By Adam Schorr, Chief Financial Officer
Ask an advisor what their practice is worth, and you’ll usually hear about assets under management, years in the business and the loyalty of a client base built over decades. Ask a buyer the same question and you’ll get a completely different answer.
That gap isn’t a negotiating tactic. It’s a structural mismatch in how the two sides are trained to think about value and it’s quietly costing advisors money at the exact moment it matters most.
A buyer isn’t purchasing a track record. They’re purchasing a forecast, a bet on whether the revenue in front of them will still be there in three years. That means they underwrite an entirely different set of variables: the transferability of client relationships, retention through the transition period, organic growth rate, process maturity and how scalable the business is without its founder driving every decision.
This is why a practice that an advisor considers a career achievement can get priced well below their expectation and why the advisor is often genuinely surprised by the number. It isn’t that the buyer is undervaluing the work. It’s that the two sides are pricing different things entirely.
“My clients love me” is not the asset you think it is.
Advisors often lead with client loyalty as a selling point and understandably so: it took years of blood, sweat, and tears to build. But to a buyer, loyalty that lives primarily with the individual advisor doesn’t read as an asset. It reads as concentration risk.
Based on my experience, the underwriting question a buyer actually asks is blunt: if the founding advisor stepped away tomorrow, what happens to the business? The more the answer depends on the founder being in the room, the more transferability risk the buyer has to price in and the lower the multiple, regardless of how large or loyal the book looks on paper. That single question does more to explain the sellers-vs-buyers valuation gap than any AUM figure ever will.
Buyers ask the same short list of questions, every time.
Strip away the specifics of any deal, and buyers are consistently underwriting the same handful of things: How old are the clients? How concentrated is the revenue? What does organic growth actually look like? How dependent is the business on the advisor personally? Are the key processes documented, or do they live in one person’s head? Is the service model scalable? And, most fundamentally, what’s the realistic probability that clients stay after the transition?
These aren’t due-diligence formalities. They are the valuation. An advisor who understands this list of concerns can start managing toward it years before a transaction is on the table. An advisor who doesn’t is negotiating from a position they don’t fully understand.
The fix isn’t a bigger book. It’s a more transferable one.
The advisors who get the outcomes they expect aren’t necessarily the ones with the largest AUM, they’re the ones who started treating their practice like an asset that has to survive them, well before they had any intention of selling. That means documenting workflows instead of carrying them personally, distributing client relationships across a team instead of concentrating them and deepening organic growth instead of relying on legacy production.
None of that is a pre-sale checklist. It’s an operating discipline and the earlier it starts, the more room an advisor has to actually shift where they land in the valuation range, rather than reacting to whatever number the market hands them.
According to Cerulli Associates, 105,887 advisors plan to retire over the next decade, translating to 37.4% of industry headcount and 41.4% of total assets. More than a quarter of those advisors (26%) are uncertain about their succession plans, largely because they are unsure their practice will be valued properly and are concerned about structuring terms and finding a qualified buyer.
If advisors make a conscious effort to address what buyers are really focused on today, they can influence the outcome of a potential sale tomorrow.
