You are buying
relationships.

Practices are described as bought and sold. What changes hands is a set of relationships that can decline to come with you.

What you are actually buying

Advisory practices are described as being bought and sold, and in most transactions what changes hands is not really an asset. It is a set of relationships that can decline to come with you.

That is the whole risk of the category, and it is why structure matters more than price.

Price is the least interesting term

The multiple gets all the attention and the payment structure determines the outcome. What matters is how much is paid up front versus over time, and what the deferred portion is contingent on.

A deal where a meaningful share is contingent on client retention aligns both parties. A deal that is entirely cash at close transfers all the risk to the buyer, and the seller's motivation to help ends the day the money clears.

Diligence that actually predicts retention

• Client age distribution. A book averaging seventy-four is decumulating. You are buying an income stream with a known decline built in.
• Concentration. If the top ten relationships are a large share of revenue, you are buying ten relationships, and each one's departure is material.
• Who holds the relationship. If every client deals only with the seller, retention depends entirely on their willingness to hand over well.
• Revenue quality. Recurring advisory fees are worth considerably more than commission or one-off planning income.
• Fee levels against yours. If their clients pay materially less, you have bought a repricing problem. If materially more, you have bought a retention problem.
• Compliance history and file quality. Missing agreements and undocumented exceptions become your findings the moment you close.

The integration nobody budgets for

Most acquisitions underperform on the operational side rather than the commercial one. Two firms means two custodial arrangements, two ways of doing reviews, two billing conventions and two sets of records that have to become one.

Firms that acquire repeatedly and successfully tend to have decided this in advance: every acquisition moves onto our platform, our process, our cadence, within a defined window. Firms that let each acquisition keep its own way of working end up operating several firms under one name.

The first ninety days decide it

Clients decide whether to stay based on what happens immediately after the announcement. Joint communication from both parties, the seller visibly endorsing rather than departing, no service degradation, and no fee change in the first year unless it was disclosed at announcement.

Change anything meaningful in the first quarter and you have confirmed the fear every client had when they got the letter.

The question to answer before you start

Why is this person selling? Retirement, health, a partnership breakdown, or declining revenue they can see and you cannot — these produce very different books at the same price.

What a buyer is actually pricing →