Sellers often value decades of client trust, long‑standing relationships and the revenue those relationships generate. Buyers focus instead on client retention, transition risk, operational consistency and whether the business can thrive without its founder. These different emphases often create a gap in valuation expectations between a buyer and seller.
WSR spoke with Adam Schorr, Chief Financial Officer of Private Advisor Group, about why those perspectives can produce different valuations, which factors advisors can address shortly before a sale and why reducing founder dependency requires years of preparation.
Our discussion follows.
WSR: You’ve said advisors and buyers often price the same practice using different criteria. Walk us through that gap: What criteria do sellers look at, and what does the buyer consider?
Schorr: Sellers often value the trust they’ve built over decades, their long-standing client relationships and the revenue those relationships generate. Many also believe their business deserves a premium because of specialized expertise or services.
Buyers look at practices differently. Their focus is on client retention, transition risk and whether the business can thrive without the founder. They’re evaluating client demographics, succession risks, operational consistency and how dependent the practice is on one person. When the founder is the primary reason clients stay, what the seller views as the practice’s greatest strength can actually reduce its value to a buyer who sees transfer risk.
When the founder is the primary reason clients stay, what the seller views as the practice’s greatest strength can actually reduce its value to a buyer who sees transfer risk.
WSR: Where does that mismatch tend to surprise advisors the most? Is it usually a shock in the number, or a shock in why the number is what it is?
Schorr: The surprise is usually both the number and the reasoning behind it. Advisors often compare themselves to headline transactions without realizing how different deal structures and market conditions can be. But for most advisors, the bigger concern isn’t maximizing price, it’s finding the right successor.
They want fair value and peace of mind their clients will be well cared for. The challenge is that buyers evaluate practices through a financial and operational lens, while founders often attach personal value to something they’ve spent a lifetime building.
WSR: Of the variables buyers consider, which you said include transferability, retention through transition, organic growth, process maturity and founder dependency, which is most within an advisor’s control to fix shortly before a sale, and which has to be functioning well years in advance?
Schorr: The variable most within an advisor’s control before a sale is transferability, particularly through stronger processes and operational consistency. Buyers gain confidence when key workflows are documented and repeatable. Founder dependency, however, must be addressed years in advance.
The earlier clients build relationships with other team members and successors, the more likely they are to stay through a transition. Over time, the goal is for clients to see value in the firm, not just the founder.
Over time, the goal is for clients to see value in the firm, not just the founder.
WSR: How do you guide an advisor through reducing “founder dependency” when it was essential to building their practice? How does a firm start to systematically spread dependability to other team members without eroding what made it valuable in the first place?
Schorr: Founder dependency is often a blind spot because the attributes and personality of the founder are the very things that helped build the business. The first step is recognizing where clients, decisions or processes rely too heavily on one person. The best solution is bringing a successor into the practice well before a transition.
While this may temporarily reduce margins, it increases transferability, strengthens client confidence and often enhances the firm’s overall value. Just as importantly, it gives the founder something they may overlook in the midst of running a practice: more time and flexibility before retirement.
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
