Buying book after book: a strategic growth story

One young adviser is making his own luck

February 2021

Matthieu Bouchard

Financial Security Advisor, Mutual Funds Representative, Group MCB Private Wealth Management, PEAK Investment Services Inc.

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Risk Disclaimer

The information, opinions, estimates or forecasts contained in this article were obtained from sources reasonably believed to be reliable and are subject to change at any time. It has been produced for information only.
Views and opinions are those of the author and do not necessarily reflect those of BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned. No action must be taken or refrained from being taken based on this content alone.

Key takeaways:

  • How new advisers coming into the industry can build and shape a small practice that resonates with millennials and retirees alike
  • Understanding client bank characteristics that that help to make the purchase an ideal match
  • Ideas to expand and grow a small practice by recruiting new advisers that can be replicated with the purchase of additional client banks

Matthieu Bouchard, Group MCB Private Wealth Management, considers himself lucky – to be in a business he loves, strategically buying one book after another, and shaping a practice that resonates with millennials and retirees alike. Given the roadmap he’s created for growth and success, it’s clear this young adviser is making his own luck.

 

Book one: earning luck

My grandfather ran an adviser practice for over 35 years and as soon as I graduated with a finance degree, he asked if I’d be interested in a one-month unpaid stint. Almost immediately I fell in love with every aspect of the business. I could see how he invested money that people worked their whole life to accumulate, the meaningful relationships he’d built over time, and how much he enjoyed meeting with clients to help them achieve their goals. The flexibility of running my own business was also appealing – and I knew I’d have the good fortune of being mentored until I was able to develop my own style.

I ended up working for him, at an entry level, while I obtained my qualifications. I used that time to not only learn about the business, but also about every client – the details of their past, present, family life and how they planned to retire. Six months in, he decided to take me along to a few meetings and that’s when he could see that I was suited for this. We soon began to discuss succession and the logistics of handing the reins to me over time.

First, he personally spoke to clients and then wrote an introductory letter to let them know that while I was the young gun who would be looking after their account, he would maintain oversight – from the sidelines – for years to come. The feedback was amazing; clients were happy the practice was staying in the family and that the values they’d come to trust would remain in place. In 2017, he sold me 50% of his book and I began servicing 100% of the clients.

In 2017, he sold me 50% of his book, and I began servicing 100% of the clients.

The median client age when I took over was about 69 and I’ve lowered that quite a bit over the last few years, attracting younger people in a few different ways. First, I’m not a salesman and never will be. What I am is lucky, in that I’m a very passionate golfer, and golf happens to be a hobby where you’re exposed to people for hours at a time – long enough to make a genuine connection. I also have a presence on LinkedIn and my Facebook page is targeted to millennials. My expectation isn’t to win clients on social media; it’s to post worthwhile content for young professionals and hopefully stay on their radar. I’ve also been fortunate to start working with a few osteopaths as clients, which has led to other healthcare professionals – doctors and dentists who similarly appreciate that beyond investments I can help with life, disability and critical illness insurance needs.

 

Book two: the power of networking

Success with millennials aside, my extensive experience working with retirees was a factor in my recent purchase of a second book of business with a similar clientele. The reason I sought out another acquisition is that my grandfather’s book had about 140 clients with $29 million in assets, which did not demand a 40-hour work week. Even with new business and referrals coming in, I had room to grow.

I found the seller by attending conferences. He’s a fellow adviser who happened to be sitting at my table on one occasion. We started talking and exchanging ideas. He liked that I had a younger perspective on investing and technology, I valued his experience, and we shared a similar style. Over time we kept in touch. He met with several advisers when he was ready to sell and decided that I was the right fit. I started to service all of the accounts, and he remained in place for 18 months as a resource for me and to ease the transition.

Each situation is different, but in my opinion if you’re generating revenue with your existing clientele and are careful not to deplete your finances with houses and cars and other personal expenses, then it’s fairly easy to buy another book.

Risk Disclaimer

The information, opinions, estimates or forecasts contained in this article were obtained from sources reasonably believed to be reliable and are subject to change at any time. It has been produced for information only.
Views and opinions are those of the author and do not necessarily reflect those of BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned. No action must be taken or refrained from being taken based on this content alone.

My ideal book

  • Skewed pre-retirement (clients still accumulating wealth)
  • The right price, the right seller (honest and trustworthy), the right fit (style)
  • Buyer/seller chemistry (a good, aligned working relationship)
  • Fee-based (clients exposed to the structure and transparency)
  • Apparent gaps (untapped areas buyer can add value)
  • Don’t overlook smaller accounts (unlikely to be spread among multiple advisers)

 

My ideal transition process

  • Communicate the transition to clients with personal calls
  • Write a joint letter
  • Meet all clients together over time
  • Pace – and carefully explain – any portfolio changes

Book three: reaching critical mass

My grandfather had two longstanding associates; one that sold a book two years ago and another, still active, but at a place where he wants to solidify his succession. At the beginning of 2019 we signed a legal agreement that allows me to buy his book within a five-year period.

I’m optimistic about retention. He’s already introducing me to clients, and some knew my grandfather, so there’s inherent trust. In terms of the contract, he’ll account for the standard maximum 20% reduction in retention – and if we lose more clients than that, it’s on me.

If all goes according to plan, by January 2024, if not sooner, I’ll have approximately 200 more clients, bringing the total to 500 households under management, which I think is the limit for one adviser.

 

A repeatable process

To get to the next level of growth, I’m bringing on an associate to learn the business from the ground up, like I did. In fact, I have a friend just finishing up a finance degree. The plan would be to mentor him for a few years while he gains his qualifications and then help him get his own book.

I have a creative solution in mind for this. The next time the right book becomes available I’d buy it and keep 90% of the revenue for five years, in order to pay it off. My associate would get a 10% stake while servicing 100% of the accounts. After five years, he’d receive another 10% annually until we’re 50/50. At an agreed upon point in time, he’d receive 100% ownership.

Ultimately, if he learns from me, does a good job and is able to retain clients, it’s a win/win. I’ll recoup my investment without doing the work. While I maintain oversight of my own clients, he’d eventually come to meetings and be available to help when I’m away. And it’s a great opportunity for an associate, because I’d mentor him and finance the transaction. How else could a young adviser starting out be able to own a book… without having to pay a penny?

 

Advice to buyers

At this early point in my career, I consider myself lucky to be able to grow this way, because what I see is that the older you get, and the more established your business, the harder it is to walk away. Unfortunately for buyers right now, there are a lot of sellers waiting until the very last minute. Perhaps as we near the end of the market cycle, and more demands – of time and effort – are placed on advisers of retirement age, change will happen.

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