In 2024, Chris Anderson was approached by an 89-year-old stockbroker seeking a successor.Jeanette Sesay/Supplied
In Buy the Book, advisors discuss their experiences acquiring a book of business, from practice valuation to client retention.
Chris Anderson, a 53-year-old senior portfolio manager and senior investment advisor with RiverRock Private Wealth Partners at Harbourfront Wealth Management Inc. in Edmonton
As the primary breadwinner with a young family, Chris Anderson decided to change careers.
In 2007, he left the pulp and paper industry to join London Life as an insurance advisor. He only earned commissions at the time (“I had no choice but to make it work,” he explains), but thrived and got his certified financial planner designation.
He had no natural client market or demographic, but over a period of 15 years, he acquired 400 clients and $150-million in assets through retiring advisors at the insurance agency.
However, as he focused on financial planning, he noticed he was lacking product options for clients.
“We didn’t have any good solutions on the fixed income side for retirees,” he says. “The limited product shelf was holding the clients and us back.”
After shopping around at different dealers, including banks, he settled on Harbourfront, as he liked the firm’s entrepreneurial approach and independent product shelf. Soon after switching firms, he earned his chartered investment manager designation.
Mr. Anderson now has two associate advisors on his team, along with four people providing administrative support.
The book
In early 2024, Mr. Anderson was approached by an 89-year-old stockbroker seeking a successor for 94 clients – loyal seniors with small accounts.
While there was little upside to taking on these clients from a revenue point of view, he saw it as an opportunity to grow through referrals by tapping into younger generations.
Mr. Anderson and the seller hit it off, despite their different approaches to the business (and Mr. Anderson being 37 years younger). The seller traded investments and provided no financial planning services, Mr. Anderson says. He had managed a billion-dollar book but sold it off decades ago.
“There was no [financial] planning. It was all about growing their wealth,” Mr. Anderson explains. “He wasn’t super active in the business.”
Mr. Anderson was also empathetic to the seller’s plight.
“He had no plan. If he were to pass away, those clients were just going to be abandoned,” he says.
One major wrinkle: the seller and Mr. Anderson were both portfolio managers but had different regulatory bodies and licensing.
That meant Mr. Anderson would have to purchase the seller’s client list and “repaper,” or transfer, clients who wanted to make the move to Harbourfront.
The price
Mr. Anderson paid two times recurring revenue for his portion of the book, below the industry average of 2.5 times.
The seller wanted the full amount paid upfront, but Mr. Anderson refused. Not being able to transfer clients in bulk due to the different licensing meant more work on his part, and Mr. Anderson believed he had room to negotiate as the seller was considerably older and had no succession plan.
With that in mind, Mr. Anderson offered the seller an upfront deposit, with prorated monthly payments based on the assets that transferred over until the end of 2024. He financed the purchase with an external loan from Care Lending Group.
Mr. Anderson and the seller agreed to the terms in June, 2024.
The seller reached out to all clients, introducing and endorsing Mr. Anderson as his successor. Mr. Anderson followed up with the clients one week later to schedule appointments.
An unexpected death
In October, the seller died suddenly and Mr. Anderson says everything came to a grinding halt. Even though the terms of the deal had closed, he says someone on the seller’s end needed to facilitate the asset transfer.
“But there was nobody left behind who was licensed and could process orders. It was shocking,” he says.
The seller’s family had to hire a third party to manage the business and assist with winding it up.
Mr. Anderson agreed to extend his payment conditions by three months, to March, 2025, giving the family more time. At that time, he paid a lump sum and closed the deal.
Mr. Anderson was notified of the death by the seller’s assistant, whom he had never met in person. In hindsight, he says he would have pressed the seller for contact information for his spouse and children.
“Due to his age, I should have had backup contact details in the event something happened as it did,” he says. “It would be a different situation if he had a team … but he was a one-man show with a very part-time assistant.”
Advice for buyers
Mr. Anderson says more than 70 per cent of clients moved to him, representing 53 per cent of the assets.
Those clients who came on board are now receiving broad financial planning and investment advice, he says.
They’re in actively managed model portfolios, which he says allows the team to respond to market conditions and offer downside protection, and some clients also have alternative investments.
Mr. Anderson says buyers need to check their math to ensure buying makes sense.
“When you factor in the cost of borrowing and income tax, it doesn’t leave much margin left over,” he says. “You need vendor financing to make the math work.”
He also says buyers shouldn’t be afraid to negotiate a deal that works for them. For example, he was glad to pay a deposit upfront with more payments based on client assets moving over.
“Doing so mitigated my risk,” he says.
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.