Why Won’t Advisors Sell?

As for the successor advisor, he lost half of the assets of the practice he acquired as a result of his failure to call the clients.

Verboon takes pains, to the extent he is able, to ensure that the deals he works on succeed by negotiating between the parties and structuring a viable acquisition.

"What we really look to see is that there's a good cultural fit between the successor and the retiring advisor. That fit I claim to be the most important piece in making it a success," he says.

"The second piece is the hard work," he continues. "I tell people to block at least three months out of their life—'Don't take this lightly,'" he tells would-be acquirers.

The results have been impressive. Verboon says seven out of 10 acquisitions have been profitable within 24 months and another two out of 10 shortly thereafter.

"We're very careful that advisors remain at least cash-flow neutral unless they have enough of a book themselves that they don't need the revenues from the purchased firm," the Securities America exec says.

But while the firm wants to ease the financial burden, it nevertheless wants the acquiring advisor to put some of his own money into the purchase just as it wants the retiring advisor incented to foster client retention.

"We want everyone to have skin in the game," Verboon says.

So in the case of an average selling price of $500,000, and an average down payment of 30%, or $150,000 — down payments range from 10% to 50%, Verboon says — the firm would typically see to a loan of about $110,000, thus requiring $40,000 on the buying advisor's part. That said, just six advisors on average seek financing assistance, annually.

But because the firm puts so much emphasis on the cultural fit — to avoid potential disaster — Verboon says a higher level of financing is possible in extremis.

"We had an advisor we thought would be a very, very good fit with a retiring advisor. He did not necessarily have the dollars to have skin in the game himself, yet the cultural fit was great. We said the deal was worth looking at more in depth."

In the end, Securities America put up a much larger loan to help the advisor swing the deal.

The firm provides advisors with a practice listing site through its parent firm, which encompasses all retring advisors from Ladenberg Thalmann's broker-dealer network.

But the firm also assists its advisors making acqusitions affiliated with outside firms such as LPL, Commonwealth or Cambridge.

"The asset transfer rate is never as great as in house. In house you just pull a switch and the assets are moved over," Verboon says, boasting a 98% in-house client retention and asset transfer rate, though a still high 85% retention rate with external acquisitions.