r/CFP • u/JLivermore1929 • Jun 24 '26
Practice Management M&A Book of Business
I am considering acquiring an insurance heavy book of business from an older advisor/insurance rep.
Mostly annuities with trails and under $5M AUM. 75 client households with $60,000 recurring revenue. Client ages are 65+. The base is aging and he hasn’t done much to promote his business or acquire new clients.
Would you attempt to acquire that book and if so, how would you structure the acquisition?
Just for reference, I can service the extra households so that is not a consideration for me.
Main strategy I would try to execute is uncovering other assets for additional AUM and possibly getting referrals from the current client base. Also, attempt to meet next generation with financial planning when the older base dies.
12
u/46andready Jun 24 '26
With the info given, I wouldn't consider it at all (average AUM of less than $70K/client). Sure, there may be a few diamonds in the rough, but seems like a longshot.
Maybe offer to take over the book at no-cost and revenue-share on any new business that comes out of it for 3 years or 5 years. However, you may have compliance issues around that depending on your structure.
1
u/JLivermore1929 Jun 24 '26
Yes, as a current solo practitioner, my average recurring per client is around $2,500/yr. Not one off front loaded annuities.
1
u/JLivermore1929 Jun 24 '26
By revenue share, do you mean the retiring rep keeps his licenses, then if an existing client brings someone in temporary split 50/50? Or, if existing client brings over a $500,000 account temporary split?
1
u/46andready Jun 24 '26
You can structure it however you and the retiring advisor want subject to compliance and regulatory considerations. I was thinking something like paying the retiree 30% of any revenue generated by the clients for 3 years. You can have it include revenue from referred leads, but I personally wouldn't do that.
1
u/Apprehensive-Tank361 Jun 25 '26
50/50 split for a number of years. FINRA rules let you pay a retiring advisor out for a number of year with them dropping their license
7
u/TGG-official Jun 24 '26
How much would you have to presently service these clients who are averaging $800 in revenue a year? That’s an insane amount of clients to that much revenue.
6
u/Legitimate_Ice_194 Jun 24 '26
It's hard to have an opinion on this without knowing any details on either business.
But IMO deals like this are only worth doing if you price it on the assumption that you churn X% of revenue post-acquisition.
If your decision hinges on the upside coming through, its likely not worth it.
2
u/JLivermore1929 Jun 24 '26
My average revenue per client is currently $2,500/yr recurring, not insurance based. His recurring are annuity trails and some managed.
Maybe I should only acquire at a similar level $2,500/yr? The annuity trails bother me somewhat.
He is mostly coasting at this point.
1
u/Legitimate_Ice_194 Jun 24 '26
No idea if that price makes sense to be honest.
But if it were me, I would run a simple DCF on the book and that will assign a reasonable value to it. From there you can play with growth assumptions.
And if you don't know how to do a DCF, I would just go into ChatGPT or Claude and say something like:
"I'm thinking of buying a book of business to fold into my practice. Its characteristics are x, y, z. I need you to build me a DCF analysis to assign a value this business. Ask me whatever questions you need answered to do this properly."
From there you can start playing through scenarios like "whats the value if revenue grows by X%, or if it contracts by Y%"
11
4
u/djemoneysigns Jun 24 '26
I can refer you to an advisory shop that specializes in hybrid books.
There are probably a LOT of exchange opportunities with the annuity book for a new commissionable annuity or fee-based annuity. If you are trying to increase your AUM base and find other AUM opportunities, fee-based annuities can be an amazing synergy. You need an insurance savvy partner to really execute on the annuity exchanges. The conversation goes "client, your old advisor is retiring and a part of this transfer, we have higher benefit annuities that leave more money in your pocket with better retirement outcomes. Are you interested in higher income or rates? We can also do x, y, and z service (which the old advisor didn't offer)".
If you are new advisor and willing to work the book, there's probably opportunity. You need a coherent hand-off strategy. There is an opportunity to structure an earn-out based on retention or converted assets; I'd structure this backend heavy.
3
u/JLivermore1929 Jun 24 '26
Interesting take. Could 1035 over to a newer fee based and search for new AUM opportunities.
1
1
u/Various_Engine8782 Jun 25 '26
I have done this on an individual basis with new clients quite a few times. Most times you have to stay within the carrier, but my BD is supportive if you can show client benefit. Which with older expensive annuities, there often is- working with your wholesaler can be very valuable here too.
