Advisers Face Challenges to Make Acquisitions Work

Posted on October 2nd, 2014 at 9:19 AM

From the Desk of Jim Eccleston at Eccleston Law Offices:

According to a recent survey conducted by Aite Group and sponsored by NFP Advisor Services, most advisors are facing challenges from different aspects when they look to pick up a book of business to build their own practice.

Client retention was the most difficult challenge. Even in the most successful acquisitions, which the survey called “alpha acquisitions”, the average retention rate of clients was 76%. Around one third of respondents said they kept only 44% of the clients from the acquired practice.

Another challenge was finding the right match in terms of geography, product lineup and age. More than half of all successful acquisitions happened between two people who were personal contacts before the deal. Only 10% were brokered by an external consulting firm. Moreover, many of the most successful acquirers took three years or more to find their partner.

Another stumbling block is determining what to pay for the practice presented. The 25% of acquirers who reported being most satisfied with the deal also reported paying more. According to the survey, factors for pricing were assets under management, client service model, revenue mix, business longevity and cash flow from operations. More than half the alpha acquisitions were financed entirely by the acquirer without loans. In 73% of the cases, advisers who were not satisfied by their purchase took out personal loans.

 Once a deal was finalized, the majority of advisers in the successful acquisitions had transitioned the business within a year, however, while it had taken three years or more for the less successful acquisitions. In total, 36% of the alpha acquisitions reported an increase of more than 10% in revenue for the acquired practice. While only 3% of non-alpha acquisitions reported the same.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston


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As a financial advisor with over 20 years of experience, I feel fortunate to call Jim my attorney and friend. He is a fantastic lawyer and trusted advisor. He is skilled in the matters necessary to do the job well. He uses his thoughtful approach and calm demeanor to achieve a positive outcome for the client. If you want to feel confident that nothing will be missed and that you will be represented in a highly professional manner, call Jim Eccleston.

Bill C. and Dan M.


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