Whether you’re an employee at one of the major firms, an independent advisor with a broker dealer or the principal of your own RIA, acquiring a book of business is likely a topic that has captured some of your mindshare. And there’s good reason: It’s a quick way to increase your client base and assets, while also solving for succession. That said, it’s a crowded marketplace with many competing would-be buyers. The good news is that there are several ways for a buyer to differentiate from the pack—and you may have some already in place.
What is it that makes you or your firm more attractive to those looking to sell their book of business? Here are 5 key areas to focus on that can boost your value proposition:
The ability to provide comprehensive wealth management and services beyond traditional investment management is often attractive to sellers. If you serve niche client segments (i.e., athletes, doctors, international businesses, etc.), you can attract a more specific book that will enhance your stance and presence within that market segment—which will make you stand out even more for future acquisitions. Behind the scenes, a strong staff will significantly add value by ensuring back office, compliance, HR and operations are maintained at optimal levels.
When an advisor is looking to merge his book into your business, he will want to understand how your services will be able to maintain the book, as well as continue growth trajectory. What is your solution to help them grow? Is it through referral source, lead generation, covering existing clients, or help in acquiring or recruiting? An advisor wants to know that you have a clear plan in place to help “move the needle.”
In this competitive environment, it is important to understand the dynamics of the deal and what other firms are offering in terms of valuation multiple, upfront cash, payout and the like. Not knowing how to structure a deal hints at an unprepared acquiring firm. Know the market and your competition; then be ready to offer a deal worthy of their consideration in terms of price and overall value.
When advisors are looking to merge, they want to fully understand the mechanics of their firm integrating into the other. Outside of cash, equity is very attractive to advisors. Is equity available? Will advisors be able to earn into the partnership? Or even be a part of the principal’s succession plan? Many buyers only offer cash in a deal, so if your firm is trying to land next generation talent or those with a long runway, equity is a very important part of the deal.
Many advisors are accustomed to state of the art technology platforms, both client-facing and internal. How does your platform compare to the competition? Does it create efficiencies for advisors and clients, or is it a tech support nightmare? Although it takes a hefty investment to maintain, a sophisticated tech offering could be a key differentiator.
While many principals are proud of what they have built – and rightly so! – it’s important to take a step back and identify the real value your firm brings to the table. As you stand on the cusp of this next level of your business, you need to look carefully at what others will see when you make that offer. Because as they say, you only get one chance to make a first impression—so be ready to make it a great one.