Financing A Financial Advisor Acquisition Or Succession Plan With Live Oak Bank

Michael Kitces | Nerd's Eye View, June 2016

Summary: With a large number of financial advisors approaching retirement in the next 10 years, there has been a growing interest in advisor mergers, acquisitions, and succession plans. In many cases, though, deals don’t get done because it’s difficult to find a buyer and a seller who are a good match. And in some cases, the probably is simply that it’s too difficult to get financing for the transaction.

The most important factor in these deals is the discounted cash flow, because that’s what pays back your investment. A valuation is done at a point in time, not a future looking, which is how a buyer’s looking and say, “Well, how long is it going to take to pay back my investment?” That’s what they’re more interested in, and that’s what I’m more interested in. That’s why we want a strategy in place of how you’re going to make sure the clients move from one platform to another. Are we re-papering? Are we changing investment philosophies? All those things that cause ripples in the water, we want to mitigate as much as we can."