Book Announcement by FP Transitions: Buying, Selling, & Valuing Financial Practices: The FP Transitions M&A Guide

LAKE OSWEGO, Ore., Aug. 22, 2016 /PRNewswire/ -- In his latest book, Buying, Selling, & Valuing Financial Practices: The FP Transitions M&A Guide (John Wiley & Sons, Wiley Finance Series, August 22, 2016), David Grau Sr., JD, president and founder of FP Transitions, the leading firm in the retail independent financial advice space for succession and acquisition management, presents the definitive guide for anyone contemplating today's unique complexities and pitfalls regarding the process of buying or selling an independent financial advisory business.

As one of the industry's leading experts in helping independent financial advisors buy, sell and transition their businesses to new owners, David Grau Sr. and the FP Transitions Team bring over 18 years of experience working with over 10,000 independent financial advisors on matters related to valuation, continuity planning, succession planning and change-of-control transactions. This latest book contains insights gleaned from more than 1,500 completed transactions and draws upon the firm's proprietary data base containing information on more than 8,000 practices around the United States.

Grau's detailed exposition is also accompanied by pithy advice. His rule number one is: "You only get one chance to do this right." And he continually admonishes selling advisors with motivational counsel, such as: This book is designed to put you in control of your future and to level a playing field now dominated by buyers of independent financial advisory practices – a level playing field is good for your buyers, too! But sellers, you need a plan and you need to execute it in a professional and learned manner."

Although the book is dually aimed at two distinct audiences – buyers and sellers, each of which receives its own dedicated foreword – the book's dominant objective is to redress the vulnerability of sellers when encountering the marketplace. As Grau states, the goal of the book "is to help advisors who contemplate an exit strategy involving the sale of their practice to do a better job; to value it using the correct standard of value, the proper valuation approach and method for the purpose at hand, and by doing so ensure that a great fit can be attained to provide a seamless transition for the client base."

At the heart of the book, Grau addresses a paradoxical truth: despite the fact that in today's market buyers outnumber sellers by an astounding 50:1, and although available independent advisory practices regularly generate robust buying interest, the current environment is not a "sellers market;" in fact, it is actually the sellers who are at a considerable disadvantage.

As Grau explains, there are many factors stacked against sellers: the motive of broker-dealers to keep practices – and their clients – within the broker-dealer's organization; the fact that sellers usually have only one shot during their lifetime to sell their business, whereas successful buyers may conclude multiple transactions and use them to hone their acquisition skills; and the fact that there are a variety of ways to arrive at an appropriate value for a business – and that too often sellers are unaware of the best ways to evaluate what they have built and to reap the greatest possible rewards. 

Recent industry trends reinforce the timeliness of the book's publication. In today's independent universe, M&A transactions are increasing at a pace never before experienced. This has been driven by the convergence of several interrelated developments: the aging of the advisor population, resulting in a greater number of practices coming onto the market; the increased burdens of regulation and compliance – including the recent DOL fiduciary ruling – which are motivating advisors either to join with larger advisor groups for support or to exit the industry altogether; the greater availability of bank financing; and the development of new financing structures and valuation techniques (some of which have been pioneered by FP Transitions), making the acquisition of independent practices more readily feasible.

Other key highlights of the book include the following:

• The important distinctions between the terms succession planning, continuity planning, and planning an exit strategy. Although many within the industry use these terms interchangeably, Grau points out that whereas succession planning involves effecting a phased internal transition, an exit strategy involves selling a business – whether internally or externally – in a single and complete transaction. The two paths are fundamentally different, and an advisor needs to understand which path is right for his or her circumstances. Buying, Selling, & Valuing Financial Practices is clearly focused on effecting a successful exit strategy. For those interested in succession planning, Grau's previous volume, Succession Planning for Financial Advisors: Building an Enduring Business, (John Wiley & Sons, Wiley Finance Series, June 28, 2014), provides invaluable guidance and has become an industry standard.
• The differentiation between selling a book, a practice, a business, and a firm.  Most advisors today – about 70% -- merely own a book of business, whose value – and mode of compensation -- primarily resides in its top-line revenue generation. Practices, which may include support staff, some infrastructure, as well as other advisors owning their own books of business, account for 25% of the industry, and similarly rely on an "eat what you kill" model of income generation and compensation. Businesses, which tend to enjoy a structure based on equity ownership, are sustainable entities capable of being passed from one generation to the next; these account for about 4% of the industry. The final 1% of independent advisors own firms, which are established, multi-owner, multi-generational entities focused on attracting top talent which collaborates interdependently to create bottom-line profitability. Each of these structures commands different values and supports different methods of valuation. As Grau points out, firms tend to buy businesses, businesses buy practices, and practices buy books. 
• Walking the reader through a comprehensive overview of all the steps entailed in preparing a practice or business for sale (or purchase). These steps include a discussion of the various valuation models that might apply in a sale situation, and also examine the many practical, procedural, regulatory and legal considerations a selling advisor must address.

Although the book is not intended to be a "do-it-yourself" manual – which might lead an advisor to mistakenly believe that he or she could dispense with retaining experienced professional assistance – it nevertheless serves as an authoritative guide to enable an advisor to embark on a financially pivotal, life-changing milestone event in a manner that is fully educated and informed.

About FP Transitions
Based in Lake Oswego, Oregon, FP Transitions partners with independent advisors to build businesses of enduring and transferable value, and also operates the largest open market for buying and selling independent financial advisory practices. For more information, please visit www.fptransitions.com.

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SOURCE FP Transitions

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http://www.fptransitions.com