A less-common model of retirement planning for financial advisors is to acquire a practice. Very few independent financial advisors are actually in the position where they can consider this option because it requires a rare combination of financial flexibility, timing, and the availability of a practice to acquire. However, if you’re a visionary entrepreneur, you can’t deny that one viable possibility for your practice is to identify the person with the longest career ahead of them and then buy their practice instead of them buying yours.

 

This is a strategy for tremendous growth of your practice’s value as you move towards retirement, but it’s also best if you’re doing this when you still have 5-10 years left before your actual retirement date. That will allow you to achieve economies of scale and increase your value even more in a practice that is bigger than it was before. It also gives you the chance to merge your clients gradually over time under the younger person’s oversight, providing them with a transition that is less rocky than it would be if you were suddenly absent.

Every independent financial advisor knows that acquisition is a much faster way to grow than by organic growth, and while this is a tempting thought, it isn’t always possible. If the opportunity presents itself, wonderful, but planning to do your retirement this way might be difficult. Whether or not you can implement and execute a plan to this end, if the opportunity serendipitously presents itself to you, you might just be wise to take it.

Pros

  • Increase the value of your book by acquisition rather than by gradual organic growth.
  • Achieve economies of scale as another advisor and their staff join you.
  • Offer your clients a smooth and gradual transition towards your retirement. They’ll be aware that it’s happening and you will be able to answer all their questions and make sure that they’re being properly taken care of.
  • Continue to grow your own book and retain ownership for as long as you want.
  • Have a logical destination in place for your practice when you’re ready to retire.

Cons

  • It’s difficult for most retiring advisors to pull this off.
  • Some of the same difficulties that are associated with an internal succession can also show up in this model.
    • Difficulty of letting go
    • Difficulty of building enough trust with the junior advisor to be comfortable with them taking over the practice
  • Since the ownership is still yours, you will still be faced with the question of succession planning if you end up not wanting to go with the idea of letting the acquired partner take over the whole practice. This means that you could still potentially find yourself looking into one of the other retirement options down the road.

Next Article: Selling the Practice

advisorRETIRE’s mission is to come alongside retiring independent financial advisors and provide them a viable succession planning framework. Maximize your profitability and minimize your succession planning stress when you choose the advisorRETIRE program for your succession plan. Learn more and sign up today.

 

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  • SEAMLESS INTEGRATION OF CLIENTS

    We apply our proprietary service meeting processes to ensure a smooth client transition.