There are only so many hours in the day for the owner of a one-principal shop, especially one that has begun to accumulate serious assets, Leonetti says. "One way they can open up their options for growth and equity is to bring their clients and skill base to a firm like ours."

Late last year, Leonetti acquired Successful Financial Solutions Inc., and its $39 million in client assets, and moved one of the principals and his staff into Leonetti's firm in Buffalo Grove, Ill. "Once we agreed on a valuation, we paid cash to one retired principal, cashed out a partner who had 9% equity and brought on one of the partners for equity in our firm," Leonetti says.

The acquisition brought Leonetti's total assets to about $350 million and is a less expensive way for him to grow his firm than marketing. "It doesn't cost me anything," the advisor says. He uses the acquired firm's cash flows to cash out principals over a couple years and to pay practitioners who come aboard at Leonetti & Associates.

His target market, like Hong's, is firms that have higher-end clients and talented advisors but with operating inefficiencies he can exploit. "What I'm trying to find in these deals are companies that aren't run as businesses, but as practices-firms that don't have systems in place. With the Successful Financial Solutions deal, we were able to take a firm that wasn't profitable, cut out two principals' salaries and a staffer's salary and eliminate their rent, overlapping technology and other costs. The transaction created an immediate profit," Leonetti says. "This was just the right firm, the right structure, the right numbers and the right people at the right time."

The other two acquisitions he has in the works involve similar deals, albeit with young, one-principal practitioners who have grown sizeable practices but need a more structured environment in order to continue growing. Both practitioners are interested in bringing their practices to Leonetti & Associates in return for equity. The larger of the two planned acquisitions will add approximately $150 million more in assets to Leonetti's $350 million.

"The competitive environment is tough these days, even for fee-only planners," says Leonetti, who fits the profile of someone building a business a little bit more than of a planner these days. "In the beginning when I launched my firm, I was a practitioner," he says. "Now, most of my time is spent on business planning and acquisitions. The people who don't want to make that transition-those who want to stay as planners-they're our next acquisition opportunities."

As for problems, Leonetti says avoiding them is part of finding the right deal in the first place. Beyond making sure the numbers work, it's crucial to ensure that the people or clients fit your firm. "Finding the right mix and not jumping the gun is important," the planner says.

The absorption or transition period post-acquisition could be trying, he says, but so far the only hurdle he's found is in trying to get principals who come on to let go of their way of doing things. "For instance one planner wants to offer simplified planning, like net-worth-statement and insurance planning. But our plans are comprehensive, so they're having to make that transition."

Leonetti's strategy of growing his firm by bringing on entrepreneurial advisors who have already built practices, as opposed to bringing on junior planners, can be a stroke of genius because it doesn't really cost the acquiring firm anything. "Basically you're giving the advisor the equity they brought to your firm in the first place," says Roame. "It's a fairly savvy growth strategy."

Of course, it's a fact of life that not all deals work the way they should, which underscores the need for advisors to plan for all legal contingencies and strive for a match that will be a good fit. Kabarec Financial Advisors Ltd., in Palatine, Ill., sold half its $150 million in client assets in 1999, only to buy them back in 2002. "We were being courted by several money management firms, even H&R Block, which started talking about offering us real money," says the firm's principal, 55-year-old Michael P. Kabarec.