Asking questions about compliance, checking for regulatory complaints and ensuring your services match client expectations are important steps when buying another advisor's book.Duanghathai Phitakjaroenwong/iStockPhoto / Getty Images
This is the first article in a series about succession planning and acquiring books of business. Click here for the second article and here for the third article in the series.
Advisors looking to purchase a book of business need to ensure their values align with the seller’s, according to advisors who recently acquired new clients from other advisors.
Sam Lichtman, founder and certified financial planner (CFP) at Millen Wealth Advisors in London, Ont., says many buyers make the mistake of taking on any book, only to find a disconnect between the services they hope to offer and what the new clients want from their advisor.
“You have to know and audit the book before you buy,” he says.
He’s heard of advisors purchasing books that increased their assets under management significantly but led to difficulty managing client expectations.
“Sometimes, the quick win of getting more assets and managing more money puts the long-term viability of your business in jeopardy,” Mr. Lichtman says.
For that reason, Mr. Lichtman recently acquired a smaller book of 20 clients, some of whom were within the same family household.
“It just made sense to dip my feet in at a small scale and not be overwhelmed by the volume of new clients,” he says.
Before making that purchase last August, Mr. Lichtman had planned to take over a retiring advisor’s book and offer clients more financial planning services. But that arrangement went awry as the retiring advisor couldn’t pinpoint a date for the transition. He notes that sometimes sellers can get cold feet because they built client relationships for decades and may be reluctant to let go.
Other sellers may be uncomfortable when the buyer offers clients a higher level of service, Mr. Lichtman says. For example, clients may be receptive to new tax planning strategies but sellers worry the new advisor will be seen more favourably.
Mr. Lichtman has a well-defined process when interviewing sellers. He wants to see how well they know their clients, asks questions about compliance and checks for regulatory complaints. His practice serves millennial clients exclusively, so he also ensures the demographics fit.
Christian Battistelli, CFP and senior wealth advisor with Unified Advisory Group at Assante Financial Management Ltd. in Markham, Ont., purchased 32 households in June as part of a larger purchase with his partners. In 2022, they also purchased a book from Mr. Battistelli’s mother-in-law, who was also at Assante.
Mr. Battistelli had spent a few years as his mother-in-law’s associate before working for another Assante advisor. When she experienced health issues and had to accelerate her succession plan, he stepped in. They worked on client files and meetings together for eight months.
“We were able to bounce ideas off her and just get her opinion on things,” he says. “She was a big resource to us during that transition and we were thrilled not to lose a single client when she passed away.”
Over the years, he’s been approached by other sellers but didn’t see a natural fit. “They were insurance-only practices with limited planning and client engagement,” he says.
He notes the books were pitched as an opportunity to bring more services to clients.
“In my experience, that’s not necessarily well received,” he says. “If clients are comfortable doing things a certain way, they want to continue doing things that way. Any changes need to be handled carefully and slowly.”
Elke Rubach, principal at Rubach Wealth Holistic Family Advisors in Toronto, concurs. While she offers holistic financial planning and family office services, she bought an insurance book of 650 clients five years ago. Some weren’t interested in planning, but others changed their minds after they got to know her.
Her due diligence of the seller started with a handshake. But after much research, Ms. Rubach determined the seller ran a compliant practice, used insurance to solve client problems – not to earn a quick buck – and had stellar relationships with clients.
The seller transferred the clients to Ms. Rubach in batches every six months over the five years. They all received a letter from the seller about her retirement and introduced them to Ms. Rubach as someone who shares the same values.
At that point, Ms. Rubach sent her own letter and scheduled a meeting.
“It went well,” she says. “Some stayed, some didn’t fit the profile. But we didn’t feel like we were drowning, dealing with all the clients at the same time.”
Some advisors who follow a similar process don’t follow up with the new clients to request a meeting, she says. That’s a huge error, as clients get annoyed when the new advisor finally calls three years later wanting to connect, usually to discuss a product.
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