Cold-calling can work not only for building an advisor's business, it can also lead to similar success in finding retiring advisors looking to sell their books.Yurii Karvatskyi/iStockPhoto / Getty Images
In Buy the Book, advisors discuss their experiences acquiring a book of business, from practice valuation to client retention.
Kreesan Naidoo, 30, president of NW Strategic Private Wealth Management Group at Global Maxfin Investments Inc. in Toronto.
When he was 22, Kreesan Naidoo entered the wealth management industry by joining IG Wealth Management Inc., building his business through cold calls, seminars and other networking events. His father, Bala, was a regional director at the firm and one of his mentors. When deciding to become an advisor, Mr. Naidoo spoke to top advisors at his previous dealer.
“That fast-tracked my learning,” he says. “I had some good mentors along the way who helped me shape my value propositions.”
Two years ago, he decided to establish his own independent firm, NW Strategic Private Wealth Management Group. Mr. Naidoo says he manages more than $200-million in client assets and more than 300 clients; he specializes in comprehensive financial planning for professionals and business owners. He has a staff of six.
The book
Mr. Naidoo met the seller, who worked for his former employer, on the phone. Cold-calling had worked so well for building his business, he thought he could achieve similar success finding retiring advisors looking to sell their books.
The advisor and Mr. Naidoo established a good rapport on the phone, but the seller was concerned about transferring clients to another firm. Some advisors prefer to sell to someone at the same firm, as clients don’t have to transfer accounts. But having already moved 70 of his clients to NW from IG, Mr. Naidoo knew how to conduct a smooth transition by being transparent and upfront with clients about the process. The deal went through this past February.
Kreesan Naidoo was willing to pay more for a book of clients who fit into his specialization.Supplied
The 100 clients he acquired are mostly in their 60s, either retired or working as doctors, dentists or incorporated business owners. They were invested in mutual funds primarily.
The price
Mr. Naidoo paid more than the industry average of 2.5 times recurring revenue. It was also significantly more than the seller’s firm was offering, he says. With this book, he says he understood the lifetime value of the clients, who fit into his specialization: professionals and business owners.
“I wanted to ensure I could provide an equal or preferably better level of service while meeting their expectations for the long term,” he says.
His dealer, Global Maxfin, partners with a lending firm that specializes in acquisition loans for advisors. Mr. Naidoo says loans are approved on a case-by-case basis and the interest rate is more competitive than those offered by regular financial institutions.
The transition
The seller and Mr. Naidoo met with all clients to explain what services they would be receiving. Transition planning took around 18 months, he says, and he estimates that he and the seller had at least 60 meetings.
“The amount of time it takes should not be underestimated,” he says.
When speaking with clients, Mr. Naidoo used his age to his advantage, noting that many older clients worry about not having an advisor to grow with. He offered them a lifelong relationship, something many advisors can’t provide.
“That’s one key variable I can deliver on,” he says.
He also addressed high mutual fund fees. Mr. Naidoo emphasized his product independence and ability to offer his new clients comprehensive planning and an expanded product shelf with lower-fee options.
“Investment planning is usually the last conversation we have,” notes Mr. Naidoo, who has the qualified associate financial planner certification.
The new clients valued Mr. Naidoo’s full gamut of estate planning, corporate and tax planning, and risk management, he says, and that’s why more than 95 per cent made the move and stuck with him.
Intergenerational planning is also a focus of Mr. Naidoo’s practice. He’s aware of industry statistics showing heirs changing advisors when the wealth transfer takes place, so he aims to connect with clients’ children sooner.
“Not many advisors take on the kids of the clients because they may not have much in assets, but that’s a huge mistake advisors make,” he says. “Get the kids as clients from day one, so when they do get that money, it will flow to us as they’re already clients and we have a very strong relationship with them.”
He notes his age also makes connecting with younger generations a bit easier.
Advice for buyers
Determine the stickiness of the client relationships upfront, Mr. Naidoo says. Is the relationship with the advisor or with the firm? He notes there aren’t many external acquisitions of bank advisors’ books, for example, as many clients prefer to stick with the bank name.
Mr. Naidoo also recommends negotiating with the seller to stay on in the business for two to three years. In his case, the seller is staying even longer – five years – in a consulting role as he still enjoys the business.
Are you a financial advisor or financial planner who recently bought a book of business? Globe Advisor would love to speak with you about your experience. Candour, especially around the finances, is appreciated, and your name and photo will be used for the column. Please e-mail dgage@globeandmail.com and include a brief synopsis of your situation.