Buying an Investment Advisory RIA Business

Loan options

• SBA 7(a) Loan — Limited Applicability

  Hybrid advisory firms where active service revenue — financial planning fees, tax preparation, or insurance commissions — constitutes the primary revenue source and AUM-based fees are secondary; requires lender-by-lender eligibility review

• Seller FinancingTypically 20–50% of total purchase price · 3–7 year term at 5–8% interest; subordinated to any senior debt; structured with personal guarantee from buyer

  The most common financing tool in RIA acquisitions; sellers accept a promissory note for a portion of proceeds, aligning incentives and bridging valuation gaps between buyer and seller expectations on AUM retention

• Earnout Structure30–50% of total purchase price held back · 2–3 year measurement period tied to AUM retention, revenue thresholds, or client retention rate above 90%; paid in annual or semi-annual installments

  Deals where client attrition risk post-transition is the primary concern; protects buyer from paying full price if the selling advisor's departure causes AUM decay; seller earns full consideration only if revenue is retained

Eligibility

• The business must not be classified as a passive income business — RIAs deriving the majority of revenue from AUM-based management fees typically fail this test under SBA SOP 50 10
• If pursuing SBA financing for a hybrid advisory firm, fee revenue from active financial planning, tax, or insurance services must constitute a meaningful share of total revenue to support an eligibility argument
• The buyer must inject a minimum of 10% equity as a down payment, with lenders often requiring 20–30% for acquisition loans given the intangible-heavy nature of RIA balance sheets
• The seller must not retain more than a 20% ownership stake post-closing if SBA financing is used, which may conflict with equity rollover deal structures common in RIA transactions

Step by step

1. Assess SBA Eligibility for the Specific TargetWeeks 1–2

   Before assuming SBA financing is unavailable, analyze the target RIA's revenue mix with an SBA-approved lender.

2. Determine the Appropriate Deal Financing StructureWeeks 2–4

   For most RIA acquisitions, build a financing stack using seller financing and earnouts as the primary tools.

3. Conduct AUM and Revenue Quality Due DiligenceWeeks 3–8

   Request a complete client AUM report segmented by household, account type, fee schedule, and custodian. Calculate what percentage of total AUM and revenue is concentrated in the top 5, 10, and 20 clients.

4. Evaluate Client Retention Risk and Key Person DependencyWeeks 4–10

   The single largest risk in any RIA acquisition is client attrition if the selling advisor departs too quickly or clients follow the founder to a new firm. Evaluate how embedded the firm's relationships are with the business versus the individual advisor.

5. Secure Regulatory Approvals and Custodian TransitionsWeeks 8–16

   RIA acquisitions require regulatory filings and approvals that have no equivalent in most other business acquisitions.

Other financing

• Seller Financing / Earnout Structure5%–8% on seller note; earnout tied to AUM retention thresholds

  The seller carries a portion of the purchase price, often 30–50%, tied to AUM and revenue retention over 2–3 years post-close. This is the most common RIA deal structure because it aligns seller incentives with successful client transition.

  • + Aligns seller's incentive to retain clients and support transition, reducing post-close attrition risk
  • + Reduces upfront capital required from buyer, improving deal accessibility for smaller acquirers
  • − Seller may resist full earnout exposure, creating negotiation friction on retention thresholds and measurement periods
  • − Earnout disputes can damage working relationships during the critical client transition window
• Conventional Bank or Credit Union Term Loan

  Community banks and specialty lenders familiar with professional services firms offer term loans secured by firm assets, revenue contracts, and personal guarantees. Lenders underwrite on recurring fee revenue rather than AUM market value.

