Letter of Intent Template for Acquiring a Wealth Management Firm

Parties and Transaction Overview

Identifies the buyer (acquiring RIA, aggregator platform, or individual advisor) and seller (the RIA entity and/or founding advisor), the legal structure of the target firm, and the high-level form of the proposed transaction — whether an asset purchase of the book of business, a stock or membership interest purchase of the RIA entity, or a merger into the buyer's existing RIA.

💡 Buyers should confirm early whether they are purchasing the RIA entity itself (stock purchase) or solely the book of business and client relationships (asset purchase). An asset purchase avoids inheriting undisclosed regulatory liabilities and prior compliance disclosures but requires novation of all client advisory agreements. A stock purchase simplifies continuity of custodial agreements and client contracts but transfers all historical liability. For smaller RIAs with clean compliance records, stock purchases are increasingly common among aggregator buyers. Sellers should confirm the buyer's own RIA registration status and whether clients will be serviced under the buyer's existing ADV or a newly registered successor entity.

Purchase Price and Valuation Methodology

Establishes the total proposed enterprise value, the basis for valuation (AUM multiple, revenue multiple, or EBITDA multiple), and the breakdown between upfront cash at closing, seller note, and earnout. Wealth management firm valuations in the lower middle market typically range from 4x to 8x EBITDA or 1.5x to 3.5x trailing twelve-month recurring revenue, depending on AUM quality, client demographics, fee structure, and retention risk.

💡 Buyers should insist that the valuation be anchored to fee-based, recurring AUM revenue only — explicitly excluding any one-time planning fees, insurance commissions, or transactional income that may inflate trailing revenue. Sellers should negotiate for the highest possible percentage of total consideration paid at closing (target 65–75%) since earnout risk is real and market-driven AUM fluctuations can suppress earnout payouts even when clients are retained. Both parties should agree in writing on which AUM schedule, as of which date, constitutes the baseline for earnout calculations, and how market appreciation or depreciation will be treated in retention math.

AUM Retention Earnout Structure

Defines the earnout mechanism tied to client and AUM retention following close, which is the single most important and most negotiated term in any RIA acquisition LOI. Specifies the measurement period, AUM retention thresholds that trigger full versus partial earnout payments, the treatment of market-driven AUM changes versus true client attrition, and the cadence of earnout measurement dates.

💡 The treatment of market volatility in earnout calculations is one of the most contested terms in RIA deals. Sellers should insist — and buyers should generally accept — that earnout AUM thresholds be calculated on a market-neutral basis, meaning the baseline AUM is adjusted for market returns so that only actual client departures count against retention. Buyers should push for tiered earnout schedules with hard floors (e.g., no earnout at all if retention falls below 75%) to protect against scenarios where the founding advisor's departure triggers a wave of departures. Sellers should also negotiate for specific obligations from the buyer — including retention of the selling advisor in a client-facing role, no forced rebranding in year one, and continued use of existing custodial platforms — as conditions precedent to full earnout eligibility.

Key Person and Employment Terms

Addresses the post-close role, compensation, and obligations of the founding advisor and any other key team members whose continued involvement is essential to client retention and AUM continuity. This section typically includes an employment or consulting agreement term, non-compete and non-solicit provisions, and conditions under which the earnout may be forfeited due to voluntary departure.

💡 Buyers should carefully calibrate the employment term length to the earnout measurement window — the founding advisor should remain in a client-facing role for at least as long as earnout periods are active. Non-compete provisions in wealth management are more legally defensible than in many other industries given the fiduciary nature of client relationships, but geographic and temporal scope must comply with applicable state law. Sellers should negotiate for clear definitions of 'cause' and 'good reason' in the employment agreement so that a constructive dismissal by the buyer — such as stripping the advisor of client-facing responsibilities or forcing a relocation — does not forfeit the earnout. Sellers should also negotiate for an accelerated earnout payment if the buyer terminates the employment agreement without cause.

Due Diligence Contingency and Access

Establishes the scope, timeline, and conditions of the buyer's due diligence investigation, including access to AUM schedules, client-level data, regulatory filings, custodial agreements, and financial records. Specifies the due diligence period duration and the conditions under which either party may terminate the LOI based on due diligence findings.

💡 RIA-specific due diligence is more nuanced than most business acquisitions. Buyers must prioritize client concentration analysis — if any single client represents more than 10% of AUM or revenue, that concentration must be disclosed and the earnout structure adjusted accordingly. Regulatory due diligence should include a thorough review of all SEC or state examination records, any Form ADV disclosures related to disciplinary history, and the firm's written compliance policies and procedures. Sellers should limit data room access to anonymized or redacted client information until a definitive purchase agreement is signed and client consent protocols are established under applicable privacy regulations. Buyers should also confirm custodial agreement transferability — Schwab, Fidelity, and Pershing all have specific protocols for RIA succession events that can delay closing if not initiated early.

Regulatory and Licensing Transfer Obligations

Addresses the regulatory change-of-control obligations specific to RIA acquisitions, including SEC or state notice filings, Form ADV amendments, client consent requirements under the Investment Advisers Act of 1940, and the timeline and responsibility for completing all required regulatory notifications prior to or promptly following close.

💡 The Investment Advisers Act of 1940 prohibits the assignment of an investment advisory agreement without client consent — and a change of control of the RIA entity is deemed an 'assignment' under federal law. This means client consent is not optional; it is a legal requirement. Buyers should negotiate for responsibility over the consent solicitation process to control messaging and client communication tone. Sellers are often better positioned to draft the initial client communication given their existing relationship, but buyers should review and approve all client-facing materials before distribution. Both parties should agree on a consent threshold — typically 85–90% — below which the deal may be renegotiated or terminated. State-registered RIAs may face additional notice and approval requirements depending on the states in which the firm is registered.

Exclusivity and Confidentiality

Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit, entertain, or negotiate with other potential acquirers, and reaffirms the parties' mutual confidentiality obligations with respect to all shared financial, client, and proprietary information.

💡 Sellers should resist exclusivity periods longer than 60 days without a corresponding commitment from the buyer — such as a non-refundable good faith deposit or a requirement that the buyer deliver a draft purchase agreement within the first 30 days of the exclusivity window. Buyers should require that confidentiality obligations explicitly cover client identities and AUM data, which are trade secrets in the advisory industry and carry additional sensitivity under privacy regulations. Both parties should confirm that the existing NDA covers the additional information to be exchanged during due diligence, including client-level data, and that data room access is logged and auditable.

Conditions to Closing

Lists the key conditions that must be satisfied before either party is obligated to consummate the transaction, including regulatory approvals, client consent thresholds, custodial agreement transfer confirmations, and lender approval for any SBA or senior debt financing.

💡 The client consent threshold condition is the most deal-critical closing condition in RIA transactions and should be carefully negotiated. Buyers should set a hard minimum consent threshold — typically 85% of revenue — below which they have the right to renegotiate price or walk away. Sellers should push for a mechanism whereby the buyer's obligation to close remains intact if consent failures are attributable to buyer conduct (e.g., premature or poorly executed client communications). SBA financing timelines — typically 45–90 days from full application to approval — should be factored into the overall closing timeline to avoid exclusivity expiration before financing is confirmed. Material adverse change provisions should explicitly include significant AUM declines due to market conditions only if they exceed a defined threshold (e.g., greater than 20% decline in AUM).