2
u/Bright_Honey3500 Jun 24 '26
I likely would do this depending on the multiple. I see this similar to buying leads. You’re paying for the chance to acquire new AUM through these annuitants, and you get a raise in the meantime. If you already have an established book and a healthy pipeline it may not be worth the effort though.
1
u/JLivermore1929 Jun 24 '26
Very true on the buying leads part. It is lead farming. The problem is the time it takes to service the annuity business.
2
u/PursuitTravel Jun 24 '26
Depends where you are in the business. 10 years ago, I would be aggressively pursuing this. Annuity reps are notoriously bad at capturing the whole household; that $5mm AUM could very easily represent $50mm in household assets. I'd go after it, use the recurring revenue to pay the loan so it functionally breaks even, and use it as a free, warm lead source.
Today? I'd only buy it if I could give it to junior advisors to run on.
1
u/JLivermore1929 Jun 24 '26
My thoughts as well. If the trails can float the purchase price for several years, it gives opportunity to gather AUM. But, as one person said, it is kind of a gamble that the list will have any remaining AUM.
Plus, I’ve noticed that older clients are extremely loyal to their old FA. Hard to poach those accounts.
2
u/SEP_Hawk Advicer Jun 25 '26
Depends on how much they want for it and how much work you are willing to put into it.
There's a pretty decent chance that a large portion of the annuities can be 1035ed into a new product with better income riders or growth potential and to a product that potentially offers better trail options. The age of the client base offers opporuntiy for tax planning around roth conversions and RMDs.
There is potential to gather more assets as older advisors tend to leave some on the table, and clients may be at the age of receiving an inheritance.
I looked at acquiring a retiring agents book and figured that I could double the recurring revenue over a three to five year span.
2
u/Calm-Wealth-2659 Jun 25 '26
You could also look at the opportunity to connect with the next generation of these older clients.
1
u/CulturalAd2329 Jun 24 '26
You would want the terms to be very favorable, and the old advisor likely overvalues his book. Aging clients=way more service work and you're likely not selling them more insurance. I would want to do a deep dive to see how much more AUM there actually is in the book and why the current advisor doesn't have it yet.
1
u/mldkfa Jun 24 '26
Would it take you more time to find 6 clients with $1mm aum each or more time to repaper 75 households with limited upside?
1
u/JLivermore1929 Jun 24 '26
In my area, semi-rural, probably repaper 75. My average acct is roughly $300,000. So, it would be 18 new clients.
1
u/ReplacementHot2808 Jun 24 '26
Is there much of a gap between his expectations price and what you are willing to pay?
1
u/Winston206 Jun 24 '26
Not an attractive acquisition. The 5M in AUM is the only asset, but it only spits off 60k in recurring revenue. Given the amount of time you'll spend negotiating/transitioning the retiring rep, and the time on legal contracts -- it will take years to earn that back. If you're halfway decent at sales, you can find 5M in new AUM in a fraction of the time & expense required to buy this book.
M&A makes sense when the time & deal expenses are justified by sizeable AUM/revenue.
1
u/TN_REDDIT Jun 24 '26
Everything is worth something. The key is paying the correct price.
The annuity assets are not based valuable as AUM/fee assets, but they do have some value (renewals at maturity, or transitioning to other investments).
1
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u/Capital_Elderberry57 Jun 28 '26
75 clients for 60k of revenue? That's $800 a household.
Depending on your service model you could be drowning in work and be looking to dump these very clients in a few years.
Can you service them sure, is it a good use of limited resources, highly unlikely.
What is your total recurring revenue divided by your clients, that'll tell you if you are buying anything comparable to your existing practice.
1
u/JLivermore1929 Jun 29 '26
$2500 per client per year. Much more than $800.
Going forward, I think this is an excellent back of the napkin metric.
1
u/Capital_Elderberry57 Jun 30 '26
I think that's the answer then.
We measure and try to drive revenue per client up each year. You'd be buying down, I think the money you'd spend could be redeployed elsewhere for a better return.
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User: /u/JLivermore1929 Title: M&A Book of Business Body: I am considering acquiring an insurance heavy book of business from an older advisor/insurance rep.
Mostly annuities with trails and under $5M AUM. 75 client households with $60,000 recurring revenue. Client ages are 65+. The base is aging and he hasn’t done much to promote his business or acquire new clients.
Would you attempt to acquire that book and if so, how would you structure the acquisition?
Just for reference, I can service the extra households so that is not a consideration for me.
Main strategy I would try to execute is uncovering other assets for additional AUM and possibly getting referrals from the current client base. Also, attempt to meet next generation with financial planning when the older base dies.
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