  • + Provides clean all-cash closing capability, preferred by sellers wanting certainty and clean exits
  • + No equity dilution — buyer retains full ownership and upside of the acquired RIA
  • − Requires strong personal credit, demonstrated advisory industry experience, and meaningful equity injection of 20–30%
  • − Most generalist banks are unfamiliar with RIA valuation, requiring borrowers to educate lenders on AUM-based models

Lender tips

• When approaching conventional bank lenders for RIA acquisition financing, lead with the quality and predictability of recurring fee revenue — a firm with 95% fee-based AUM revenue and 90%+ client retention over five years is a fundamentally different credit risk than a commission-heavy practice
• Provide lenders with a detailed client retention analysis and demographic report showing average client age, tenure, and household net worth — lenders want evidence that the revenue base will persist post-transition and is not dependent on clients aged 75 or older who may begin drawing down assets
• Structure the seller's continued employment or consulting agreement as a formal exhibit to the purchase agreement and present it to the lender — evidence that the selling advisor is contractually obligated to remain engaged for 24–36 months significantly reduces the lender's perceived key person risk
• Be prepared to offer a personal guarantee and, in some cases, additional collateral such as real estate or investment accounts to compensate for the limited hard asset collateral in an intangible-heavy RIA acquisition

• Earnout Structure

  The buyer pays a portion of the purchase price at closing — typically 50–70% — with the remaining 30–50% contingent on AUM and revenue retention over a defined post-close period, usually 24–36 months.

  • + Aligns incentives between buyer and seller by tying deferred consideration directly to the stickiness of the AUM being acquired
  • + Significantly reduces buyer risk of overpaying for a book of business where client relationships may not transfer intact
  • − Seller bears disproportionate downside risk if market corrections erode AUM independent of actual client attrition, an outcome outside their control
  • − Earnout disputes are common when retention metrics are ambiguous or when the acquiring firm's service changes drive client departures the seller couldn't prevent
• Equity Rollover20–40% of total purchase price in acquirer equity at closing

  The seller receives a portion of the purchase price — typically 20–40% — in the form of equity in the acquiring firm, a PE-backed RIA aggregator's holding company, or a combined entity. The remaining consideration is paid in cash at closing.

  • + Seller participates in the upside of the combined entity, which can produce returns well above the initial rolled equity value if the acquirer continues to grow through additional acquisitions
  • + Aligns long-term interests between the seller-turned-partner and the acquiring platform, reducing the likelihood of post-close disengagement
  • − Seller's rolled equity is illiquid and subject to the acquirer's performance, governance, and eventual exit timeline — outcomes entirely outside the seller's control
  • − Valuation of the acquirer's equity can be opaque, particularly in PE-backed platforms where enterprise value depends on continued M&A activity and market conditions
• All-Cash Deal with Consulting Agreement100% of purchase price at or within 90 days of closing

  The buyer pays the full agreed purchase price in cash at or shortly after closing, eliminating deferred or contingent consideration.

  • + Provides maximum liquidity and certainty for the seller at closing, which is especially important for advisors ready to retire or reduce involvement
  • + Simplifies post-close accounting by eliminating earnout tracking, retention calculations, and contingent payment disputes
  • − Buyer assumes full client retention risk at closing with limited financial recourse if AUM attrition exceeds expectations post-transition
  • − Purchase price may be compressed relative to earnout structures since the buyer is absorbing all retention uncertainty upfront

Negotiation tips

• Define AUM retention metrics explicitly before closing — specify whether earnout measurements use beginning-of-period AUM, account for market appreciation or depreciation using a benchmark index, and whether voluntary client withdrawals are treated differently from clients who terminate their advisory relationship entirely.
• Negotiate a market adjustment provision in any earnout tied to AUM — if a 20% broad market decline reduces AUM mechanically, the seller should not be penalized for asset value decay that is unrelated to actual client departures.
• Request a rep-and-warranty provision covering compliance history and pending regulatory matters — buyers should require the seller to represent that there are no undisclosed SEC or state examination deficiencies, customer complaints, or pending enforcement actions, with a survival period of at least 24 months post-close and indemnification coverage for any costs arising from pre-close compliance failures.
• Structure the consulting agreement compensation as a blend of fixed retainer and activity-based milestones tied to client introduction meetings completed, accounts re-transferred to the new custodian, and investment policy statements re-papered under the buyer's agreements — this converts the seller's engagement from a passive obligation into an incentive-aligned activity with measurable outcomes.

