If you are a financial advisor or planner who intends to retire in the next decade, you are not alone. According to the Certified Financial Planner Board, about 45% of its members are over the age of 50 as of July 2024. Meanwhile, a 2022 Cerulli white paper found that about four in 10 advisors (representing an equal share of industry assets) were looking to retire in the next decade, with a 2023 J.D. Power survey finding that 20% were looking to do so in the next five years.

So what does this mean for you? You'll probably face some competition when you look to sell your business. It's not too early to start thinking about your succession plans.

Given your responsibilities to your clients and the nature of the financial planning business, it will be a bit more complicated than selling another🏅 small business🌌. A well-planned sale could take years.

Create Your Retirement Plan

Your obligations to your clients includဣe picking a compet♍ent successor. If your clients do not trust the planner taking over from you, they will probably leave. They may even leave before you sell if they feel you are not adequately preparing for retirement.

That can decrease the value of your practice. Clients shouldn't be caught off guard when it comes to managing their finances.

To prevent this from happening, get a head start in planning for the transition. Before you start looking for a buyer, you need to decide precisely what you want to do in retirement. Knowing that will help you decide what type 🌞of sale to arrange for your practice.

If you plan to move away or want to leave your career in the past, you need a clean break. Otherwise, you might consider a gradual transition or a segue to part-time hours. You can go for a lump-sum payment for the practice or arrange for payments over time.

2 Ways to Sell Your Practice

There are two main types of sales:

• An internal sale means selecting a family member or employee ready and willing to take on the business.
• An external sale involves selling your business to another firm or an individual who has no connection to you personally or professionally.

Turning over to a junior partner

With an internal sale, you may have to start planning even earlier. The new owner is most likely a junior partner but will still need some training to run all aspects of the bu🧜siness.

You also need to be sure the business ♏has the proper processes to run without you. Many business owners keep too much information stored in their heads. Geꦇt your business processes down on paper.

You also need to ensure that all your clients are comfortable with the soon-to-be owner. You'll need to market to your clients what you like about your partner, their strengths, and why you're confident clients will be in good hands.

An internal sale is typicall𝄹y financed by the retiring owner as a loan repaid over an extended period. You can structure the agreement as a f🅠orm of pension, receiving payments after retiring.

Usually, the price is based on a multiple of the business earnings, with the succeeding owne🔴r keeping🅠 all the business infrastructure.

Selling to an outsider

If you sell to an external buyer, thജere are various ways to handle the transaction and its timing. Many advisors choose a gradual transition🎃, staying on to ease the process for the new owner and their clients.

You can sell the business but commit to overseeing the transition for six to 12 months. You can also do a partial book sale, transferring only💮 some of your clients and keeping others.

The gradual transition is typically d༺one if you and the buyer are within the same broker-dealer network and you are trying out a transition to see how it would work, or if you want to continue working part-time.

Another option is a merger with another company. You can sticꦑk around and receive a salary while someone else takes over the business management. 

An external sale is typically priced based on a trailing 12-month revenue valuation. These sales usuallyℱ require a down payment, with the balance paid off over several years.

Other payment options include a lump sum, a seller-financed note, or 澳洲幸运5官方开奖结果体彩网:an earn-out arrangement.

Finding the Right Buyer

If it's an internal sale, you probably already know which employee is ready and able to take over. Assuming the person wants to buy the practice, you must be prepared with a price tag and other terms.

Finding an external buyer requires more research. You can hire a business broker to manage the process for you 🥂or reach out to other local planners who might be interested. You can take some time to meet with candidates and choose one who is the right fit for your clients, given their personality and investing style.

For a merger, you also need to consider whether a pr🎶ospective new owner will be compatible with your employees and business.

Finally, you can negotiate a deal,ꦿ complete the required paperwork, and complete the s꧑ale.

Managing the Transition

A key part of a smooth transition is continuously communicating with all interested parties: your clients, your staff, and the new owner. The 2022 Cerulli study notes pitfalls to watch for from the buyer's point of view: Among the top challenges for them, about half of the advisors acquiring an advisory business mentioned style differences with the seller (52%), followed by client transitions from the buyer (48%) and the time commitment to get the deal done (48%).

Writing out a transition plan and making it open to review and revision as necessary will help. When something happens that does not align with your initial plan, people ne💎ed to know where they stand and how they will be taken care of.

The more you communicate, the less risk of clients or personnel becoming disgruntled and leaving.

How 🐷Do I Price My Financial Advisor Business for Sale?

There are many ways to price a 🐓business; all are open to negotiation before settling. Given the statistics on retirements for financial advisors in the next decade, there could be competition.

澳꧋洲幸运5官方开奖结果体彩网: Some valuation methods include the following:

• Multiples of revenue: The price is based on a multiple of average revenue over 12 months.
• Multiples of cash flow: This is like multiples of revenue but accounts for expenses.
• 澳洲幸运5官方开奖结果体彩网:Discounted cash flow: This method allows both you and the buyer to account for long-term growth potential and risks.

The Bottom Line

Just as you advise clients to plan well ahead for their retirement, you need to do so, too. First, decide what you want from retirement, then find a succession plan that will make a more ideal retirement a reality while ensuring quality service and advice for your clients after you leave. If you want to attract a better price for your business, you'll want to ensure that revenues aren't declining and that you're continuing to add clients, even as you consider your own exit.