If you have a “for sale” sign hanging outside your office, you are in good company these days. With many independent advisors nearing the retirement age, a growing number of practices owned by baby boomers and those only a little older are going on the block. “A bulge of 55- to 65-year-olds is going through our business,” says Tom Sinyard, a vice-president at SunAmerica Securities in Phoenix.
This inevitable demographic bulge is presenting a tidy opportunity for those who broker sales and purchases of planning practices. But it also should be forcing you to ask some hard questions about your business. Advisorbenchmarking.com, a Web site run by Rydex Global Advisors that collects information on the planning industry, estimates that just 30% of advisors have a written succession plan. Other surveys say the number is even smaller. Advisorbenchmarking also says that only 40% of advisors even have a written business plan. Without such documents, do you really know what your practice is worth? Do you know if now might be a good time to cash out? Or should you stick it out and even expand by purchasing someone else’s practice?
I can’t write a business or succession plan for you. But I can give you some idea of where the market for planning practices is right now. To do that, I turned to Sinyard, who is responsible for Myivalue.com, a SunAmerica Financial Network Web site that matches advisory practice buyers and sellers, and David Goad, CEO of FPtransitions (www.fptransitions.com), a Portland (Oregon)-based independent firm that brings together RIAs, CPAs, insurance practitioners and broker-dealers.
Goad says that 63% of the sales he has handled were of practices run by those aged 51 to 65. By contrast, a quarter of his purchasers are between 41 and 45, and nearly as many are between 36 and 40. And like many current financial planners, Goad’s buyers tend to think long-term. Rather than plunk down the full purchase price in cash, many will make a 20% deposit and opt for an “earn-out” arrangement that spreads the balance out over time.