AUM Quality and Client Concentration

• Request a full AUM schedule broken down by client, account type, and custodian.critical

  Reveals concentration risk and whether AUM is custodied on transferable platforms like Schwab or Fidelity.

• Analyze the percentage of fee-based AUM versus commission or transactional assets.critical

  Fee-based AUM produces predictable recurring revenue; commission revenue is non-recurring and harder to value.

• Review AUM growth and attrition trends over the trailing 36 months.important

  Organic AUM growth signals a healthy, self-sustaining practice versus one in slow decline.

• Confirm that all client assets are held at a qualified custodian with transferable account agreements.important

  Proprietary or illiquid custodial arrangements can block or delay post-close AUM transfer.

Compliance and Regulatory History

• Pull and review current Form ADV Parts 1 and 2A/2B for accuracy and completeness.critical

  Outdated or inaccurate ADV filings signal compliance neglect and create inherited regulatory liability.

• Request all SEC or state examination correspondence and deficiency letters from the past five years.critical

  Past exam deficiencies may indicate systemic compliance failures requiring costly remediation post-close.

• Confirm whether the RIA is SEC-registered or state-registered and verify the correct AUM threshold applies.important

  Crossing the $100M SEC registration threshold mid-acquisition can trigger re-registration requirements and delays.

• Review compliance manual, code of ethics, and cybersecurity policy for currency and implementation evidence.standard

  SEC cybersecurity rules and marketing rule compliance are active examination priorities for small RIAs.

Revenue Quality and Financial Performance

• Obtain three years of P&L statements with personal and non-recurring expenses clearly identified.critical

  Owner-advisors frequently run personal expenses through the business, inflating apparent EBITDA margins.

• Reconcile stated advisory fee revenue against custodian billing records and client fee schedules.critical

  Fee revenue should reconcile exactly to custodian billing data — discrepancies suggest undisclosed fee arrangements.

• Calculate client revenue retention rate over the trailing 24 months excluding market movement.important

  True revenue retention above 90% is the single best predictor of post-acquisition cash flow stability.

• Assess whether any revenue is tied to affiliated products, referral arrangements, or undisclosed compensation.important

  Undisclosed revenue sharing or affiliated product revenue creates SEC disclosure violations and conflicts of interest.

Client Demographics and Relationship Stickiness

• Request a client segmentation report showing average age, tenure, household net worth, and service tier.critical

  Average client age above 70 signals near-term AUM decay through required minimum distributions and estate transfers.

• Evaluate the depth of firm-level versus advisor-level client relationships through CRM activity records.critical

  Relationships documented only with the selling advisor will not transfer naturally to new ownership.

• Review client agreements for assignability and consent requirements triggered by a change of control.important

  Many advisory agreements require written client consent to assignment, which creates post-close attrition risk.

• Assess whether any top clients have personal or business relationships that could follow the departing advisor.important

  Referral network clients or clients with personal loyalty to the seller are highest attrition risk post-close.

Investment Advisory RIA-specific checks

• Custodial platform review: Identify all custodians (Schwab, Fidelity, Pershing) and assess transition complexity, account transfer timelines, and any platform exclusivity agreements affecting post-close operations.
• Investment policy statement audit: Confirm each client has a current, signed IPS documenting risk tolerance and objectives, ensuring regulatory compliance and smoother advisor transition post-acquisition.
• Key person transition plan: Evaluate the selling advisor's client introduction strategy, planned retention role duration, and whether top-client relationships have been seeded with other team members.
• Technology stack compatibility: Assess CRM (Redtail, Wealthbox), portfolio management (Orion, Tamarac), and financial planning software (eMoney, MoneyGuide) against your existing systems for integration cost and timeline.
• Earnout structure calibration: Model AUM and revenue retention scenarios at 80%, 90%, and 95% retention to validate deal economics and ensure earnout triggers are fair to both buyer and seller.

