When is the best time for a financial advisor to retire? According to FP Transitions, which has valued 1,000 firms with an average value of $1.4 -$1.5 million, the best age is 59, when advisors are not working so hard. Peak growth for advisors comes between the ages of 45 and 55, so advisors should start considering their exit strategy at age 50.
FP Transitions estimates that valuations for internal successions are 6 to 7 times earnings, compared with 2 times earnings for an external transaction. This raises an interesting question: Is an advisor is building a practice or a business? The difference is that a business can survive for long periods of time without its founders — and, it appears, will result in a greater payout when they retire if they have a team ready to take over and buy the business.
