When It Comes to Your Firm’s Values, Get Real

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Think about what really matters to you and your advisory practice before starting a discussion about selling it.

By Angie Herbers

David Grau Sr., founder of FP Transitions in Portland, Oregon, once told me about an unexpected trend his firm saw when matching sellers and buyers of independent advisory firms.Far more sellers were interested in selling to owners of firms like their own rather than to the highest bidder, he said. They were more concerned with their clients continuing to receive a high quality of service than they were about the money involved.

Fast forward about 15 years, and we find the greatly expanded M&A market for independent firms has both increased the value of most independent firms and, unfortunately, is testing the client-centered resolve of many owner advisors.

One of the driving forces behind higher firm pricing is the recent interest that venture-capital firms are showing in the independent advisor industry. Most of these VC firms have other holdings in the financial services industry, although not typically in the independent world.

And there’s the rub. Focusing on specific industries such as financial services makes good business sense, as does looking for synergies between their holdings in the same industry.Yet, these “synergies” combined with investors’ motive to maximize the return on their investments, has the potential to take the “independence” out of financial advice.

This means it’s very important for advisory firm owners to have not only a very clear view of “why” they want to sell their businesses, but also a very clear notion of what their values are and whether those values have changed over time.