Red flags

• Top 3 clients represent more than 50% of total AUM, creating catastrophic attrition risk if any one departs post-close.
• Selling advisor refuses a transition period longer than 6 months, signaling limited commitment to client relationship transfer.
• Active SEC or state enforcement action, regulatory investigation, or unresolved deficiency letter on file.
• AUM is concentrated in illiquid or proprietary products that cannot be transferred to the acquirer's custodial platform.
• Client revenue retention rate falls below 85% on a market-adjusted basis over the trailing two years.

What the LOI covers

• Parties and Recitals

  Identifies the buyer entity, seller entity, and the individual selling advisor(s) by name.

• Purchase Price and Structure

  States the total proposed purchase price, the allocation between upfront consideration and contingent earnout, and how each component is calculated. RIA valuations typically express price as a multiple of recurring revenue or a percentage of AUM.

• Earnout Provisions and AUM Retention Metrics

  The most consequential section in any RIA LOI. Defines the earnout period, the specific metrics used to measure retention (AUM, revenue, or both), how shortfalls are calculated, the payment schedule, and whether the earnout has a floor or cap.

• Purchase Price Allocation and Revenue Quality Adjustment

  Addresses how the agreed purchase price will be adjusted if due diligence reveals material differences from the representations made in the LOI — specifically around revenue quality, fee schedules, and client concentration.

• Regulatory and Compliance Representations

  Outlines seller's representations regarding regulatory standing, ADV accuracy, and compliance history.

• Key Person Obligations and Transition Services Agreement

  Defines the obligations of the selling advisor to remain engaged post-close to facilitate client introductions, transfer relationships, and support operational continuity.

Terms to negotiate

• Upfront Cash vs. Earnout Split

  The ratio of upfront cash to contingent earnout payments is the single most impactful economic term in an RIA LOI. Buyers in the $500K–$3M revenue range commonly propose 50–60% upfront with 40–50% contingent.

• AUM Retention Threshold and Market-Depreciation Carve-Out

  The retention percentage required to earn full earnout payments — commonly set at 85–95% of closing AUM — and whether normal market depreciation is excluded from the attrition calculation.

• Transition Period Duration and Time Commitment

  How long the selling advisor must remain engaged, in what capacity, and at what level of time commitment.

• Client Notification Timing and Process

  When and how clients are informed of the change in ownership, who communicates it, and what form it takes. Early or poorly executed notifications are one of the leading causes of client attrition in RIA transactions.

Target profile

• Fee-only or fee-based revenue model generating at least 80% of total revenue from recurring AUM-linked advisory fees with minimal commission or transactional income
• Client retention rate above 90% with an average client tenure of 8 or more years and no single client representing more than 15% of total AUM
• Clean compliance record with no regulatory actions, enforcement proceedings, or material deficiency findings from SEC or state examinations in the prior 5 years
• Selling advisor willing to execute a 2 to 3 year transition and employment or consulting agreement, structured with earnout provisions tied to AUM and revenue retention post-close

Platform and add-on criteria

• Minimum $150M AUM with $1M+ Recurring RevenuePlatform

  The platform firm must generate sufficient fee-based revenue to absorb shared services costs and demonstrate sustainable cash flow independent of any single advisor relationship.

• Clean Compliance Record and SEC RegistrationPlatform

  No regulatory actions, deficiency findings, or enforcement history. SEC-registered status ($100M+ AUM) simplifies multi-state expansion without individual state re-registration burdens.

• Scalable Technology and Custodial InfrastructurePlatform

  Platform must operate on institutional-grade CRM, portfolio management, and custodial relationships — ideally Schwab, Fidelity, or Pershing — to onboard add-on acquisitions without technology rearchitecting.

• Experienced Leadership Team Beyond the FounderPlatform

  A COO, compliance officer, and at least two client-facing advisors reduce key person dependency and provide management bandwidth to absorb and integrate acquired practices.

