Drivers of Value: Maximize Your Business Worth

By Jason Carroll, Managing Director, Advisor Lending, at Live Oak Bank

Today, we are looking at a wave of transition and consolidation among independent advisors. And for good reason: With so many advisors rapidly approaching retirement age, and an industry whose business and service models are being drastically altered by new technology, for many people now is the right time to step back from the fray.

For many advisors, equity in the practice is the foundation of their retirement plan. They need to maximize the value of their practice before they sell—a process that can take as much as five years. So where should advisors start?

Let’s look at the main drivers of valuation for an advisor’s practice and how an advisor can improve each one.


There is no more important element of practice valuation than growth—both in total size of a practice and in profitability. A healthy practice steadily brings in new clients and increases earnings, year after year. Not only does growth counteract the natural attrition of clients—who move, divorce, pass away, etc—but it also provides a future for the firm’s staff, who can advance and take on additional responsibility. An advisor who doesn’t devote his or her firm to growth will have a much harder time selling the practice.

Client Loyalty

A 2012 study by NFP and Aite found that “one in three advisors who acquired a practice as part of building their own book of business reported that the acquisition resulted in a client retention rate of less than 50%.” A key to getting one’s money’s worth from an acquisition is to carefully match service models and philosophies and to pay attention to the stickiness of the client list. This is good for the seller as well as the buyer, as it will improve the earn-out at the end of the deal.


In financial services, people are the product—their intelligence, training, diligence and organization are the foundation of success. Advisors need to make sure their team has appropriate certifications and licenses, which will add to the overall credibility and attractiveness of the firm.

In addition, an advisor’s service team has strong relationships with clients. Are they staying with the practice? To improve valuation, they should be offered incentives to stay on board for at least a year after the transition to new ownership. This will help with client retention.


The way a practice is organized will determine, in large part, the success of a transition to new ownership. Philosophies of client service and investment management should be a good match. But so, too, should be recordkeeping, software platforms, client relationship management and communication styles. Process is what enables the new advisor to learn the clients quickly and continue serving them without missing a beat. An advisor who is looking to sell a practice should make sure that technology is up to date, client data is complete, workflows are uniform and documented, and people in the office know every procedure.


Advisors who take time to build a brand for their firm—in addition to bolstering their personal reputation—will have an easier time transitioning a practice. Investing in the firm’s position in the community will ease a transition to new ownership considerably, especially if the prospective buyer’s branding is based on a similar values and ideas.

Access to financing has changed the paradigm for succession planning, empowering both current and next generation owners. At my firm, Live Oak Bank, we believe in aiding advisors who want to finance a transition, and are always happy to discuss a prospective deal. We are also happy to talk to home offices that want to support their advisors through this process.

Jason Carroll is Managing Director, Advisor Lending, at Live Oak Bank, the only bank dedicated to providing loans to Investment Advisors. Live Oak Bank is headquartered in Wilmington, NC.

Live Oak Bank is a 2015 FSI Premier Sponsor


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