Last March, in the middle of a global pandemic, my family bought a new house. We were under contract on our new home before the shelter-in-place and work-from-home orders began, and frankly, like most, we thought we would be back in the office by late spring. We were happy because our boys would be saving 40 minutes (each way) on their commute to school. They didn’t go back until September, and we are still not back in the office yet.

For those of you who have purchased a house, you know that the inspection is a must. As a buyer, you want it to be thorough to find any issues before you take ownership. An inspection helps you to be prepared, know what to expect and negotiate a fix or accept that you will have to live with it. It gives you peace of mind when a professional signs off on what can be one of the biggest purchase you will make.

Of course we had a thorough inspection of our new home, but since we had some time before the sale of our old home, I had an inspection done on that house too. I am so happy I did.

Be a knowledgeable seller

Over the years, I have had numerous conversations with advisors who are contemplating selling or at least transitioning their businesses to a junior partner or to their kids. Invariably, they look at their business with pride and expect top dollar for their “baby.” They see their business as I saw my old home, with love and great memories. 

green house iconThey don’t tend to see the blemishes before they sell. It is hard to recognize and change things that will discount the value of the business: an aging book, a high concentration of wealth in just a few clients or a large percentage of transitional business. Often advisor business owners who have sold their firm talk about what they could have, should have and would have done differently to prepare for the sale — things they could have done years before putting it on the market. But owners usually wait until it’s too late.

I thought about those financial advisors as I hired a home inspector to look at my old house. I wanted to be prepared for what a buyer’s inspector would find wrong with our property. I wanted to see the obstacles for a sale before we had an offer on the table and emotions were high. I wanted to be able to fix, on my time, the blemishes that would reduce the sale price. I wondered how many advisors would do the same for their business.

A valuation of your advisor business can help, long before you sell or transition

It is common to put off things like a valuation until you are thinking about retiring or selling, but as we discussed, by then it may be too late. A formal valuation is ideal, but you can also take a quick inventory of your practice today to see what may cause a problem down the road. 

For example:

  • Look at the demographics of your clients. Are they aging? Are you brining in newer/younger clients?
  • Look at the concentration of wealth. Is it tied up in a few families or well diversified?
  • Are you primarily fee-based or are you prepared to take a lower multiple for transactional accounts?
  • Do you have a “do-it-yourself” investment approach or is it replicable — easier for the buyer to take over?
  • Is it a closed platform? Does the buyer have to re-paper all accounts?
  • Do you have an integrated platform or a hodgepodge tech pile?
  • Do you have a clearly articulated service model ensuring client stability?

If you are prepared, you’re much less likely to get inconvenient surprises during the sale. And, if you plan to maximize the value of your business now, you can maximize the price later. 

Do an inspection today – years before you need it.


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