Buying a Book of Business – Ins and Outs


Financial advisors know that there is no better way to build a business than through a warm referral. However, the process of getting a warm referral can be a bit awkward at times. Given the relationship that is built between advisor and client, as well as the trepidation that many have about discussing money, it is no wonder that few financial advisors truly master the ability to ask for warm referrals with more than a handful of their clients.

Luckily, there is a way to get an entire career's worth of warm referrals, though it is not cheap. By buying a "book of business" from a retiring wealth manager, investment professionals can quickly expand their own practices in a much shorter time than usual, and without paying for dozens of dinners or networking events. For many professionals seeking to grow their businesses, this presents an incredible opportunity, especially given the fact that more and more financial advisors are starting to age out of the profession.

It is not just availability that makes this a worthwhile opportunity. If a financial advisor has had a successful enough career to be able to retire, chances are he / she has helped guide many of their clients to that same goal. That means a good number of high worth individuals that an advisor in their twenties simply would not have the opportunity to meet. Further, since this is essentially a warm referral, a number of those clients will be motivated to pay attention to what their financial advisor has to say about their successor. Without the benefit of years of performance to fall back on, having a more established professional vouch for younger practitioners could be invaluable.

That said, buying a book of business is not a sure-fire way to guarantee business growth. Clients are under no obligation to suddenly decide that they trust the younger advisor. Also, there is the chance that the book of business is not worth a great deal – a collection of portfolios worth only $ 1 million may not be an investment for the advisor. Finally, as with any deal of this type, make sure that everything is legally sound and to the benefit of all parties involved. That could mean seeking the advice of a lawyer who specializes in assisting investment professionals. Still, if these factors are mitigated, buying a book of business can help an investment professional create a practice that is much more successful than might otherwise be imagined.

For those who have made the decision to purchase a book of business, there are two general approaches. Professionals who are willing to work with a more geographically-diverse set of clients can search a variety of sites that provide posting services for advisors who are looking to sell their practices. Be warned, however, that many other advisors looking to grow their businesses will also search here for opportunities.

On the other hand, networking with other professionals can present opportunities. Financial professionals in the local area may be looking to close their practices as well, and would often feel better leaving their clients with someone trustworthy. Better still, building relationships with older professionals in the area is far from a zero-sum game. Even if a book of business is not immediately, or even ultimately, sold, some referrals could come along.

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