The Growing Appeal of Sell and Stay Deals

The advisor M&A scene has changed dramatically over the last five years. This change has emerged in tandem with a shift from a concentration in the traditional solo advisor/lifestyle practice model to a wider range of models, including team and enterprise practices. Coupled with longer advisor life spans and an aversion to a traditional “retirement,” these trends have many advisors – buyers and sellers alike – exploring sell and stay scenarios. 

Benefits of Sell and Stay to the Seller 

Allows you to “cash in” without having to retire. 

Without constant growth, the value of an advisory practice can quickly decline. This can lead to a significant loss of equity (and ultimately cash) for an advisor. In the past, many advisors put off selling until they were truly ready to quit working as an advisor. Often, they were shocked to learn how much equity they lost while operating in “cruise control.” Sell and stay lets them cash in when practice value is high and continue working until they are truly ready to move on.  

Allows you to focus on the aspects of the job you like most. 

Many advisors naturally gravitate to certain aspects of the job. Some prefer the servicing side, while others wish they had more time to work “in” the business instead of “on” the business. Sell and stay scenarios allow advisors to sell to buyers who are happy to take on the aspects of the job the advisor doesn’t like so they can pursue the aspects they do like, be it servicing clients, generating COI relationships, or cultivating the next generation of advisors. 

Allows you to overcome burnout and reinvigorate your professional life. 

As mentioned in a previous post, the number one reason advisors look to sell their practice is because of burnout. Often, they are burnt out because of the stress of wearing all the hats in the business. Sell and stay scenarios allow them to tap into the energy and resources of another advisor or team. Paired with the ability to focus on the aspects of the job they like most, this often reenergizes advisors and gives them a new sense of purpose and motivation to continue.  

Allows you to achieve better life/work balance. 

Handing off parts of the business also frees up time for advisors to focus on family, health, and hobbies. Taking some of the advisor duties off their plate lets them trade in the “always on” work schedule and carve out dedicated time for the relationships and activities that make their life full and rewarding.  

Benefits of Sell and Stay to the Buyer 

Minimizes client attrition by avoiding a rushed transition.  

Client attrition is one of the largest risk factors for a buyer doing a practice acquisition. Keeping the selling advisor onboard after the transaction gives the buyer more time to build familiarity and trust with clients before the advisor they know and love moves on.

Ensures you can appropriately service the additional client base at the start. 

On average, practice acquisitions include 150-200 clients. It can be difficult to scale fast enough to meet the demands of those additional clients. Keeping the selling advisor (and their staff) onboard gives you a built-in servicing team to support clients without having to quickly hire and train new support staff.

Allows you to capture the knowledge, expertise, and experience of a seasoned advisor. 

Often, selling advisors have 20 or more years of experience in the industry. That experience is incredibly value to new and developing advisors. Selling advisors also have a wealth of knowledge about their individual clients. Those insights are critical to building trust with those clients as well as in uncovering opportunities to provide additional value to those clients.

Sell and Stay Isn’t Only For “Grey-Haired” Advisors 

Sell and stay scenarios don’t only appeal to older advisors nearing the traditional retirement age. Advisors as young as 30 and 40-years old have leveraged sell and stay scenarios. Often it is because they have realized that practice ownership isn’t for them, but they want to continue working as a servicing advisor. The sell and stay approach allows them to focus on the aspects of advising they enjoy most while handing off the operational and leadership aspects of the business that they don’t enjoy.

Essentially, sell and stay scenarios are a win-win for both parties. The nuances of how to structure deals for sell and stay can vary dramatically based on the goals of each party, their broker dealer affiliation, and how they wish to operate after the sell. It’s always best to seek the expertise of a seasoned M&A consultant to explore your options.

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