How to Sell a Financial Adviser Client Book in New Zealand

On this page

1. First, decide what you are actually selling
2. Get an appraisal before you decide anything
3. Prepare the book before it is looked at
4. Understand why this is done confidentially
5. Identify buyers, rather than find them
6. Offers: read the structure, not the multiple
7. Due diligence
8. Documentation and advice
9. Transition is the part that decides whether it worked
10. How long it takes
11. What it costs you
12. Frequently asked questions

Selling a client base is not much like selling a business and nothing at all like selling a house. There is no listing, no auction and no public price. What there is instead is a sequence of decisions, most of which are made before a buyer is ever contacted.

This is what that sequence looks like in practice.

First, decide what you are actually selling

More advisers get this wrong than get it wrong later. There are three different transactions and they are valued differently.

A client book sale is the client relationships and the recurring revenue attached to them. Nothing else moves.

A business sale includes the book but also the things around it — staff, systems, brand, premises, contracts, and the capability to keep writing new business.

A partial book sale is one segment of your clients: a revenue stream, a region, an age band, or simply the clients you no longer have the capacity to service properly.

Most transactions in the New Zealand advice market are the first or the third. Advisers frequently arrive assuming they have to sell everything and leave having sold half of it.

Get an appraisal before you decide anything

Not because it commits you to anything, but because almost every subsequent decision depends on the number.

An appraisal tells you whether a sale gets you where you need to be, whether a partial sale would do the same job, and whether waiting two years and fixing a few things would be worth more than transacting now. Advisers who skip this step often discover the answer at the point where it is too late to act on it.

An appraisal is confidential, it does not put your business on the market and it does not disclose your identity to anyone.

Prepare the book before it is looked at

The gap between the bottom and the top of a valuation range is decided almost entirely by how much the buyer has to guess. Reducing the guessing is preparation.

At minimum, before anyone looks at your book, you want to be able to produce:

• recurring annual revenue, reconciled back to the underlying clients or policies
• client numbers, with contact details that are actually current
• an age profile of the client base
• retention or persistency history, with figures rather than assurances
• concentration by client and by provider or lender
• a record of when each client was last in contact with you
• a plain description of how clients are serviced now

None of that is a document you need a professional to produce. Most of it is a CRM export and a morning's work. Seven ways to increase the value of your client base before you sell covers the parts that take longer.

Understand why this is done confidentially

Advisers are more exposed than most business owners during a sale process, because the asset can be damaged by the process itself.

If clients hear that you are selling before you have anything to tell them, some will act on it. If competitors hear, some will use it. If your own staff hear, it changes their planning. And a book that has been shopped around and not sold is a harder book to sell afterwards.

That is why client bases are not advertised. In a properly run process:

• your client base is never publicly listed
• your identity is not disclosed to a buyer without your approval
• buyers are described your book in general terms — type, approximate size, region, characteristics — before they are told whose it is
• no buyer is approached until you say so

If a process cannot promise you those four things, it is worth asking why.

Identify buyers, rather than find them

There is no shortage of buyers for good New Zealand advice books. There is a shortage of buyers who suit a particular book.

Buyers differ on book type, region, client demographics, revenue size, provider mix, how large an acquisition they can absorb, and how they prefer to structure a transaction. A buyer who wants exactly what you have will pay more, transition your clients better and be easier to deal with than a buyer who is stretching to accommodate you.

The highest-value buyer is rarely the first one, and almost never the closest one.

This is the step where using a network matters more than anything else. Approaching two obvious local buyers directly is how a book gets sold for the bottom of its range.

Offers: read the structure, not the multiple

A headline multiple is the least informative number in an offer.

Offer B is 12.5 per cent higher and may well be worth less. What decides it is buried in the terms:

Price and structure are one decision, not two. An adviser who negotiates hard on the multiple and accepts the structure as drafted has usually negotiated the wrong thing.

Due diligence

Once terms are broadly agreed, the buyer verifies what they have been told. Expect them to want the revenue reconciled to source records, the retention history evidenced, the client data reviewed for completeness, and your compliance and file documentation looked at.

Two pieces of advice about this stage. First, disclose the problems yourself, early. A buyer who finds a decline you did not mention will re-price the whole book, not just the part that declined. Second, be careful about what client information moves and when — your own privacy and regulatory obligations do not pause because there is a transaction on.

Documentation and advice

You need your own lawyer, and you need an accountant to look at the tax treatment of whatever structure is proposed. This is not a formality: the difference between how the consideration is characterised and paid can be worth more than the negotiation you just finished.

The sale and purchase agreement is where the retention mechanism, the security for deferred payments, the restraint and the transition obligations become real. Read the schedules.

Transition is the part that decides whether it worked

Everything up to settlement determines the price. What happens after determines whether you are paid it — and if any part of your consideration is retention-linked, the transition is not the buyer's problem, it is yours.

What works, in roughly the order it matters:

1. A joint letter or email to clients from both advisers, sent before anything changes.
2. Personal introductions for the relationships that matter most.
3. A defined period where you are contactable, with what "contactable" means written down.
4. Client notes good enough that the incoming adviser sounds informed on the first call.
5. A review schedule already in the calendar, so clients have a reason to meet the new adviser early.

Advisers routinely underestimate this. Clients rarely leave because the new adviser is worse; they leave because nobody told them what was happening in a way that felt considered.

How long it takes

Longer than most sellers expect, and there is no honest single answer. Buyer identification, offers, due diligence, documentation and transition each take as long as they take, and the fastest buyer is frequently not the right one.

What can be said is that preparation is the part you control, and it is the part that most often adds months when it has been skipped.

What it costs you

There is no brokerage, listing or success fee charged to the seller for using The Client Base. You will still have your own costs — legal advice, accounting advice, and your time during transition. Those are real and worth budgeting for, and they are not avoidable in a transaction of this kind.

Frequently asked questions

General information only, and not legal, financial, accounting or tax advice. Any transaction should be entered into on the basis of your own professional advice.