Selling your advisory practice? It might be worth less than you think

"As advisors begin to retire, a larger number of sellers will enter the market," Shirk says. "Practices that are heavily weighted with older clients are less desirable because they have less potential to generate future cash flow. Retired clients are also inclined to deplete asset balances as they withdraw money for living expenses."

Cerulli warns future sellers to work continuously to ensure an infusion of clients across various age ranges, and encourages them to build multi-generational relationships with their clients' families to minimize a buyer's concern about practice demographics.

For advisors who made an acquisition in the past 12 months, the most "challenging aspect of the deal," Cerulli says, was transitioning clients from the seller. "While the percentage of targeted clients' assets that were successfully transferred was high, averaging 88 percent, retention rates for practice acquisitions can vary widely. The majority (73.3 percent) of deals experienced retention rates of 90 percent or higher, but 16.7 percent experienced a retention rate of 75 percent or less."

Cerulli says that nearly two-thirds of independent advisors (65 percent) wish to buy a practice. Of those, 47 percent are proactively searching for an acquisition opportunity, whereas 53 percent are not.

"Given that a relatively small percentage of advisors plan to retire in the next four years, acquisitions are highly opportunistic in today's marketplace, and many deals are sourced informally via networking and word of mouth."