In my years traveling the country to work on M&A transactions in the wealth management space, two things have remained reliably consistent: First, every time my 6’10” frame steps off an airplane, I can count on a flight attendant to stifle a laugh and cheerfully warn, “Watch your head” as I duck through the cabin door. Second, every RIA owner who sells their business will inevitably face the so-called “client retention hurdle” to qualify for their closing, or upfront, payment. And without fail, they will fret over this stipulation only to easily clear it, retaining virtually all of the firm’s clients and revenue.
The client retention hurdle is a key concept in the sale of a wealth management firm, particularly when the transaction is structured as an asset purchase, which virtually all are. In this structure, the buyer isn’t purchasing the entity itself; they are acquiring its assets: client accounts, assets under management, and other intangibles. Essentially, the seller is transferring client relationships, not a corporation.
But there’s one major caveat: the buyer must ensure that the value of the business, i.e. the clients, don’t walk out the door post-close. To mitigate this risk, buyers typically require signed client consents as part of the deal. These signed agreements confirm that clients are willing to continue the relationship under new ownership. Without these, the buyer is acquiring a potentially hollow business.
Hence, the client retention hurdle. This safeguard ensures that a specified percentage of the firm’s client revenue remains intact after the transaction. That threshold typically falls between 90% and 95%, depending on the buyer. If the target isn’t met, the buyer may have the right to renegotiate the deal terms, reduce the purchase price or even walk away.
It May Seem Like a Hurdle, But It’s Really a Molehill
Despite how daunting the retention requirement may seem in theory, real-world experience consistently tells a different story. Just recently, I worked with a firm owner who was adamant he wouldn’t be able to reach the 95% client consent threshold required by the buyer, not because his clients weren’t loyal, but because many were older and simply uncomfortable with change. To his surprise, he hit the 95% consent milestone in just 20 days. Even more impressively, he achieved 100% in 30 days, after personally driving to visit the one remaining client reluctant to sign electronically.
In another situation, a different client managing thousands of accounts was convinced he would fall short of the threshold due to the sheer scale of the task, believing that with numbers that large, holdouts were inevitable. And yet, he too exceeded the 95% mark in short order. He later admitted he was stunned by how effective DocuSign was at simplifying the process. He credited the buyer and receiving custodian for the resources they dedicated to execution.
Both of these examples illustrate that the client retention hurdle is almost never the hurdle sellers expect it to be.
Why the Retention Hurdle Matters
From the buyer’s standpoint, this hurdle protects the economic value of the acquisition. Since a firm’s income is tied almost entirely to the clients and the AUM they represent, any mass defection would fundamentally reduce the value of the asset being purchased.
The hurdle is just as crucial for the seller, but for different reasons. Falling short can mean reduced proceeds, extended earn-out timelines or renegotiated deal terms. But when sellers focus on strong communication, client continuity and strategic execution, they can typically not only meet, but exceed the retention requirement.
It’s also worth noting that this isn’t just about deal mechanics; it’s about clients’ peace of mind. Clients expect stability. They want to know that their financial life won’t be disrupted because of a firm’s ownership change. The retention hurdle enforces a process that ensures clients feel informed, reassured and cared for as they have been prior to the sale.
How the Retention Process Works
The client retention hurdle is laid out clearly in the purchase agreement. Most deals require the seller to obtain signed investment advisory agreements from a predetermined percentage of clients, typically based on revenue or AUM.
Once the asset purchase agreement is signed, the seller initiates outreach, typically through a platform like DocuSign, which allows clients to sign updated advisory agreements quickly and easily.
These digital signatures are submitted to the buyer, who verifies whether the required threshold has been met. If 90-plus% of clients (by revenue) have signed, the deal proceeds. If targets aren’t met, the buyer will reduce the closing payment, or it could possibly trigger a re-evaluation of the deal terms.
But here’s the good news: the process is rarely a bottleneck. As shown in the two client examples earlier, skepticism is often replaced by amazement once the process begins.
The Three Questions That Drive Success
Advisors often underestimate the depth of trust and loyalty they’ve built with their clients over time. While clients may not love change, they dislike losing a trusted advisor even more. The key to success lies in clear and timely communication.
When advisors can confidently answer “yes” to the following three client questions, consent is nearly automatic:
Will you still be my advisor?
Will your team still be supporting me?
Will my fees stay the same?
These are the questions that matter most to clients, and if they receive simple, confident answers, the retention process becomes far less about paperwork and far more about peace of mind.
Proven Client Retention Strategies for Sellers
For those preparing to sell, here are practical strategies to boost retention and navigate the consent process smoothly:
1. Proactively Answer the Core Questions Above
Don’t wait for clients to voice their concerns, proactively address the three key questions upfront with a well-crafted email, video message or phone script that puts their minds at ease and removes uncertainty before it ever arises.
2. Communicate Early and Often
Transparency is everything. Start conversations with clients after the deal is struck but before formal documents are signed. This helps clients feel informed, respected and included in the process. Emphasize continuity; make it crystal clear that the services, team and experience they rely on will remain intact (familiarity builds confidence). Some clients will need more reassurance. Handle their concerns personally and promptly, whether about fees, performance, or new procedures. Above everything else, make sure you answer the questions above in an assured, upbeat fashion.
3. Make Personal Introductions
Where possible and necessary, introduce the buyer to clients, especially the largest and most tenured ones. A handshake, a Zoom call or even a letter from both parties greatly reduces anxiety.
4. Showcase Your New Partner’s Resources
Emphasize the depth of resources, robust bench strength, advanced technology and seasoned leadership that the firm you’re joining brings to the table. You’re not simply selling your business; you’re entering into a strategic partnership with a well-capitalized firm that will support your succession goals and deliver enhanced capabilities that would otherwise take years to develop independently.
5. Use Technology Wisely
Digital signature tools like DocuSign dramatically streamline the process and reduce client friction. But remember: not everyone is comfortable with tech. Be ready with an alternative, just like my client who drove across town to get that final physical signature.
Common Misconceptions About Client Retention
Misconception: “My clients are too set in their ways to accept change.”
Reality: Client loyalty to trusted advisors consistently overcomes resistance to change when the transition is properly managed.
Misconception: “Large client bases make retention targets impossible to achieve.”
Reality: Scale often works in favor of retention, as digital tools and systematic communication processes prove highly effective with larger client groups.
Misconception: “The retention hurdle will delay my closing indefinitely.”
Reality: Most retention thresholds are met within 20-30 days, with many sellers achieving 100% consent rates.
The client retention hurdle is not just a contractual checkpoint; it’s a real test of the advisor’s client relationships, communication style, and transition strategy. But over and over again, the data and real-world outcomes speak for themselves: when handled properly, sellers routinely exceed the retention requirement with room to spare.
More importantly, this process serves as a reaffirmation of client trust. After years of careful advising and personal connection, most clients won’t walk away, they’ll walk forward with their advisor.
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