteworthy that many sellers have not undertaken the necessary groundwork and planning to make them feasible. If you are thinking about a succession plan, or selling your financial practice, reach out to us today!

Putting a transition plan in place 

The journey doesn’t end once the deal is sealed. For someone who buys a financial advisor’s book of business, a well-thought-out transition plan is crucial for integrating the acquired business seamlessly into your existing practice. This includes client communication strategies, staff integration plans, and seller support during the handover period. Clear communication and meticulous planning are key to a successful transition.

You have been committed to your clients for many years – how are you going to ensure they are in good hands and can start building a new relationship with the financial advisor that will now be handling their affairs?

Whether you want to sell or buy a book of business: Beeksma Law provides specialized legal advice for financial advisors 

Buying and selling a financial advisor’s book of business is no small transaction. For the buyer, it represents the path that their business will take for years to come. For the selling advisor, it is the culmination of a career’s worth of effort. 

It’s too important to leave to chance. Instead, you need focused expertise. At Beeksma Law, we have experience in providing comprehensive legal services tailored to the unique needs of financial advisors. From helping you prepare before selling the book of business to preparing the purchase agreement and more, our team is dedicated to helping you embark on the next chapter of your business journey with confidence. Reach out today!