4 Steps to Improving the Value of Your Financial Advisory Business

Last Edited by: LPL Financial

Last Updated: December 12, 2022

young business people meeting seated at table in front of a window

Four ways to increase your market value 

You never want to sell yourself, or your book of business, short. Should you ever decide to sell your book, it’s important to have a good understanding of what increases the market value of it. As a financial advisor operating a small business, you may recognize the critical role that business valuation plays in your growth – both now and in the future. But the process of assessing your overall business valuation, or the estimated sale price of your practice, can get tricky.

Many analysts recommend creating a business valuation report by taking a holistic view of your current revenue, profits, and expenses. But the true value of a book of business is measured by its future potential as well.  The earlier you learn the unique value of your book and can begin to maximize it, the greater your growth potential.

When planning for the future possibility of selling, financial advisory firms can get ahead by making a few simple changes now. Down the road, it could mean the difference between realizing your practice’s full value and selling it for substantially less than what it’s worth.

Use the following four strategies to: 

  • Help guide your business investments
  • Manage your expenses
  • Streamline your operations
  • Increase your book’s value

1. Calculate Client Lifetime Value (CLV)

The first factor that impacts your market value is how much potential value your clients will offer the buyer over the course of their lifetimes. This is commonly referred to as your customer (or client) lifetime value (CLV).

How do you find your client lifetime value? 

Most experienced business valuation experts in the financial advisory space will determine the client lifetime value by comparing your book against the averages of all books assessed. Your valuation will be influenced by whether it falls above or below the average of books evaluated. So how can you compare your business?

As a point of reference, for financial advisors who’ve received valuations through LPL’s valuation team:

  • The average portion of clients over 70 is 30% to 32%
  • The average age of clients is 50 to 52               

Ideally, you’d want to fall below these numbers to get a higher valuation. This is because the younger the client base, the more years they’ll spend in the wealth accumulation phase, and the greater their potential value to a book. A younger average age of clients is generally more desirable than an older one.

How can you improve your client lifetime value? 

Consider diversifying the age ranges of your clients by building new relationships. One way to do this? Reach out to your older clients’ children and grandchildren by setting up a trust. Engaging in multigenerational planning helps offset the outflow of assets with net positive inflows.

You can also attract younger audiences through custom financial planning services. For example, you can help them to hit major life goals, which leads to more assets under management (AUM) and fee income. Plus, it helps demonstrate the relevancy of your service model. Your book is a living asset and it should be continually refreshed for best results. 

2. Deepen your client relationships

The value of your advisory business is also calculated through the stickiness of your existing, long-term client relationships. This shows that your business’s revenue stream is stable and predictable. The level of trust your clients have in you is incredibly important, too. For example, the number of clients who invest most or all of their liquid net worth with you will have a positive impact on your business’s market value. Think of this as a way to measure client satisfaction and trust. 

By potentially selling your book of business, you’re essentially selling relationships. The happier clients who are fully invested are far more appealing than lukewarm clients who trust you with only a third of their total worth. The depth of your client relationships – and the level of insight you have into their complete financial lives – will ultimately help determine the overall value of your practice.

You can work toward this standard by inquiring about your clients’ other financial accounts and making recommendations to consolidate with you. Or, maybe you want to expand your service offerings – like adding insurance products or estate planning – to help bring more of your clients’ total portfolios under your management.

Recurring revenue streams that show your organic business growth will typically indicate a higher likelihood of success and will appeal to more potential buyers. All of these small efforts can make a big difference in your future business valuation. 

3. Balance your assets under management (AUM)

In an ideal world, you would have an even portion of AUM controlled by each section of your clientele. This is important because potential buyers don’t want to see a majority of your assets being controlled by a small number of your top clients. An unbalanced asset concentration creates a significant retention risk for a potential buyer of your book. 

You can assess this risk by determining if your book is highly concentrated – meaning 25% of your financial advisory firm’s revenue comes from one or two clients. Being this top-heavy is viewed by experts as being too risky of a revenue loss. In result, this lowers your fair market value (FMV) of your financial advisory firm as a whole. 

How do you balance assets across clients?

Strive for diversity across client demographics to create a more naturally balanced concentration of AUM in your business. You can seek to serve clients at various life and career stages, with different household incomes and investable assets.

Want a quicker way to balance your AUM and increase your market value? There’s two more ways:

  1. Add more clients with accounts similar in size to the upper quartile of your book.
  2. Terminate relationships with clients who have small accounts and with whom the relationship is no longer mutually beneficial. 

4. Build a tech-centric business plan

A technologically advanced office is a big driver of value and can be a major selling point to a future buyer. Tools that offer paperless processes, virtual client meetings, and customer relationship management (CRM) make it easy to run a business and transfer responsibilities to a new owner. Tech-driven firms also show stability and innovative thinking – features of wealth management that are universally attractive to new and existing clients.

So, how does this drive up the value of your advisory firm? Generally speaking, investments in technology and more efficient operations allow for more revenue growth and more net profits with lower overhead costs that are driven by streamlined, automated business operations.

A tech-centric business helps to:

  • Retain your support staff
  • Boost your workplace culture
  • Minimize your risks and reduce errors
  • Create efficient business operations
  • Provide stability for clients and staff

You can increase your impact by pairing tech investments with a solid marketing strategy, delivering better brand awareness and a wider scope in your community. Your strategic business plan should be developed with your target audience in mind. Lastly, keep your marketing plan updated on an annual basis for an increase to your overall value as a financial advisory firm. If you need a marketing strategy, checkout 6 Steps for Building a Financial Advisor Marketing Plan

Succession Planning for Financial Advisors

Learn 5 keys to successful succession planning that can help financial advisors build value and reach a liquidity event, and how LPL Financial can help.

How to Know When It’s Time to Sell

Selling as your business nears peak value may allow you to capitalize on the upside. When it comes to selling your financial advisory practice, timing is crucial.

Start the Conversation

Reach out to LPL Financial to get started. Connect with am LPL consultants to learn how we can help.


The views and opinions expressed by LPL Financial Advisor(s) may not be representative of the views of other Financial Advisors and are not indicative of future performance or success. Neither LPL Financial nor the LPL Financial Advisor can be held responsible for any direct or incidental loss incurred by applying any of the information offered.