Acquisition sequence

1. Establish the Platform Entity and Operating InfrastructureEntity formation, custodial agreements, technology stack selection, and compliance infrastructure — create the platform before acquiring into it

   Before acquiring target firms, the roll-up platform must be properly structured.

2. Source and Qualify Acquisition Targets Through Proprietary OutreachProprietary deal sourcing using Form ADV data, custodial relationships, and M&A advisor partnerships — avoid relying solely on listed deal flow

   The most attractive RIA acquisition targets are rarely listed on public marketplaces.

3. Conduct RIA-Specific Due Diligence Focused on AUM Quality and ComplianceAUM quality, client concentration analysis, compliance record review, and key person dependency mapping — these four factors determine whether acquired revenue survives the transition

   Standard financial due diligence must be augmented with RIA-specific analysis across five critical dimensions.

4. Structure Deals with Earnouts That Align Seller Incentives with AUM RetentionEarnout structures tied to AUM retention thresholds and seller transition agreements — deal structure is the primary mechanism for mitigating post-acquisition client attrition risk

   The standard RIA acquisition deal structure in the lower middle market involves splitting the purchase price between an upfront cash payment at closing (typically 50% to 70% of total consideration) and an earnout component (30% to 50%) tied to AUM and revenue retention over a 12 to 36 month post-close period.

Value creation levers

• Centralized Compliance and Regulatory Infrastructure

  One of the most immediate and tangible cost savings in an RIA roll-up comes from centralizing compliance functions across acquired firms.

• Technology Platform Rationalization and Margin Expansion

  Acquired RIA firms typically operate across a patchwork of CRM systems, portfolio management tools, financial planning software, and custodial reporting platforms with no integration between them.

• Organic AUM Growth Through Referral Networks and Enhanced Marketing

  Solo and small-team RIAs are structurally limited in their ability to generate new client referrals and organic AUM growth by the bandwidth of the founding advisor.

• Advisor Retention and Productivity Enhancement Through Career Pathways

  Acquiring advisor talent is as important as acquiring AUM in an RIA roll-up.

Day one

• File Form ADV amendment with SEC or state regulator to reflect ownership change, updated firm name, and any new service offerings before resuming client-facing activities.
• Notify the custodian — Schwab, Fidelity, or Pershing — of the change in control and begin account re-papering or assignment of existing client agreements to the acquiring entity.
• Issue a joint client communication co-signed by the selling advisor introducing the acquirer, emphasizing continuity of service and confirming no immediate changes to fees or investment approach.
• Conduct an internal AUM audit cross-referencing the seller's client roster, account balances, and fee schedules against the representations made during due diligence.
• Establish access controls for all operational systems including CRM, portfolio management software, and billing platforms, and revoke former advisor credentials no longer authorized post-close.

Phase 1: Stabilize Client Relationships and Compliance (Days 1–90)

• Schedule in-person or video introductory meetings with top-tier clients, ideally facilitated by the selling advisor, covering 80% of AUM within 60 days.
• Engage outside RIA compliance counsel to review all client agreements, investment policy statements, and fee disclosures for post-acquisition enforceability.
• Audit all custodial accounts to identify any client who has not signed updated agreements and prioritize re-papering outreach to avoid account service interruptions.

Phase 2: Technology and Operations Unification (Months 3–6)

• Run parallel CRM systems for 30 days post-migration to verify data integrity before decommissioning the seller's legacy platform.
• Standardize investment policy statement templates and model portfolios across both client bases, flagging any accounts still held on legacy commission-based platforms.
• Train acquired staff on acquirer's technology stack, compliance workflows, and client service standards with documented competency checkpoints at 60 and 90 days.

