5 Things Every Advisor Should Know Before Buying a Book of Business

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Posted on by The Money Finder

Buying a book of business is a natural career progression for some advisors committed to furthering their career and building out their client base. While the process may seem daunting, a clear cautious approach may pay off, says Stephanie Holmes-Winton, noted author and CEO of The Money Finder.

After scouting a seller, ideally an advisor who is retiring and has a proven track record of strong ethical commitment to their clients, the next logical step is a deep dive into the practice.

Before discussing details typically a confidentiality agreement containing a non-compete and non-disclosure, is standard practice between seller and potential buyer. In the case where one is not requested, proceed with caution.

Conversely, a standstill agreement, a document that states the seller can’t deal with anyone else while negotiating with the buyer helps safeguard the buyer against competition or price inflation.

Some questions to consider before buying the book include: What is average asset value per client? How many clients are in the book? What is the demographic make-up of the book? What is the total recurring revenue? What is the product mix? What percentages of those assets were sold with front-end load commissions? How will recent regulatory change affect how the book is valued?

The value of a book of business is often determined by a calculation of trailing fees on mutual funds / segregated assets (typically 1.5-2.5 multiplier) and the commercial goodwill held by the seller. In fact, 90% of the selling price often hinges on client retention. An important aspect to keep in mind! Will you be able to retain the clients you have purchased or will they choose to take their portfolios elsewhere?

Managing the transition carefully and offering clients new value is key. There should be overlap between the previous and new owner. For larger clients, both advisors should meet together to discuss transition of portfolios to instil confidence that they will be looked after in a similar fashion.

This is also an opportunity to determine if assets are held elsewhere. Cash flow planning is an ideal strategy to open this discussion. Former advisor, Luigi Lucia, says that it isn’t surprising to see $200,000-$300,000 in assets held at other institutions or with other advisors.

Bringing a differentiating factor to clients after purchasing a book of business can prove to be a lucrative endeavour. Conservatively, introducing Behavioural Cash Flow™ Planning to clients held in a new book of business opens a dialogue about their entire financial picture and creates an ability to sell two additional products and increase revenue per household by 265%.

To learn more about how to incorporate Behavioural Cash Flow™ Planning into your practice here


Cash flow planning case studies  are helpful when buying a book of business. Each brings a different approach depending on the client  demographic held within the book.


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