“Coach’s Forum” is a place in which you can ask your questions, tell your stories or give your opinions on any aspect of practice management. For each column, George selects the most interesting and relevant comments from readers and offers his advice. Our objective is to build a community of people with a common interest in making their financial advisory practices as effective as possible.

Advisor says: I have been reading your columns on succession planning for some time now and have noticed that, more often than not, you look at the process of making the transition of a business from the seller’s perspective rather than the buyer’s. I understand that buyers outnumber sellers right now, so I assume that is the rationale for favouring one view.

However, I must be terribly lucky because I am a potential purchaser who has not one, but two good buying opportunities in front of me. I can’t absorb both businesses at the same time, so I am going to have to choose one and let the other one go. I have some ideas about which would be the better choice; however, I am wondering if you have a checklist or something I could use to make sure I have considered everything that should matter.

Coach says: You are correct that most of my columns have been slanted toward financial advisors who are getting ready to exit the business. One reason for that is my belief that it is a much more difficult decision to sell than to buy. In addition to the financial aspects of any deal, sellers have all the emotional struggles of giving up their life’s work and long-standing client relationships and deciding what to do when going to the office every morning is no longer necessary. Being a buyer is just easier.

That said, buyers have to be as diligent as sellers if those buyers want to give themselves the best chance of making the purchase work out as hoped. In our coaching work, I always ask advisors who are contemplating their succession: “Would you sell your business to just anybody?” Invariably, the answer is “Of course, not.” When I ask “Why not,” I hear all the right reasons: someone who shares my philosophies with respect to planning and investment; someone who will treat my clients well; someone who will guard the reputation I have spent years building, and so on.

When I work with advisors who are looking to acquire a practice or book of business, I ask a similar question: “Would you buy just any business?” Again, in most cases, the answer is: “Of course, not! I’d want to buy from someone who was respected by their clients, who ran a good practice, who was compliance-conscious,” and so on.

While there might be a number of things in common that most advisors would hold out as ideal characteristics of a practice or attributes of the buyer or seller, I also think most advisors also would have some personal preferences that are particularly important to them. As the saying goes: “One man’s poison may be another man’s cure.”

For example, one advisor might look at a practice with little or no technology as being old-fashioned and inefficient, while another might see that same business as a chance to create a state-of-the art, technology-based practice from the ground up.

The same goes for services. For example, one advisor may view a practice with no financial planning element as lacking a key component, while another advisor may view that as a great opportunity.

The bottom line is that you have to decide what are the important characteristics of a practice or book of business that you are contemplating buying. How important is each? How much leeway are you willing to grant to an otherwise good match that falls short on one or two criteria? Add up all the pluses and minuses, and chances are your choice will become clearer.

Since you asked, here are a few things that aren’t always obvious items on due-diligence checklists. Note that some apply to the purchase of a “book of business” (that is, a client list), while other items apply more to the acquisition of a “business” (an operating entity). In either case, it’s good to consider all aspects.


– Why is the practice or book of business for sale?

– Has the advisor tried to sell before? What happened?

– How complex is the business?

– How does the business stack up against the competition?

– What is the selling advisor’s reputation in the community and among clients?


– Are up-to-date financial statements available? Do they accurately reflect cash flow?

– Are expenses reasonable? Have there been any significant increases or decreases recently?

– What cost-reduction opportunities exist?

– Have there been any large sales or loss of accounts recently that distort normal revenue flow?

– What baseline, recurring revenue can be expected on an ongoing basis?

– What is the revenue model? If fee-based, how are fees determined?

– What is the product mix? What revenue is generated by each product line or service?

– What is the client retention rate? Persistence of business?

– Is there a high concentration of assets held by a small number of clients?


– Are there any unsettled client complaints?

– Is there a positive attitude toward compliance?

– Are there any leases, rental contracts, etc., that need to be assumed?

– What compensation is staff entitled to in the event of termination?

– What is the relationship with regulators? Any upcoming audits or disciplinary hearings?

products and services

– Are the products and services offered compatible with your choices?

– Is the vendor’s investment philosophy and approach to planning aligned with yours?

– Are the processes used to create client recommendations sound?

– Is there a high concentration of assets held in a small number of products?

– How many clients are “leveraged”? To what extent?


– What marketing activities are used? How much do they cost? How effective are they?

– What marketing collateral material exists? How useful is it?

– What does the branding look like? Does it reflect the image you, as the buyer, want?

– How are clients “on-boarded”?


– Is there a Policy & Procedures Manual? Is it up to date?

– Does the technology require updating?

– Is all software properly licensed and registered?

– Are tech systems compatible? Do they “talk” to each other?

– Are any aspects of operations or support outsourced? To whom? At what cost?

– How secure is client data?

– Is there a disaster recovery plan in the event of a systems failure?


– Are staff members qualified to do their jobs?

– Are staff members motivated to do a good job?

– What expectations do staff have regarding incentive compensation? Bonuses?

– What are the vacation and sick day policies?

– What hours are staff expected to work? Can they work from home?

– What employee benefits are offered? Who pays for what?

– Have there been any recent staff dismissals, reprimands, etc.?

– Do all employees have non-competition, non-solicitation agreements?

In most cases, the due- diligence process should not reveal such serious problems that you will want to back out of the deal entirely. However, this process may cause you to change your offer or take steps to manage the transition.

Having realistic expectations at the beginning also is important. For example, few organizations (even very large ones) have perfect documentation for every aspect of their business, so don’t fret too much if the procedures manual is missing a few pages, as long as people know what has to be done. You can fix the manual later.

The same attitude applies to technology. Hardware might be slow and software behind by three versions, but if they are doing the job, you can upgrade later.

So, what might be a “deal breaker?” If you develop an overall sense that things are not going to work out, you probably are right. Focus your time and effort on situations that excite you.

George Hartman is CEO of Market Logics Inc. in Toronto. Send questions and comments regarding this column to george@marketlogics.ca. George’s practice-management videos can be viewed on www.investmentexecutive.com.

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