Adam Chapman of Yes Money in his office in London, Ont.Nicole Osborne/The Globe and Mail
In Buy the Book, advisors discuss their experiences acquiring a book of business, from practice valuation to client retention.
Adam Chapman, a 44-year-old certified financial planner at YES Money in London, Ont.
Like many advisors in his hometown of London, Ont., Adam Chapman got his start in the business by joining Freedom 55 Financial.
Unlike many, he wanted to focus on financial planning.
Between his university major in psychology and human nature, and his aptitude for business courses, he thought financial planning was the perfect mix.
His client-centred approach was similar to that of Mark Pincombe, another young advisor at the firm who was set to take over his father Ralph’s practice.
On Aug. 7, 2006, Mark was returning to the office after a client meeting when he was killed in a car accident. He was 26.
Ralph Pincombe’s retirement plans changed. Despite his grief, he continued working.
About two years later, in 2008, Mr. Chapman, then 26, was surprised when Mr. Pincombe approached him to step into Mark’s shoes as successor.
“I didn’t feel I’d been in the business long enough to be worthy of being asked. But I was client-centred like Mark,” he says. “I was spending more time with clients, building relationships and doing real planning before I put a product in place.”
The book
Mr. Pincombe’s 400 clients were soon-to-be retirees, some wealthy and some with middle incomes. Some just owned insurance policies and there was nothing in the way of planning, Mr. Chapman says.
He went about meeting the clients, all of whom knew Mark and were, along with Mr. Pincombe, grieving his loss.
“Clients weren’t ready for someone new yet and certainly not without Ralph,” Mr. Chapman says. “I was so not prepared to deal with the grief of these clients. That made our transition a little bit longer.”
Three years, to be specific, but they were in no hurry. Mr. Chapman says Mark’s death taught him about trauma and how to relate to clients’ pain. He’s now trained in palliative care and earned a certificate in bereavement support.
Patience and empathy paid off, as the book doubled because of referrals. Mr. Chapman saw Mr. Pincombe as a valuable mentor who championed his financial planning approach and helped him fine-tune client communications. He also loved the experience of having leads he didn’t have to bring in himself.
However, not all clients stayed as the focus moved toward comprehensive financial planning instead of selling insurance policies.
“Financial planning requires collecting paperwork and tax documents and having some really in-depth conversations about goal-setting,” Mr. Chapman says. “That’s not what the clients have bought into in the past.”
The purchase
In July, 2011, Mr. Chapman finalized the agreement to pay 2.5 times recurring revenue for 400 of Mr. Pincombe’s clients. The fee was more than average at the time. Mr. Chapman wasn’t sure how to navigate the conversation as he helped build the book he was now purchasing.
“There wasn’t a lot of guidance on how to do these things,” he says. “Succession conversations were still relatively fresh in a lot of circles. But both of us were reasonable people.”
He paid for the book over five years using the income the book provided. The purchase was completed in July, 2016.
The transition
After the long transition period leading up to the sale, the handoff was quick and Mr. Pincombe retired as soon as the acquisition was completed in 2016.
Mr. Chapman loved the team approach to client meetings and kept that going through the hand-off.
“One of us presents while the other observes, so we can compare what we felt resonated and what didn’t,” he says.
Soon after, Mr. Chapman rebranded. Today, he has three staff members serving 50 client households with $70-million in assets under management.
He whittled the number of clients down to those who fit the niche he’s serving, which is helping retirees turn their savings into income they feel confident enough to use.
Advice for buyers
Many advisors see acquiring clients as the path to success, but Mr. Chapman has a different view.
“When you buy a book, you’re buying the ability to gain more experience,” he says. “It’s the ability to gain experience faster than on your own. That’s a really unspoken value.”
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.