More firms up for sale, but it may pay to wait

For nearly a decade, industry analysts have predicted that a large number of individual planners and advisers will sell their practices.

Amid the struggling stock market, which has punished both investors and their advisers, that prediction now is coming true.

After some false starts, including high-profile attempted roll-ups over the past couple of years by the likes of the Evensky Group in Coral Gables, Fla., a steady stream of deals for both large and small firms has developed.

Over the past 12 months, 72 deals for advisers that charge clients a fee have been completed, says Charles “Chip” Roame, principal of Tiburon (Calif.) Strategic Advisors, a leading consultant in the fee-based financial adviser market. There have been only 137 deals in the past five years.

“The talking is over,” he says. “There’s real activity.”

A growing number of aging baby boomer investment professionals are ready to sell their businesses, particularly as the stock market continues to falter, Mr. Roame says.

But it may pay to wait. In the coming years, valuations of the largest and most stable firms will rise, while those of smaller firms with poor record-keeping will slide, he says.

Tiburon earlier this month issued an update of a two-year-old report on trends in acquisitions for financial advisers and planning for succession.

The updated study shows that the firm has identified 500 specific fee-only adviser firms and practices that could merge or be acquired over the next five years.

Market forces are at work. Large and small banks and CPA firms, particularly hungry for acquisitions, are stepping up to make deals.

“The interesting thing is that anyone would sell for the right price, and I think the right price is coming down,” says Joan Gruber, a certified financial planner in Dallas who sold her eponymous firm 18 months ago to Jim Almond, another Dallas CFP. She now works with investment banks to spot potential acquisitions.

“There’s more interest from acquirers, but it’s still tough to get a good firm to sell or partner up,” Ms. Gruber says. Still, she adds, “there’s a pent-up demand to sell.”

Mr. Roame says the deals over the past year range from a price of nearly $750,000 for a firm with $50 million in assets under management all the way up to a price of $30 million for a firm with $1 billion.

The buyers, he says, range from “tiny” banks to some of the most prominent institutions in the financial planning and high-net-worth market. They include Mellon Financial Corp. of Pittsburgh, U.S. Trust Corp. and Bessemer Trust Co., both of New York, and BB&T Corp. of Winston-Salem, N.C.

Mr. Roame also says tools for advisers looking to sell continue to proliferate. A number of services have sprung up. Two of the best, he says, are FPtransitions Financing of Portland, Ore., and iValue, which serves brokers with the six broker-dealers that make up Los Angeles-based SunAmerica Financial Network Inc.