Advisors selling internally (typically to children or team members) usually take a financial hit and may assume more credit risk, said Selig. That’s because they may sell the business at a material discount, to make it affordable, and they may finance some or all of the debt. The risks drop when advisors take time to groom these successors, he said.
A checklist for buyers or sellers should include a good strategic fit and cultural fit, said Ballou. She interviewed 23 other firms over three years before finding EP Wealth Advisors.
“We fit many buckets for them,” she said, “and I would never have to worry about things I didn’t want to worry about anymore like reading compliance manuals!” EP Wealth Advisors sought a presence in the Bay Area and a female-based firm, she said, and it wanted to create a women’s initiative.
Checklists can evolve and must include financial components. “A buyer wants to understand you’ve got skin in the game and you’ve got to make sure you understand what that skin is and that you’re willing to deliver,” said Ballou. Selig also told her not to sell her business to non-rainmakers.
“How is a succession plan paid for?” he said. “The answer is future growth.”