Robert “Reb” Bortz, a certified financial planner and owner of a Lincoln Financial Advisors Corp. office in Waukesha, is making strategic moves more akin to manufacturers and suppliers than financial planners for high net worth individuals.
While he and his employees invest time and energy in meeting new high-net-worth clients for organic growth, Bortz is pursuing strategic acquisitions – buying the books of business from other financial planners who are planning to retire.
Bortz’s office offers fee-based financial planning, retirement plans, investment and estate planning for high-net-worth clients.
Since 1999, Bortz has acquired three other financial planning and life insurance broker offices. While those acquisitions were relatively small, only adding two new employees to his office, Bortz has another eight deals in his pipeline. He expects to close two of those deals later this year.
If those deals are completed, his firm will add about 600 new clients. Because of the number of new clients each deal will add to his firm, he wants to only close two purchases per year.
“We will have to hire a lot more people,” he said. “I’ll need to hire one new staff person for each 100 new clients.”
His Lincoln Financial Advisors office occupies about 4,800 square feet now. To accommodate the additional growth, Bortz is negotiating to lease an additional 1,800 square feet of space in his current office building at 20800 Swenson Dr., Waukesha.
Bortz also hopes to hire the administrative assistants that work for the firms he will buy in the future.
“The request is to please come over,” he said. “We’d love if our customers had the same point of first contact with me.”
Buying beginning
Bortz’s buying craze began in 1999, when his father, Robert Bortz Sr., asked him to buy his financial planning firm in Peoria, Ill.
“My dad started thinking about retiring when he was about 64 years old, but he waited until he was 69,” Bortz said. “He was uncomfortable with transferring his clients to a stranger.”
Before that time, it was uncommon for financial planners to buy another planners’ book of business, especially if there were not affiliated with the national broker-dealer the buying firm’s office was with, Bortz said. Previously, the national broker-dealer a local office was associated with would typically split an agent’s book of business up among affiliated agents in the area, he said.
However, that scenario didn’t allow the retiring agent to protect his clients or allow that agent to control who the clients would deal with in the future.
After he bought his father’s business, Bortz realized there are other financial planners who want to retire but are hesitant to do so because they don’t want to pass their long-term clients off to strangers.
“It was clear to me with my dad’s clients – how happy they were that they were with someone they trusted that they knew would continue to service their accounts,” he said. “I thought there must be other guys out there with the same frustrations, and their clients must have the same concerns.”
Laying the groundwork
Between 1999 and 2005, Bortz built a new business plan and model to support future growth through acquiring other financial planning firms from owners who were ready to retire.
Bortz has mailed materials to life insurance and securities brokers in Wisconsin who are older than 55 years old, who might be starting to think about retirement.
“We’re approaching those that are ready and we’re planting a seed with those that aren’t,” he said. “Maybe they’re not ready this year, but they will be a few years down the road. We’ve had an interesting response. A lot of guys are saying they want to do it in three years. We’re seeing deals two to three years out being initiated now.”
With help from Kit Vernon, owner of Kit & Co. Intelligent Marketing, Bortz has written several articles for financial publications and produced materials mailed to owners of financial planning offices, designed to raise Bortz’s profile in his industry.
“We now want to establish him in a leadership position with a recognized name, all from the perspective of someone who wants to sell (their office),” Vernon said.
The message, both Vernon and Bortz said, is that Bortz wants to buy their businesses when they’re ready to retire, that he is qualified to serve those clients and the owner can stay involved in the business after the transaction, if they want to.
Bortz hopes the owners of the businesses he buys come to work for him in the future.
“That way they get to have their cake and eat it too,” he said. “They can slowly transition their clients to someone who is working hard on their behalf. They get to have a desk and an office, and utilize our staff. And they get to monetize the value of their business.
“I recommend it. I tell them to look at the costs of operating (their business). It would be so much easier for them to sell to new clients and call on customers. Let us take care of all the other stuff.”
Bortz also invested in a new computer system, new servers and a T1 line to his office, to support the increased data needs of the office.
“The idea is to leverage technology to communicate with people,” he said. Lincoln Financial Advisors also has its own proprietary client relationship management (CRM) software, which the firm uses to track clients.
Technology upgrades have made the three purchases possible, while only growing Bortz’s employees to eight from six.
“Technology made it much easier for a small group of people to manage a huge list of people,” Bortz said.
Calculating value
Bortz isn’t interested in the real estate held by the financial planners he’s interested in acquiring – just their books of business.
To determine value, he relies on a formula similar to those used in traditional business valuations. He examines the company’s profits and then uses a multiple that is based on the number and profile of clients the company has. The number of clients retained after the sale is also a crucial factor in determining price.
Bortz and his employees have developed a process, a mixture of due diligence and marketing, that examines clients and helps woo them to keep their business with the firm after a sale.
Many of the financial planners that serve high-net-worth clients that Bortz would consider buying aren’t tech-savvy, and most rely on paper filing systems to track them. During the due diligence process, Bortz sends one of his employees to the potential seller’s office, to help them digitize their client list.
“Usually it’s the first time they’ve seen it done that way,” he said. “The result is a list, which I give to the seller. I ask them to divide it into their A, B and C lists of clients.”
With the A clients, who generally have the most valuable accounts with the firms he’s interested in acquiring, Bortz asks the seller to make a phone call to inform the client that they’re considering selling the firm. He then asks to meet the client with the seller, so they can be personally introduced.
B clients are invited to small group settings, where Bortz can introduce himself and show them a short PowerPoint presentation, he said. C clients are told about the pending business change with letters.
Through the three acquisitions he’s done so far, Bortz has kept about 83 percent of the clients of the acquired firms.
“Almost all of the A and most of the B clients stay,” he said. “The dilemma with the C clients is that the transition can be a good thing. They can get some attention now. We try to transition them up with service, performance and technology.”