Phase 3: Revenue Optimization and Cultural Integration (Months 6–12)

• Conduct a formal client segmentation review to identify high-net-worth households underserved by the prior advisor and schedule proactive planning conversations.
• Evaluate the selling advisor's continued engagement against the employment or consulting agreement terms and adjust transition timeline if client dependency remains elevated.
• Present a 12-month integration performance review to stakeholders, documenting AUM retained, clients transitioned, compliance milestones met, and revenue trajectory versus projections.

Pitfalls

• Rushing the Selling Advisor's Exit

  Accelerating the selling advisor's departure before clients have built trust with the acquiring team is the single fastest way to trigger AUM attrition. Honor the full transition period even when it feels redundant.

• Delayed ADV Amendments

  Failing to promptly amend Form ADV after change of control exposes the acquirer to SEC deficiency findings. File within required deadlines and update all related state registrations simultaneously.

• Ignoring Legacy Fee Arrangements

  Grandfathered commission-based accounts or non-standard fee schedules from the acquired firm create billing complexity and compliance risk. Audit and convert or document all legacy arrangements within 90 days.

• Underestimating Client Attrition Risk After the Seller Departscritical

  Buyers assume AUM is sticky, but when a solo advisor retires, clients follow relationships — not the firm. Failing to model realistic attrition scenarios leads to significant revenue shortfalls within 12 months of close.

• Accepting AUM Numbers Without Verifying Client Agreement Qualitycritical

  Reported AUM can include illiquid assets, held-away accounts, or informal arrangements not covered by signed advisory agreements. Overstated billable AUM inflates valuation and purchase price.

• Ignoring Client Concentration Risk in the Top 5–10 Relationshipscritical

  An RIA with $120M AUM sounds diversified until three clients represent $60M. If those clients are personal friends of the retiring founder, the concentration risk is an existential threat to post-close revenue.

• Skipping a Deep Dive on SEC and State Compliance Historycritical

  Buyers routinely skim Form ADV without reviewing examination correspondence, deficiency letters, or state enforcement actions. Undisclosed compliance issues can trigger regulatory consequences that transfer with the registration.

• Underestimating Technology and Custodian Transition Costs and Timelinemajor

  Migrating clients from one custodian to another — say, Schwab to Fidelity — requires ACAT transfers, new account paperwork, and extended client communication. Buyers routinely underbudget time and cost.

• SBA

  Attempting to finance a pure fee-based RIA through an SBA loan without confirming eligibility — most applications will be declined, wasting weeks and creating seller uncertainty that can kill a deal

Warning signs

• Seller is unwilling to provide a client-level AUM breakdown with custodian statements and signed advisory agreements
• Top three clients represent more than 30% of total AUM and have personal relationships exclusively with the departing founder
• Form ADV discloses past SEC or state deficiency findings, enforcement actions, or ongoing regulatory correspondence
• Revenue mix shows more than 25% derived from commissions, trailing 12b-1 fees, or one-time transactional sources
• Seller resists any earnout structure or post-close transition agreement, insisting on all-cash payment at closing

Phase 1: Financial and Revenue Clarity (Months 1–3)

• Compile 3 years of clean, reviewed financial statements with personal expenses removedhigh

  Buyers will normalize your financials to calculate true owner benefit and recurring EBITDA. Commingled personal expenses — auto leases, personal travel, family payroll — will raise red flags and delay diligence.

• Break down revenue by fee type: AUM-based fees, flat retainer, financial planning fees, and any commission or 12b-1 incomehigh

  Buyers place the highest value on recurring, fee-based AUM revenue. Commission income or transactional revenue is discounted significantly — sometimes excluded from valuation entirely.

• Document all fee schedules, billing frequency, and any client-specific fee exceptions or grandfathered arrangementsmedium

  Inconsistent or undocumented fee schedules create compliance risk and reduce buyer confidence in revenue sustainability. Pull every client agreement and reconcile actual billed fees against stated schedules.

Phase 2: AUM and Client Base Documentation (Months 2–5)

• Create a comprehensive AUM schedule by client, household, account type, custodian, and fee tierhigh

  Buyers need to underwrite every dollar of AUM you are representing in the sale.

