A career changer with a Series 7 registration and two years of entry-level experience who grew up in the region; and

A California-based enterprise that's expanding across the country and says it will find a local advisor to operate the firm on its behalf.

Although it's exciting to see so much interest in your firm, sorting through a pile of prospects can be a chore. And your work doesn't stop there. Once you've narrowed the field somewhat, you'll need to use the "six C's" to evaluate buyers:

Compliance/legal review. Early in the process, it's prudent to check the compliance history of potential buyers. A quick review of FINRA's BrokerCheck is a good place to start. Also important but often overlooked are the buyer's ADV, credentials, licenses and insurance appointments by state. It's also wise to ensure that a buyer isn't subject to noncompete agreements or involved in any legal disputes.

Capacity to purchase. You don't want to wait until the last minute to find out whether a buyer has the capital necessary to buy. If the buyer can show you that he is preapproved for a loan-for example, from his broker-dealer-that will give you peace of mind early in the process.

Chemistry with the buyer.
The relationship between buyer and seller is key to the success of the deal. Often, buyers want the seller to exit once all the client introductions have been made. But this might not be what the seller had in mind. Instead, she might have imagined keeping a foot in the door of the business indefinitely. The potential buyer's intent is also critical.

Increasingly, large firms are accumulating assets by buying smaller practices and assigning a staff advisor to manage the client relationships. The buyer's intent always comes out eventually, but sellers should clarify what that is early on.

Chemistry with clients.
Most advisors exiting the business have strong, long-term relationships with their clients and are eager to ensure their continued financial well-being. But the bigger the deal's earn-out component, the more the seller needs to be concerned about the buyer's chemistry with clients; otherwise, his or her own retirement finances may be in jeopardy.

Continuity of investment philosophy. Most sellers seek a buyer with investment philosophies similar to their own. For example, if the seller has never advocated variable annuities or alternative investments and the potential buyer's clients have portfolios full of these products, that buyer probably isn't the best match for the firm. Just as a potential buyer looks at the makeup of a seller's book of business, the seller should assess the potential buyer's book for insight on how he or she actually practices.

Common factors. The buyer's geographic location and current broker-dealer are critical aspects to consider. During a transition, clients may think about going elsewhere, so the less change they experience, the better. That's why sellers typically seek buyers in the same geographic area and those associated with the same broker-dealer. The buyer's age may also be a factor. Clients who are worried about their 69-year-old advisor's longevity may not be comforted if he sells the practice to a 60-year-old advisor.
On the other hand, a deep-pocketed young buyer may be able to make a down payment on the practice, but clients might equate his youth with inexperience.

Of course, no matter how much time and effort you put into conducting your due diligence and negotiating a deal, sometimes things don't work out. Roadblocks go up, as they do during internal sales, so you may need to change course. Just another reason to start the successor search well before you plan to retire or need to exit the business.

Using an outside broker. An alternative to doing it all yourself is to engage an outside firm, such as one of the listing agencies or your broker-dealer, to negotiate the deal. Some broker-dealers bend over backward to support transitions that will keep assets with the firm, offering succession planning services or making loans to advisors for the purchase of a book of business. If you choose to hire an external listing service or business broker-and there are some excellent options available-expect to pay 3% to 8% of the firm's valuation price for the service. Keep in mind, however, that this fee may balance out the premium price you might get from selling to an external buyer.