Jennifer Watson, managing partner with Watson Investments at Aligned Capital Partners Inc. in Toronto.Supplied
In Buy the Book, advisors discuss their experiences acquiring a book of business, from practice valuation to client retention.
Jennifer Watson, 35, managing partner of Watson Investments at Aligned Capital Partners Inc. in Toronto
Booking appointments and filling investment trades: that’s how Jennifer Watson started her career in 2014 at her father Peter Watson’s advisory business.
Within four years, she was working directly with clients after getting hooked on helping families with their financial needs.
Ms. Watson earned her MBA in 2018 and, that same year, secured her certified financial planner and chartered investment manager designations.
By 2021, she was leading the Watson Investments team at Aligned Capital Partners and its business operations. Peter, 77, shifted from his managerial role and continued his work as a portfolio manager, licensed insurance agent and writing his weekly personal finance column.
Together with three wealth managers and two client service specialists, the team managed $125-million in assets for 100 client families focused on discretionary portfolio management, cash flow management, tax planning and generational wealth transfer strategies.
Later that year, a seller who also worked at Aligned contacted them about taking over his business.
The book
The seller wanted to retire. When thinking about the best team to take over his clients, he thought Ms. Watson and her father made perfect sense. They already knew each other, served the same type of clients, displayed similar investment philosophies and worked for the same investment dealer.
At the time, Ms. Watson was at her cottage with a six-week-old baby. But she hightailed to the city and donned a suit to meet the seller.
The book was 100 client households with $105-million in investable assets. Many clients were business owners, and more were in their 60s who cared about wealth continuity for the next generation.
Ms. Watson saw the opportunity to add services – including tax planning, estate planning and cash flow projections – for the same fee the clients were paying.
She and the seller pulled the deal together over the next several months.
The purchase
Ms. Watson paid 3.2 times recurring revenue for the book. The purchase was 50 per cent split between assets and shares. Many buyers avoid any share purchases, which include the whole business and liabilities, rather than just the assets. But the seller’s preference didn’t deter Ms. Watson.
“We were very aware of the risk, but we did our homework,” she says. “The seller didn’t have a lot going through his corporation other than revenue. Expenses went through his personal side, so there wasn’t much [extra stuff] that came as part of the corporation.”
The deal closed in February, 2022, and payments were split over three years. Ms. Watson also negotiated a clawback for any client who left within the first year, deducting their revenue from the purchase price.
The deal was financed with a lender agreement through their dealer. The book was paid off in 2025 and Ms. Watson says she was able to retain 99 per cent of the assets.
The transition
The seller retired when the acquisition closed. Before retiring, the seller drafted an e-mail introducing the clients to Ms. Watson and detailing why he chose her. Ms. Watson then sent her own e-mail explaining she would contact them as soon as the deal became official.
Onboarding began quickly as a team member set up meetings with each client. Speed was paramount, Ms. Watson says, as was being able to alleviate any client uncertainty.
“The goal was to meet people as fast as possible. I wanted to get face to face with all the clients to get to know them and for them to get to know me,” she says.
She met them all within the first 10 weeks. In the meetings, she reviewed their accounts and took extensive notes about their goals and situations. She also learned what they liked about the retiring advisor and things they would like to see moving forward.
Because the seller had the same dealer, transitioning the clients was seamless.
Today, the team manages $350-million in client assets, with 300 client families.
Advice for buyers
Buyers need to ascertain if they have the right infrastructure in place to accommodate the book of their dreams, Ms. Watson says.
“If you’re buying a larger book, you need to have a team already well established and in place,” she says. “You need to make sure that with growth, your current clients still get the best service, time and attention they deserve.”
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.