Resources for our members

Buying or selling a book of business 

 

Buying a book of business

Purchasing a book of business from another advisor can be a great way to build an advisor business, but they must make sure that the book of business is compatible with the services they offer, since they must consider the limitations of their knowledge.


Before buying a book of business, the advisor should first ask themselves if they are able to adequately meet the clients’ needs and if they have the skills necessary to meet their expectations.
During transfers, the advisor should make sure they have the capacity and resources needed to absorb the business volume without letting it affect their clients.

They advisor have a duty to fully understand their clients’ financial and personal or corporate situations in order to keep their files up to date and make sure that their situation has not changed in a way that would require revising their strategy, or products.
This duty applies both for new clients, whom the advisor don’t know yet, and for their longstanding clients. 

There are many advantages to setting up a meeting quickly with a new client:

  • Reviewing the entire file.
  • Making any updates necessary.
  • Starting a professional relationship on the right foot.
  • Avoiding any undesirable consequences of poor file management. 
  • Fulfilling your professional obligations.
     

The advisor must have the appropriate certification, the products knowledge and the skills necessary to meet their new client’s needs to properly serve a new book of business.

  • Asking the selling advisor about the type of clients offered and the products sold to assess the book of business, determine growth opportunities and set the purchase price.
  • Arrange for a confidentiality agreement as needed, then analyze a sampling of files to assess the status and check the quality of service given by the selling advisor.
  • Plan a gradual transfer to build relationships with clients.
  • If the advisor does not have the certification required to handle certain files, transfer clients to another advisor.

For book of business buyers, soliciting new clients too urgently or too often is a breach of ethics. Just like you are free to choose your dentist or lawyer, clients are free to choose their advisor.

Selling a book of business

Selling a book of business is primarily an advantage for an advisor who wants to retire, or who wants to finance a special project and for advisors who want to quickly increase their business volume, but it involves challenges and obligations for both parties. It’s also a process that will take months or even years.

When selling a book of business, the advisor must inform the client that their file is being transferred, which will also serve to reassure them that their assets are in good hands. This way, clients are adequately informed of the potential transfer of their file and will be able to notify the seller and buyer if the transfer does not work for them and they wish to choose another advisor.

Since the client may work with the advisor of their choosing, and that they agreed to give their personal or confidential information to the advisor, their firm or dealer, they may refuse to allow this information to fall into the buyer’s hands. Advisors have a duty to protect the privacy of all personal or confidential information obtained about a client. The selling advisor will therefore want to keep a record of their actions in the client’s file. 

The seller and buyer who contact clients together to notify them of the transfer increases the chances of a seamless, orderly transition. It also ensures that business will run smoothly and demonstrates that they are acting as conscientious advisors, with skill and professionalism.
They may choose to notify clients by phone, e-mail or a letter, for example. Or the selling advisor could introduce the new advisor to clients, or a team meeting could be held with each of them.

It is important to reassure clients that the new advisor is able to continue to offer them the services they need.

Best practices

Positive effects

Maintaining files properly, including standardization and digitization of client records.

Demonstrates the seller’s professionalism when the buyer carries out thorough audits and adds value to the book of business.

Selling a book of business to an advisor who shares the same values and business philosophy. Paying attention to culture shock when moving from one corporate culture to another.

Ensures optimal service for clients who see the same degree of professionalism and service.

Making sure that the buyer is a qualified person with the appropriate certification. Leave clients in good hands and preserving the advisor reputation as a conscientious advisor among those who trusted them for years.
Keeping a copy of the client’s files who are sold to another advisor, or ensuring that the seller have access if the files belonged to the firm they worked for.  Let the seller comply with their conservation obligations and keep track of tasks that they did for their clients and the information collected, in order to ensure they are able to respond to any requests with regard to the files transferred.

 

Terms can be stipulated in the sales contract to obtain a copy of transferred files.

After a book of business is sold, the selling advisor must stop serving their former clients, unless a transition period is set out in the sales contract. In that case, they may continue to act within the parameters stipulated.
Otherwise, they must comply with all the conditions set out in the contract, including any non-compete and non-solicitation clauses.

The ethical obligations of the professional member of the Chambre continue to have an impact even after they leave the profession. In fact, since there is no statute of limitations in disciplinary law, actions taken in the past can bring them before the Chambre’s Disciplinary Committee, even if they have not opened a file in many years.

Insurance and financial planning

 

Generally, the insurer requires the advisors to sign a sale/purchase agreement for the book of business sold, and will have to approve the transfer before allowing the buyer to access the details of the contracts. If a general agent is involved in insurer relations, the transaction must be done in collaboration with them.

Mutual funds and scholarship plans

 

When a book of business is transferred between two advisors working for different dealers, each client must give written authorization to the dealer to allow their account to be transferred, since opening a new account is a contract between client and dealer.