In our last article, entitled Exit planning: Building your own retirement plans, we highlighted three reasons why most financial advisory merger and acquisition plans fail. Having no clearly planned, stated and executable strategy was the first, followed by incompatible culture and philosophies and unrealistic expectations.

Most acquisitions are strategic, allowing a buyer to acquire a competitor’s practice to obtain clients or expertise in a particular market niche or to enter a new geographic market with an established business name and operational base. Having a solid strategy and understanding your criteria for identifying and selecting potential candidates before starting your search will enable you to move quickly when you find the right candidate.

To help develop that strategy, there is a roadmap you can follow:

1. Create your overall merger and acquisition plan.

  1. Consider how a merger, sale or acquisition will assist in accelerating your business and personal objectives.
  2. Develop a prospecting plan that provides the right balance of lead flow to identify potential buyers or sellers, and confidentiality. Leads will come by way of advertising and other lead generation processes, but before they are considered to be a potential candidate, qualifications and characteristics must be evaluated, using your selection criteria. Given the confidential nature of many selection criteria points, advisors should be prepared to sign a non-disclosure agreement to protect confidential information that is not known to the general public.

2. Develop a clear profile of your potential candidate—your potential partner.

Finding the right partner is important for any successful merger or acquisition. To do so, you must clearly define and carefully evaluate your potential partner’s characteristics in the early prospecting stages by:

  1. Determining what characteristics are most important to you.
  2. Identifying criteria to help you screen out inappropriate candidates. Criteria considerations should include:
    • Ethics
    • Background
    • Personality
    • Education, licenses and designations

3. Clearly define which book or practice characteristics are important in both businesses, and just how important each characteristic is to you.


  • Billing models
  • Client base profile
  • Fee structures
  • Investment philosophy
  • Practice location and longevity
  • Price
  • AUM

4. Educate yourself.

Buyers and sellers who learn about the intricacies involved in transferring a book of business say the experience is a big part of ensuring a successful transition. Having a nuts and bolts overview of the process, maintaining strict confidentiality, understanding market value, the impact of taxes and due diligence tips are basic to almost every deal.

5. Stay focused — do not deviate from your plan.

6. Establish resources, early on, which will help identify an acquisition and help during the prospecting stage.

These may include:

  1. Your dealer or MGA — if you know them well, ask for advice and guidance
  2. Industry publications
  3. Industry associations
  4. Your peers and other industry contacts

7. Value your practice.

The intrinsic value of a practice is difficult to calculate, but once it is defined you will have a stronger sense of where to start and end negotiations. In addition to price, terms — the amount you will accept as a down payment and the length of time you’ll allow for a payoff — are also important, especially since the next three to five years will generally determine the actual number of clients who have stayed with the acquiring advisor.

8. Be patient and be prepared to move opportunistically.

Once the practice profile and objectives have been clearly defined, advisors should expect to spend the next 12 to 24 months searching for the right buyer.

9. Conduct your own due diligence.

It is important to feel secure in the knowledge that you are leaving your clients in goods hands.

10. Be prepared to enter into an economic marriage.

Once the deal has closed, both parties need to work together for a period of time, often under the scrutiny of some very sophisticated clients. This period is often called the economic marriage. If it is positive, this period generates high levels of client satisfaction, and a number of client referrals once all is said and done.

Over the next several years expect to hear more about mergers and acquisitions as potential growth and exit strategies. Their success is highly correlated with an advisor’s preparedness and the seller’s commitment to participate in the business transfer. Anything less is risky for the buyer, the seller and the client.

See also: Exit planning part 1, building your own retirement plans.

Cindy Jenner Cowan is vice president of training and development at Worldsource Financial Management. With more than 17 years of experience in the financial services industry, the expert in relationship management and value-added coaching recently developed FRAMEWORKS, a training program for Worldsource advisors, focusing on advisory practice life cycles. For more information please visit You can also contact Cindy directly at (604) 376-9119 or