Leverage External Financing to Build your Own Ensemble

Financing considerations for wealth management firms ready to go next level.


If you are principal/owner who has a successful wealth management business ready for expansion, external financing provides a powerful resource in funding your ambitions. There are numerous financing options for growing through multiple offices in multiple states or expanding headquarters and building out a significant footprint in your backyard.


In building out your empire, you can leverage financing to ramp up through acquisitions, recruiting, or expanding successful lead marketing programs.


From a financing perspective, you can incorporate either 1099 or W-2 (or both) compensation structures into your advisor force expansion. Expansion through recruiting 1099 advisors to affiliate with you in an OSJ similar model is doable but is more limiting in external financing options than expanding with W-2 advisors.


We can help you evaluate the different lending programs that would be the best fit for your financing situation and expansion goals. We can then help turnkey the process with a lender who is in alignment with your ambitions and expansion.


It’s smart to spend plenty of time and effort in the preparation of your capabilities, including having the right team in place, to support your expansion strategies. But once the expansion plan of action begins, many want to scale to the $1 Billion and $5 Billion AUM watermark as rapidly as they can, within their quality control capabilities, depending on the AUM they are starting from. Profit margins have to be closely watched even more so in expansion mode and getting scale increases margins and additional financing availability.


Leverage financing for recruiting and acquisitions. These loans not only cash flow immediately (to almost immediately), they add to your cash flow during the term of the loan, paying for themselves. These are the only types of deals you would want to do anyway, but also the ones that can get financing.


Acquisition cash flow example:


  • You acquire a $400K practice at a 2.5 multiple for a $1MM price.
  • To make the example as conservative as possible, assume 100% financing and roll in all loan costs at around $30,000 (depending on valuations, # of borrowers, more) so there is no, or little out of pocket expenses.
  • This monthly loan payment would be about $12,000 against the $33,000 monthly acquired revenue (if no significant transition attrition).
  • The acquired practice at the same level leaves $21,000 to cover other costs and add to positive cash flow.
  • Of course, if you are acquiring into your existing practice and location, the acquisition pays for itself more rapidly than when a new branch/office location where an entirely different set of overhead costs occur.
  • Add working capital to invest in the first 12 months through buildouts and renovations, hiring people, marketing, technology, and growth initiatives.


External financing can help you better compete, and level the playing field against all size levels of the competition. Competition can be fierce and larger firms have the existing cash flow and even easier access to financing if needed, to provide compelling value propositions. Recruiting transition dollars, recruiting bonuses, prior recruiting note payoffs, marketing materials, top-tier website, digital footprint development, advertising, technology upgrades, office facelift, additional needed space, and getting the right team in place are all qualified loan purposes.


Retain, Recalibrate, and Repeat. When you successfully retain most, or all, of the, acquired or recruited revenue, and make any recalibrations needed regarding people, resources, and systems to ensure a new level of additional clients and advisors are supported, then repeat the process in leveraging external financing for the next growth target.


AdvisorLoans can help you with turnkeying the external lending needed at each stage of your empire building. We consult with you in evaluating the best strategy options available for your situation and your expansion plan. If leveraging financing to fuel your expansion is a priority for you, then consider calling an AdvisorLoans Loan Advisor to get clarity around your lending options and to discuss financing strategies tailored to your goals.


Written by the AdvisorLoans Team