Buying Financial Advisory Practice


Thinking about becoming a financial planning entrepreneur? If you are considering having your own practice, you basically have two options: you can start your own firm from scratch, or you can buy an existing financial advisory practice. Starting a practice involves getting new clients, providing excellent service, and hoping you make a profit. Or you can skip all of that and focus on continuing the success of a firm for its existing clients.

For many considering a career in financial planning, buying a financial advisory practice is a better strategy as it offers many benefits. There are lower startup costs, greater up-front profit potential, and a built-in client base.

Becoming a financial planner by buying a financial advisory practice can work, if you know which firms to pursue and which steps to take. It is not a surefire way to success. It can appear to be a faster way to get clients and be profitable than starting from scratch, but if you make poor or hasty decisions, it could prove to be a disaster.

So how do you become a financial planner by buying a financial advisory practice?

Do Your Due Diligence

Buying a financial advisory practice is like buying anything in this world; you must do your homework. The first step is to organize your due diligence. Take your time and do not rush into anything unprepared. Check the financials of the firm and keep an eye out for red flags and pitfalls. If you intend to purchase a financial practice and run it well, it absolutely must fit you perfectly. You must get to know the current owner and employees, and understand how operations are carried out. You must also understand the culture of the organization and the clients. Not having a clear understanding of any of these factors can mean doom for your newly acquired business.

Determine the Value of the Financial Advisory Practice

A big part of performing your due diligence is determining the value of the financial advisory practice you intend to buy. This is an obvious step, but not as easy as many think. There are many ways to do this, but just make sure you consult a professional before making an offer.

Consider the Size of the Firm and its Culture

Another essential step in due diligence is considering the size of the firm and its culture. Consider the clients, and if you will be able to transition smoothly. A transition of a larger client base may prove extremely difficult. Ensure your investment strategy, vision, and management strategy will line up well with the firm. If not, there could be a problem before you even get started. Disagreements can arise due to differing managing styles. You must keep in mind that acquisitions make employees and clients nervous. You want to make sure that you will not lose either of them. If you are not sure that the transition can be made without any problems, do not buy the financial advisory practice.


You may need less capital to buy an existing firm than to build one from scratch, but you will still need capital. Before you even begin shopping around, you need to know how much you can spend. You need to determine how you intend to finance the purchase. You will likely need financing. Be sure to work with your financial advisors and determine how much you can afford to borrow.

Just as you must ensure you are financially sound, naturally, you must take care to ensure the seller is in a strong financial state. Make sure your accountant examines the books thoroughly for sustainable income and cash flow. Learn exactly how the financial advisory practice makes money. Study their income and expense trends. Make sure the investment will be worthwhile.

Create a Transition Plan

Once you have decided to buy the financial advisory practice, be sure to have all the paperwork looked over by your attorney. If possible, have one with experience in acquisitions. Involve all parties to make sure everyone is comfortable with the new direction of the practice. You are more likely to have a smooth transition if you have all parties work together in this process.

Just as staff and advisors must be involved in the process, clients must be made comfortable and confident about the transition. Client retention is paramount to maintaining cash flow and future growth. Meet with each client personally if possible. Make sure they are well-informed and feel they will continue to be in good hands. Encourage clients to share any questions or concerns.

You can certainly become a financial planner by buying a financial advisory practice, but care must be taken to ensure success. It may be easier than starting a practice from the ground up, but there are still many challenges to navigate. As long as you do your due diligence and carry out a well-crafted transition plan, your new financial advisory practice will make you a successful financial planner. Fortunately, the professionals at Advisor Successions are experts in helping financial planners. They have experience helping grow financial careers organically and also by buying advisory practices. Give them a call at (631) 509-4720 or visit their website, you’ll be glad you did.

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