Statistics show that 50% of all financial advisors run solo operations, and while many of these people are quite successful, their growth is limited by the number of clients they can manage. Buying a financial practice is a great way to enjoy solid growth within the industry, particularly when many of the largest and lucrative deals are going to bigger firms.
Are There Perks to Flying Solo?
Although solo financial advisors seem to have a difficult time in today’s uncertain climate, the truth is that running a one-man (or one-woman) show still has some benefits. For one, you get to call all of the shots and keep the vast percentage of all of your revenue. You also get to decide how many clients you can manage comfortably, which takes much of the pressure off of your shoulders. Finally, you have the peace of mind that your success depends on your own choices and performance – no one else’s. Still, in today’s economy, many people are buying financial practices in order to increase their revenues.
Benefits of Buying a Financial Practice
When you buy a financial practice, you have a central headquarters to call your own. What’s more, you can hire additional advisors as you like, each of whom can manage even more clients. Buying a practice is a great way to brand your services, as well. When you can make the name of your practice memorable, more people will turn to you when they want help or advice with investments, retirement accounts, debt management, and more. Today’s practices are scalable, as well; if you “grow out of” your current practice, you can merge with or purchase another to grow even more.
What the Clients Want
Some clients are perfectly comfortable working with a solo advisor in a home office setting, but others prefer the sense of security that a popular firm with thousands of employees offers them. Although you do not have to grow your own practice to the size of the world’s largest in order to succeed, in many cases, buying a financial practice is enough to help you see a tremendous boost in your overall revenue. Consumers feel that a branded practice is more professional and secure than a single advisor.
Is It Possible to Profit Instantly?
Even as a solo advisor, buying the right firm can help you increase your profits the very same day. The purchase price of a firm should directly reflect the potential net profits you can make from the practice over time. You need to make sure that this difference in numbers would represent a decent return on your overall investment, but at the same time, you should remember to factor in an appropriate risk premium. If you see an expected return of 15% to 25%, then the firm is profitable and certainly a great buy.
Although you might be comfortable as a solo advisor, purchasing a financial practice can help you become even more successful. You can find firms of just about any size, allowing you to still enjoy many of the perks of a solo operation while generating more revenue from more clients.