One of the hardest decisions a financial advisor will make is whether or not to sell their business. After years of hard work, building lasting client relationships, growing assets, and nurturing a team, saying goodbye is never easy. Cerulli Associates estimates that 37% of advisors will retire in the next nine years¹, and many choose to sell their practice when they do. If you are thinking of retiring or starting a new venture, it is important to stay objective so that you can make the best decision for you and receive top dollar for your practice.

Here are some factors to consider when deciding to sell or not to sell your advisory business:

Your Age

Age is the most significant factor in determining whether to sell your business.  If you are at or near retirement age, now is an excellent time to consider selling. If you have over ten years until you plan to retire, you should only sell if the other factors outlined below apply. If you are past retirement age, we recommend you think objectively about devising a plan to sell your business now.

As we age, our brains change. While not everyone experiences cognitive aging at the same rate, there are six primary areas where we are most impacted – mental processing speed, memory, attention span, language skills, executive functioning, and emotional processing. Leslie Kernisan, MD MPH, does an excellent job outlining how these changes occur and some practical applications of each in her article, “6 Ways that Memory & Thinking Change with Normal Aging (& What to Do About This).”

If you are in cognitive decline, you can jeopardize your duty to provide advice in your clients’ best interest. FINRA has recognized this issue and has provided increased opinions and guidance as to the risks aging advisors pose to their clients. Additionally, you must consider your mortality. Even if you decide to continue working, you do your clients a disservice by not planning ahead and considering who will take over your book of business. If you are a senior advisor, we recommend identifying a successor and establishing a plan to ensure you do not “die at your desk,” leaving your clients without guidance.

Business Growth

Is your business still growing? Are you continuing to receive referrals and attract new clients? If so, you shouldn’t sell unless the other factors outlined here take higher priority. However, if you have not experienced a consistent level of growth, now may be a good time to sell.

Remember that deciding to sell your business does not have to be an “all or nothing” decision. Many advisors ensure their book provides them with future income by breaking up the sale over several years. For example, if you are ten years out from retirement, you could sell one third of your book now, another third in five years, and the final third when you retire. This way, you can make a smoother transition into retirement by reducing your workload over time. You can also focus on serving your most important clients for longer, while leaving the buyer with the opportunity for further growth.

Personal Interests

Are you satisfied with the number of hours you work? Are there professional goals you have yet to achieve, such as reaching the next level of AUM or obtaining your CFP? Have your clients become close friends? If you enjoy spending time at the office, are deeply satisfied working with your clients, and are striving towards new professional goals, now is not the time to sell.

However, if your interests lie elsewhere and you would prefer to work fewer hours, now is an excellent time to start looking for a buyer. Financial advisors tend to be entrepreneurial in spirit. The income generated from selling your business doesn’t have to go into your retirement fund – instead, the sale can fuel a new venture.

Business Valuation

While you may be ready to sell, your business may not be market ready. Often, what an advisor thinks their business is worth does not align with their business’s actual value. An experienced business development consultant can provide you with an objective, realistic business valuation. If you have five to ten years before you plan to retire, a business development consultant can also provide you a plan for improvement to increase your business’s value before it’s time to sell. Increasing your advisory assets, diversifying your client base, streamlining your portfolios, and using new technology to increase efficiency are several ways to increase business value.

To help you determine if your business is move-in-ready, a fixer-upper, or if you need a full renovation, read this article.

If you have gotten to this point and have decided you are ready to sell, contact us. Our experienced business development team can help you devise a sales strategy or succession plan that maximizes your opportunity and aligns best with your vision. Give us a call at (360) 866-2345 or send us an email at info@financialadvocates.com.

¹ Cerulli Associates, U.S. Broker/Dealer Marketplace 2019