You’ve worked hard to build your financial planning and wealth management practice. It’s certainly taken years, if not decades, of thought, planning and hard work to do so. Over that time, you’ve strived to serve your clients well, putting their needs and goals at the forefront of what you do, while educating them on the nature and nuances of the market and the overriding importance of a long-term investment strategy.
Through the years, you’ve helped them meet interim objectives, reach financial milestones, and prepare for retirement. You’ve carefully structured their portfolios, shepherded their asset allocations and helped them manage the transition from retirement-bound saver to retired spender. You’ve earned their confidence and respect. You’re justifiably proud of your work. Your success is reflected by theirs. It’s a serious responsibility and it hasn’t been easy.
And now it’s your turn. Your turn to cap off a great run with your own transition, your own retirement. After years of professional dedication, you’re getting ready to move on and reap the rewards of your own investing prowess. There’s just one more thing to do – exit your practice gracefully and profitably.
You know what your firm is worth to you, but unfortunately you can’t put "priceless" in the sales ad. If you want to sell your practice and move on to your own well-earned retirement, you will need to come up with a fair number, one that will stand the intense scrutiny of potential buyers.
You might get a quick sale if you price your practice too low, but you also risk leaving more money on the table than you need to. Set your sale price too high, and you could end up delaying closure as you either wait for the right buyer (one with a similar investment and client-service outlook who’s ready to buy) or adjusting your price one or more times to stimulate interest.
Trying to get a new financial planning or wealth management firm off the ground is no easy task – just ask anyone who’s done it. When you first started, it was a struggle to land a single client. As you mastered your value pitch and established a reputation for quality and results, the client base began to grow. Now that you have a healthy roster of clients who value your perspective, trust your judgement and have confidence in working with you, how do you fix a value to your existing client base and what impact will it have on the sale price of your practice?
The financial impact of your existing client base will depend on a number of different factors, including the nature of those relationships, the comfort level your clients feel with you and how much of their trust is tied to you personally.
The value of an existing client base can cut both ways. On one hand, having an established base of clients, especially longstanding ones, can reassure potential buyers that your practice is profitable and has long-term viability. On the other hand, for a buyer to take on an existing base of clients can be tricky, even with your facilitation and goodwill, particularly if buyer prefers a different investment approach.
Valuating your client base can be a challenge, but valuating your business can be a bear. It’s hard to be objective about the value of your business, much less its potential value if you’ve been grooming it for sale. Conviction won’t cut it, but hard numbers and evidence will.
And the more emotionally invested you are in your business, the more difficult it will be to ascribe a true valuation to it. The truism you preach to your clients about keeping emotion out of investment decisions applies here, too. Objectivity is key. If a valuation argument holds water, it holds water for both you and a prospective buyer.
It’s not impossible to accurately appraise the value of your own business, but nothing solidifies a buyer’s confidence like corroborating evidence of its worth. Like an audit, it will always beat taking your word for it. Turn to an unbiased source for information.
An independent eye can provide an objective look at the entire practice, addressing how well its portfolios are optimized across investment types, economic and market trends, regulatory and compliance issues, management and operations, and other pertinent metrics that validate its value.
There are several options in the marketplace that offer services aimed at helping to build practices and prepare them for sale. They run the gamut from how-to practicums for business owners to learn how to do it themselves to consulting firms that will do it for them. Their costs run from too-good-to-be-true to the sticker price on a Lexus. And their approaches, methodologies and results range from tried-and-true to you-get-what-you-pay-for. The telling point of commonality they share is that they are outdated, designed for yesterday, not now.
There is an exception, however. Truelytics, a sophisticated yet easy to use application that puts you in control of every facet of your practice and whose analytics guide you to optimally build, modify, run, measure, and accurately value your practice. Just enter your practice data at your own pace as prompted, and the Truelytics platform shows how your business is doing, and moreover how and where you can make it do better and worth more.
It’s all there in one comprehensive, constantly upgraded online suite, so you can manage and optimize the direction of your practice and maximize its value. When you’re ready to sell, Truelytics will be the key that documents the business and upholds your price.