Letter of Intent Template for Acquiring a Financial Planning Practice

Parties and Practice Identification

Clearly identify the buyer entity, the selling advisor or practice entity, the registered investment advisor (RIA) CRD number, and any affiliated broker-dealer relationships. If the practice operates under a DBA or is registered under a parent RIA, specify the exact legal entities involved in the transaction.

💡 Sellers should confirm which legal entity holds the RIA registration and client agreements, as this determines whether the transaction is an asset sale or entity purchase. Buyers should verify CRD and IAPD records before signing to avoid inheriting undisclosed compliance disclosures. If the seller operates under a broker-dealer, clarify whether the BD relationship transfers or terminates at close.

Purchase Price and Valuation Basis

State the proposed total purchase price and the methodology used to arrive at it. For financial planning practices, valuation is typically expressed as a multiple of trailing 12-month recurring revenue or a percentage of AUM, and the LOI should make the basis explicit so both parties agree on the starting point.

💡 Sellers should push for AUM verification to occur at close rather than at LOI signing, as market fluctuations between signing and close can affect fee revenue. Buyers should insist on a clear definition of what counts as 'recurring revenue' to exclude commission spikes or non-recurring planning project fees that inflate trailing revenue figures. The multiple range of 2x–4x is standard for this market, with the higher end reserved for fee-only, fiduciary practices with strong client demographics and low attrition.

Deal Structure and Payment Terms

Outline how the purchase price will be paid, including upfront cash, seller financing, SBA loan proceeds, and any earnout component. Financial planning practice acquisitions almost universally include an earnout tied to client retention to protect the buyer from attrition risk following the selling advisor's departure.

💡 Sellers should negotiate the earnout measurement period carefully — shorter periods (12–18 months) reduce exposure to attrition that may occur for reasons outside the seller's control. Buyers should insist that the earnout baseline is calculated on AUM retained, not just client count, since a high-value client departing has a disproportionate revenue impact. If using an SBA 7(a) loan, note that seller notes must typically be on full standby for the SBA loan term, limiting seller access to those funds.

Earnout and Client Retention Mechanism

Define precisely how client retention will be measured, what retention thresholds trigger partial or full earnout payments, and the time period over which retention is assessed. This is the most heavily negotiated section in any financial planning practice LOI and must be specific to avoid disputes post-close.

💡 This section requires careful negotiation on two fronts: the retention threshold and the carve-outs. Sellers should push for carve-outs that exclude attrition caused by market downturns, Buyer service failures, or rebranding decisions made by the Buyer. Buyers should insist that the seller's active solicitation of clients post-close (prohibited by non-solicitation) is not counted as neutral attrition. Both parties should agree in advance on who tracks AUM data and which custodian statement serves as the authoritative source.

Transition and Consulting Period

Specify the seller's post-closing obligations to introduce clients to the buyer, participate in client meetings, and support regulatory transfer processes. A structured transition period is essential in financial planning practice acquisitions where client relationships are personal and long-tenured.

💡 Sellers should negotiate transition compensation separately from the earnout — a monthly consulting fee of $5,000–$15,000 during the active transition period is reasonable and keeps the seller financially motivated. Buyers should avoid making the earnout entirely dependent on the transition period length, as a seller who is 'checked out' will not deliver quality introductions regardless of contract terms. Define what constitutes a completed client introduction to avoid ambiguity.

Regulatory and Compliance Transfer

Address how the practice's regulatory registrations, ADV filings, client agreements, and custodian relationships will be transferred or restructured at closing. This section is unique to RIA and financial planning acquisitions and is often underestimated in complexity.

💡 If the practice is dually registered with a broker-dealer, the BD relationship must be addressed separately — the selling advisor's registrations typically cannot be transferred and must be terminated and reestablished. Buyers should engage an RIA compliance consultant or M&A attorney with RIA experience before LOI signing to map out the regulatory timeline, which can add 60–120 days to the closing process. Sellers should confirm whether their client agreements include assignment clauses or require affirmative client consent to transfer.

Due Diligence Period and Access

Define the length of the due diligence period, the scope of access to financial and client data, and confidentiality obligations during review. Financial planning practice due diligence must cover both financial records and regulatory history, and client data access must comply with privacy regulations.

💡 Sellers should provide client demographics (age, AUM tier, tenure) in anonymized format during early due diligence and only release client identities after exclusivity is confirmed and a robust NDA is in place. Buyers should pay particular attention to client age demographics — a practice where the average client age is 72+ carries meaningful mortality attrition risk that should be reflected in valuation. Request FINRA BrokerCheck output directly from the seller rather than running it yourself to ensure completeness.

Exclusivity and No-Shop Provision

Establish the period during which the seller agrees not to solicit or entertain competing offers while the buyer completes due diligence and works toward a definitive agreement. This is standard in LOIs and protects the buyer's investment of time and resources.

💡 Sellers should resist exclusivity periods longer than 60 days unless the buyer provides a meaningful earnest money deposit (typically $25,000–$75,000 for practices in this revenue range). Buyers should request a right to extend exclusivity by 15–30 days if due diligence reveals issues requiring additional review. Include a provision that the exclusivity period tolls if the seller fails to provide requested due diligence materials on time.

Non-Compete and Non-Solicitation

Define the post-closing restrictions on the selling advisor's ability to compete, solicit former clients, or recruit employees. These provisions are especially critical in financial planning practice acquisitions where the seller's personal relationships represent the core of the business value.

💡 Non-compete enforceability varies significantly by state — buyers should have local counsel review the clause before including it in the LOI. Sellers should negotiate the geographic scope carefully, particularly if they have an online practice with clients nationwide; a radius-based restriction may be inappropriate. Courts have generally upheld non-competes in RIA acquisitions where the seller received meaningful consideration, but overly broad restrictions risk being voided entirely.

Conditions to Closing

List the specific conditions that must be satisfied before the transaction can close, including regulatory approvals, financing contingencies, client consent thresholds, and third-party consents. Financial planning practice closings have more conditions than typical business acquisitions due to regulatory requirements.

💡 The client consent threshold (condition e) is frequently the most contentious closing condition. Sellers should negotiate this threshold down to 70–75% of AUM, as 100% consent is virtually never achievable. Buyers should insist the threshold be measured by AUM dollars, not client count, since a small number of large accounts represent the majority of practice revenue. Build in a cure period if the threshold is not initially met, allowing additional time to obtain consents before either party can walk away.