The Key Types of Financial Advisor Practice Sales

When it comes to selling a practice, advisors have many options available to them. Since most advisors are new to the selling game, the options can seem overwhelming. Starting with an understanding of the types of practice sales and different paths an advisor can pursue will allow you to make the best decision for you and your practice.

No two practice sales are alike. However, they can be grouped into two main categories: closed sales and open market sales. Closed sales are sales between two specific parties while open market sales entail soliciting multiple buyer candidates. Within each category there are a variety of deal options, depending on how much of the business is being sold and to whom.

Closed Sales

Again, a closed sale is a transaction between two named parties. Usually, the buyer and seller find each other because they are colleagues in the same firm or through networking or professional relationships. Closed sales can be broken down into four types:

• Internal Sale: This is your typical internal succession, where part or all of the practice is sold to another advisor within the practice.
• External Sale: This is the sale of the business to an advisor or practice outside of the practice.
• Partial Sale: The sale of a portion of the client base to an advisor or practice outside of the practice.
• Recruitment: When an external advisor, generally with their own book of business, is recruited into the practice in order to become the successor.

Open Market Sales

Open market sales occur when an advisor has not yet identified a successor and needs to solicit and evaluate prospective buyers. There are two types of open market sales:

• Full Sale: The advisor entertains multiple buyers for the entire practice. This type of transaction is usually facilitated by a third-party broker or consultant who helps list the practice on the open market and manages the transaction.
• Partial Sale: This is when an advisor solicits multiple prospective buyers for a specific group of clients.

Not all practice sales are end-of-career events. Sometimes a practice must sell off a group of clients in order to focus on a specific niche or market segment, or to downsize the practice in order to improve practice management and efficiency.

There are also “sell and stay” opportunities with many full practice sales where advisors can either sell into a larger firm in order to gain operational advantages or in order to transition out of the business owner role in order to focus on serving clients instead. If you are considering multiple options and are not sure what is best for you and your practice, you can contact us for a free initial consultation.