Considerations When Purchasing a Practice Outside of the “Family”

We often say that buying or selling a practice is a lot like dating. Just like finding the perfect partner, finding the perfect book of business relies on a number of key factors that make a practice a good fit. Sometimes the right practice operates on a different broker-dealer or custodian platform than your own. Although not an instant deal breaker, this can create some challenges and raise key considerations when purchasing a practice outside the “family.”

We have helped numerous buyers and sellers transition practices across platforms. The process requires an added investment of time and a commitment to collaboration and communication as we work through the regulatory and administrative requirements of migrating a practice, but it is definitely doable. In our experience, there are a few questions to ask when looking at purchasing a practice on a different platform.

• Are the selling advisor’s assets portable to the new firm?
• Do the accounts need to be repapered?
• Do the buyer and seller both use the same CRM?
• Do the advisors share the same investment philosophy?
• Will the buyer and seller’s corporate office support the transition?

It’s also important to note that there often is a “cultural” difference around platforms that influences how they view and practice their craft. Does the platform view its members as financial planners or just asset managers? Are they fee based or transactional? Do they use a lot of insurance products or none? These philosophies and approaches to their work impact the client’s expectations. They will want to stay with what they are used to and can be difficult to change, depending on the age of the client group.

Again, the right fit is still the most important consideration. Many of the other questions can be answered and resolved with due diligence, care, and focused effort. Because of the time involved it is often best to leverage an acquisition consultant whether you are a buyer or seller, so you can keep the bulk of your time and effort focused on maintaining your existing clients.