Making the Decision to Sell Your Practice

The decision to sell your practice can weigh heavy on you. Often, many questions plague your mind. Will you sell to the advisor you know down the street, groom a junior advisor to be your successor, or cast a wider net in an open market sale? Moreover, are you ready to sell today or some time in the future? How can you make these difficult decisions when it is often easier to avoid them?

With so many things to consider it can be hard to take the first step. But the first step – the step to educate yourself about your options – is one you must take. There are many paths to succession planning. Finding one that is best suited to your unique needs and goals requires due diligence, insight, and guidance from a trusted succession expert. Selling your practice is likely one of “the” major milestones of your life, both personally and professionally. It's one you don’t want to take lightly, nor do you want to delay planning any longer.

Why Do So Many Advisors Avoid Planning For Their Own Retirement?

It is a vocational irony that advisors are not taking their own advice and planning for their own retirement. It is the proverbial “the cobbler’s children have no shoes” scenario. Just like with clients, the reasons are complex and specific to the individual. Over the past several years, advisors have experienced a long period of growing revenue and a relatively stable market. Good times don’t generate the pain points necessary to motivate change. The risk here is that those advisors, who are in the very large group at or past retirement age (Baby Boomers), are now in a place analogous to maintaining an aggressive portfolio (related to the asset that is their practice equity) close to retirement. The average valuation is now in excess of $2m. The practice is often the advisor’s largest personal asset. Taking your practice equity off the table at the correct time is done for the same reason that you don’t leave your clients in aggressive positions close to retirement – to reduce risk.

What Are the Key Considerations of a Sale?

A professionally executed sale should involve both quantitative and qualitative success. The qualitative result involves the selling advisor having absolute confidence in the selection of their successor, by way of the process of the sale. The primary concern of most advisors is “who will take care of my clients and staff”. The quantitative results are found in the price, terms and the agreements that support them. We often communicate the priorities being Fit, Terms and Price, in that order of importance. All three should align with the advisor’s goals for a successful sale.

Where Should You Start?

A practice valuation and consultation are the starting points for most, providing both information and insight. Does the current value of your practice support your financial plan? Is your practice likely to experience declining value (most near retirement decline in value)? How do I get paid for the sale and how is it taxed? All these questions and more are part of our valuation deliverable and review. The valuation is often followed by a deep dive into succession options, industry standards and best practices. We are also experts at working in the Ameriprise system to ensure that all their requirements are closely followed. Most advisors will sell one business in their lifetime and have one chance to achieve that lifetime goal, it is far too important to leave to chance.