• Prepare a client segmentation report showing demographics, tenure, household net worth, service tier, and relationship historyhigh

  Buyers worry about two things above all else: client attrition after you leave, and AUM decay from an aging client base.

• Identify and document client concentration risk — flag any single client representing more than 5–10% of AUM or revenuehigh

  A single client representing 15–20% of your AUM is a deal-stopper for many institutional buyers or will result in a large portion of purchase price held in earnout pending that client's retention.

Phase 3: Compliance and Regulatory Cleanup (Months 3–6)

• Review and update Form ADV Parts 1 and 2A/2B — ensure all disclosures are accurate and currenthigh

  Form ADV is the first document every sophisticated buyer and their legal counsel will request. Outdated AUM figures, stale business descriptions, incorrect ownership disclosures, or undisclosed disciplinary history are immediate red flags.

• Pull your SEC or state examination history and address any open deficiencies or correspondencehigh

  Buyers will request all regulatory examination correspondence for the past 5 years. Any deficiency letters, examination reports with findings, or unresolved correspondence from your state securities regulator or the SEC must be disclosed and explained.

• Ensure your compliance manual, code of ethics, and business continuity plan are current, implemented, and documentedmedium

  Many small RIAs have compliance documents on file that are years out of date or do not reflect actual firm practices.

Phase 4: Operational Documentation and People (Months 4–9)

• Document your investment process, portfolio construction methodology, and model portfolio structurehigh

  One of the biggest concerns buyers have about acquiring a solo practitioner RIA is whether the investment process lives in the founder's head or in documented, transferable systems.

• Document your financial planning workflow, client onboarding process, and annual review cadencemedium

  Buyers — particularly aggregators with standardized platforms — want to understand how client relationships are serviced. Document your annual review process, client communication cadence, financial planning deliverables, and onboarding checklist.

• Introduce team members or a junior advisor to top client relationships before going to markethigh

  The single greatest risk in any RIA acquisition is client attrition when the selling advisor departs or reduces involvement.

Quick wins before a sale

• Update your Form ADV Parts 1 and 2 to ensure AUM figures, fee schedules, and disclosures are accurate and current — this is the first document every buyer requests and errors create immediate credibility issues
• Pull your last 3 years of P&L statements and identify all personal or non-business expenses running through the firm — cleaning up these add-backs directly increases your calculated EBITDA and supportable valuation
• Build a simple AUM schedule in Excel listing every client household, total assets, annual fee, and custodian — this single document will accelerate your sale process by weeks when buyers request it
• Identify your top 3–5 clients by AUM and assess whether those relationships are exclusively yours or shared with a team member — if all top relationships are solely yours, introduce a second advisor contact immediately to begin reducing key person risk

Questions to ask a broker

• How many RIA transactions under $3M in recurring revenue have you closed in the past three years, and what was the average AUM multiple achieved?

  Confirms relevant deal experience in your size range and benchmarks realistic valuation expectations against actual market outcomes.

• How do you structure earnouts to protect sellers against AUM attrition caused by market downturns versus client departures the seller couldn't have prevented?

  Market-driven AUM declines are outside seller control; an experienced broker designs earnout language that distinguishes voluntary client attrition from market losses.

• What is your process for managing the ADV amendment filings, state vs. SEC registration transitions, and custodian notification requirements during a deal?

  Compliance missteps during ownership transfer can trigger regulatory scrutiny; brokers without RIA-specific experience routinely underestimate this complexity.

Broker red flags

• Broker cannot cite completed RIA transactions and pivots to generic business sale experience when pressed — AUM-based deals require specialized knowledge most generalist brokers lack.
• Broker encourages you to inflate AUM by including non-discretionary or one-time assets in your pitch book, which creates liability and destroys credibility with sophisticated RIA buyers.
• Broker has no working knowledge of Form ADV Part 2 disclosure requirements or assumes compliance transfer is the buyer's problem — regulatory missteps can unwind deals post-close.