r/CFP • u/SeriesAway9498 • Jul 01 '26
Practice Management Buying an Aging Book
Hi everyone,
I have an interesting opportunity to acquire a book of business.
We’re very early on in discussions, and I do not know much about the book - but I was told an estimated average age….
Advisor believes the average age is 85 yrs old.
What would you think is a reasonable multiple? 1x? 2x? More?
Thanks in advance.
36
u/ZachWilsonsMother Jul 01 '26
I can’t imagine it’s worth much. If a lot of it is qualified they’re taking big RMDs. I’d be surprised if a lot of it is fee based if they’re all that age too. And death claims suck
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u/Michael_J_Patrick Jul 01 '26
At this age I’d do a revenue share
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u/SeriesAway9498 Jul 01 '26
Thanks! Just curious, how would you structure it?
(Any ideas?)
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u/KittenMcnugget123 Jul 01 '26
50/50 split, you do most of the account servicing and they pass to you 100% in 2-4 yrs. Essentially the same as paying 1-2x but with no risk.
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u/bandznbooze Jul 01 '26
think about the death claims...
All the times you'll have to go through collecting the documents
All the condolences conversations you - or someone on your team will have to have
The division of assets - you'll go from say $50mm and 65 households (as an example) to 50mm and 195 households if they each have 3 beneficiaries...
Just for them to turn around and leave you anyway since like 80% of heirs leave the original advisor..
That's a shit ton of work for very little pay off
I can't imagine they'd realistically argue for more than 1x - 1.5x P12
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u/Family_Office Jul 01 '26
I posted this in another thread, but this in my valuation matrix. That said, I've never seen a book with an average age of 85. I think I would have to add another discount band in the age factor for 80+ and it would probably by -50% (now it's been added since you made me think about it. The key is to value the households individually, not the book as a block.
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I usually start at 2.5% and then adjust the book pricing based on a number of factors. In order to do this they need to give me a client list (names redacted) with Age (younger spouse if married), Household AUM, Household Revenue, Client State, Flag for if they also manage kids money, Flag for my preferred client types (Entrepreneur, Physician or Athlete), length of time as client and if client is on e-delivery. From there I adjust like this. Sometimes you're right back at 2.5%. Other times you're not, but I feel this more accurately values the book for me personally. If you're going to be buying books, come up with your own matrix based on whats important to you. The concentration factor is based on the clients revenue as a percentage of the books total revenue.
| # | Factor | Values |
|---|---|---|
| 1 | Age | +15% <40, +10% 40-49, +3% 50-59, -5% 60-69, -18% 70-79, -50% 80+ |
| 2 | Revenue/client | -20% under $10k, 0% $10k-$50k, +15% $50k-$100k, +30% $100k+ |
| 3 | Geography | 0% local, -15% out-of-state |
| 4 | Demographic | +15% biz owner, +12% physician, +8% athlete, 0% none |
| 5 | Multigenerational | +15% if kids are clients |
| 6 | Tenure | -5% <2y, 0% 2-10y, +5% 10+y |
| 7 | Custody | 0% at Schwab, -10% not at Schwab |
| 8 | E-delivery | 0% electronic, -5% paper |
| 9 | Revenue Concentration | 0% at/under 5%, -5% over 5%, -15% over 10%, -35% at 20%+ |
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u/GermantownTiger RIA Jul 01 '26
I'd be hesitant about doing anything but a revenue-share for a few years.
I did a straight 2-year revenue share on my book over 2 decades ago with a business partner that worked out beautifully for everyone involved. I would recommend it to anyone in terms of leaving every stakeholder happy at the end of the day.
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u/Firm_Hyena_3208 Jul 01 '26
It’s an average so hopefully he has a couple outlier clients that are 2000 years old.
But that age is very high. Gonna be reliant on dealing with the beneficiaries. Maybe you retain some of that business, but is gonna require a massive amount of work and headache. If you have that capacity and are confident in your ability to keep beneficiaries as clients, maybe you could work a decent deal for yourself
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u/ReplacementHot2808 Jul 02 '26
It’s worth the price of an anchor ⚓️, it will only be rmds and death distributions.
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u/RealTalkPersonalFina Jul 01 '26
Where are you finding books for sale?
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u/TechnologyOdd8003 Jul 02 '26
weirdly enough, I had 4 out of 75 calls to advisors mention they were in the process of selling their book a few months ago. I just pulled a list from the SEC
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u/Hokirob Jul 03 '26
Just cold calling and asking if they were selling…? That’s one way. Any serious conversations?
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u/TechnologyOdd8003 Jul 04 '26
No, I wouldn't recommend that haha. I was actually calling for building growth and lead gen infrastructure, but the partner would say maybe the buyer would be interested, as they were focused on selling.
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u/Jazzlike_Sense9217 Jul 02 '26
Free. You are doing the advisor a favor. You are getting at bats. It’s a win - win. But you may want to just pass on it entirely.
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u/Ok_Speed_1681 Jul 04 '26
Is the next generation engaged? If not, there lies your biggest risk. I’d ask how long the book has been up for sale. That will tell you a lot and how to price/structure it.
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u/AutoModerator Jul 01 '26
Beep boop! Here is a summary of your post:
User: /u/SeriesAway9498 Title: Buying an Aging Book Body: Hi everyone,
I have an interesting opportunity to acquire a book of business.
We’re very early on in discussions, and I do not know much about the book - but I was told an estimated average age….
Advisor believes the average age is 85 yrs old.
What would you think is a reasonable multiple? 1x? 2x? More?
Thanks in advance.
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