Verify AUM, assess client attrition risk, and navigate compliance requirements before closing on a fee-only or hybrid RIA acquisition.
Find Financial Planning Practice Acquisition TargetsAcquiring a financial planning practice requires evaluating recurring revenue quality, client demographics, regulatory compliance, and key person dependency. With AUM-based practices trading at 2–4x revenue, disciplined due diligence protects against post-close attrition and compliance surprises.
Confirm the quality, composition, and sustainability of revenue streams before proceeding to deeper operational review.
Reconcile custodian statements against reported AUM for trailing 12 months. Separate recurring AUM-based fees from one-time commissions to confirm 70%+ recurring revenue threshold.
Identify any single client representing over 20% of total AUM or revenue. High concentration creates outsized attrition risk and may require deal structure adjustments.
Analyze 3-year revenue trends adjusted for market performance versus organic client growth. Distinguish AUM appreciation from new client acquisition to assess real growth.
Assess the practice's regulatory standing and confirm that client agreements and registrations can be transferred cleanly post-acquisition.
Pull complete compliance histories for all registered advisors. Any disclosures, client complaints, or regulatory actions require immediate legal review before proceeding.
Review current Form ADV Part 1 and 2 for accuracy. Confirm client investment advisory agreements include assignment clauses or assess consent requirements under applicable law.
Contact custodians (Schwab, Fidelity, Pershing) early to understand transition timelines, approval requirements, and any restrictions on account transfers to the acquiring entity.
Evaluate client demographics, staff depth, and technology infrastructure to model post-acquisition retention and integration costs.
Request client-level data including age, AUM tier, tenure, and annual attrition rates for 3–5 years. Average client age above 70 signals elevated runoff risk and lower earnout realization.
Assess whether associate advisors independently hold client relationships or all trust resides with the selling advisor. Solo practitioners with no team represent the highest attrition risk.
Audit CRM completeness (Redtail, Salesforce, Wealthbox), financial planning software licenses (eMoney, MoneyGuidePro), and data portability to estimate integration costs and timeline.
Verify the Financial Planning Practice acquisition qualifies for SBA financing, the purchase price is supportable by the verified cash flow, and the deal structure protects the buyer's downside.
Confirm the Financial Planning Practice meets SBA 7(a) eligibility requirements: the business is for-profit, U.S.-based, within SBA size standards, and the buyer meets personal financial requirements. Some industries have specific SBA restrictions — verify before LOI.
Model verified normalized EBITDA against projected SBA loan payments at current rates. A $1M SBA 7(a) loan at 10.5% over 10 years costs approximately $13,000/month. The Financial Planning Practice must generate at least 1.25x debt service coverage after a market-rate manager salary to pass underwriting.
Confirm the seller note is properly subordinated to the SBA loan and goes on 24-month standby as required by SBA rules. If an earnout is included, define exact measurement metrics, time period, and dispute resolution process before signing the purchase agreement.
Before signing a Letter of Intent, request these documents from the seller. Missing or incomplete items are a red flag — not a reason to proceed without them.
Fee-only RIA practices typically sell at 2–4x trailing 12-month revenue. Practices with 70%+ recurring revenue, low attrition, and clean compliance records command the higher end of that range.
Most deals use a 70/30 split — 70% cash at close, 30% earnout over 2–3 years tied to client retention thresholds, typically 85–90% AUM retention measured at 12 and 24 months post-close.
Yes. Financial planning practices are SBA-eligible. SBA 7(a) loans can finance up to $5M with 10-year terms. Lenders will require 3 years of business tax returns and personal financial statements from the buyer.
Client attrition after the selling advisor departs is the primary risk. A structured 12–24 month seller transition, joint client meetings, and warm introductions are the most effective mitigation strategies.
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