In today’s episode, “Buying a Book of Business”, we’re shifting the spotlight to what it takes to become the buyer. Acquiring a book comes with its own set of challenges, opportunities, and blind spots. Today we’re tackling key questions like: Where do you uncover real opportunities to purchase a book of business? What groundwork should you lay before making an offer? How do you determine a fair price? Providing us with real‑world insights is Kelsie Lenton, who purchased three separate books of business and chose to walk away from a fourth after recognizing warning signs. Through these experiences, she’s gained deep insight into what makes an acquisition worthwhile, risky, or transformative.
Listen to the episode:
This transcript has been edited for clarity. This transcript may differ slightly from the original audio to provide a better reading experience.
In this Advisor Talk episode, “Buying a Book of Business”, we’re tackling key questions like: Where do you uncover real opportunities to purchase a book of business? What groundwork should you lay before making an offer? How do you determine a fair price? And what exactly should you be assessing before you commit?
00:00:00,110 –> 00:00:32,809 [Geoff Evans, Vice-President Marketing and Communications at PPI]
I’d like to talk through your journey. I have to believe that any advisors listening will be fascinated the same way I am. I think there are so many different lessons that you uniquely are positioned to share with advisors because of the number of times that you’ve had to go through these buy-sell processes, and in such different ways. Take us back, if you can, to 2011 when you first became an advisor. I know you began with a vision of working with another advisor hand-in-hand. Can you walk us through that first experience?
00:00:32,809 –> 00:01:36,920 [Kelsie Lenton of Lenton Financial Inc]
When I first became an advisor I was being mentored by another advisor – he had a ten-year plan. That was his goal. He was like, “You know, I’m probably going to be in the industry for ten years. Ideally, if something happens to me, you know, I get sick, injured, couldn’t do this anymore, or passed away, a succession plan would take place.” I would be that person for him. So, the buy-sell was something we discussed, but once the basic agreement was signed and put in place, it wasn’t really something we discussed any further. Which I think is probably the downside. One thing I stress all the time, is making sure that the succession plan is something that is actually talked about.
So, we’re talking 2011. I’m new in the industry. When I first joined, I was licensed, but I worked on a lot of his client information. Getting client information put into his CRM and getting all his files electronic. So that was a big part of, I think, the first few years of building the business. But it was nice because, you know, I worked with a lot of his clients along the way and built those relationships, which I think is obviously very important when we’re talking buy-sells. But there really wasn’t a discussion of succession after that. The idea was, I thought, that eventually, at some point, he’d say, “I’m not going to do this anymore” and the business would transition over to me.
00:01:36,920 –> 00:01:47,800 [Geoff Evans]
When you were introduced to the second advisor who was also exploring succession, what did that conversation look like? Was this an advisor you knew, so you didn’t need to get to know him or…?
00:01:47,800 –> 00:05:02,560 [Kelsie Lenton]
So with all the advisors that I’ve actually purchased books of business from they are advisors I knew. Because, as I said, I worked at head office [for Canada Life], so I knew these advisors. I knew a lot of the business that was coming in because I was on the other side of the desk processing that business, which really helped me.
How the second advisor opportunity started was interesting. He was an older advisor. He was having health issues. He knew it. He shook a lot. Things were getting harder for him to write. You know, his compliance was maybe kind of going down by the wayside. His files weren’t in the best condition, things like that. So, the first advisor introduced the opportunity by saying, “Hey, you know, Kelsie helped me do this, this, and this.” Not so much as a buy-sell, but rather, “Maybe you can pay her, and she can come in and help you and get things organized. Get your client files organized, get them electronic, try to make your life easier and more efficient to make that as easy as possible, so you can continue working or whatever it is that you want to do.” And then from that conversation I actually went through all of his client files and created his CRM and did all the paperwork, scanning, filing, making it all electronic. I built this relationship with him and worked with him, and then he started going down the line of: “Okay, well, you know, it’d be really nice to get help. Maybe you can start helping me work cases and do stuff like that.” So, then it was more like I started working with him and with his clients.
At this point I’m still working with the original advisor, too, right? I was still my own individual business owner, so we actually split cases. Even with the original advisor, we split cases. That’s how it worked. Everything was split between us through agreements. So, as I said, working with advisor two was not a conflict. Everybody knew about the relationships. It’s not like we were sharing client information. We were very private in that way. There were completely separate systems. I just had access to everybody’s individual systems in that scenario. And then it just evolved into him realizing his health was failing and that this wasn’t really working the best, so he said: “I need you to start doing more.” So, we had the conversation of how he’d actually start introducing me to his clients. And that’s when we had the discussion of: “If something happens, would you be willing to take this over? Would you buy this out?” And, that was a conversation that happened two years prior to the buyout. Because he knew his health was changing, and it was important to him to have somebody there to take care of his clients. And what made his transition so successful and so nice is that I worked with him and his clients for two years. We’d send out Christmas letters, and there’d be a picture of me with him along with an introduction: “Hey, just a reminder, if you’ve got questions. Kelsie is the other person you can reach out to.” And, that was really, really helpful. And I would say it’s probably some of the most successful succession planning when you have that pre-introduction.
When things finally happened in 2016, we really started talking about needing to make a plan now. His health was starting to go downhill. He realized it wasn’t even reasonable anymore for him to do the job. So, it got to the point where we needed to start doing the official paperwork. Getting the files transferred. This was the first official buy-sell I completed and you have to complete all the paperwork to transfer from all the different carriers. And that took a while. We actually went back and forth on the buy-sell a few times.
00:05:02,560 –> 00:05:09,120 [Geoff Evans]
Is that a process that the MGA helps you with, or is that something you are on your own managing with each carrier?
00:05:09,120 –> 00:05:37,620 [Kelsie Lenton]
So, some MGAs definitely do help, and I’m not going to say others probably wouldn’t. This was essentially something the advisor and I talked about, right? What was the businesses value? What was he looking to get for it? What did he think his business was worth? Because I had such a warm welcome with his clients, and I had all that time with them, I did buy his business at a higher multiple. He was the highest multiple. I bought his business at a three-and-a-half times multiple. Which is crazy when you think that this happened in 2016.
00:05:37,620 –> 00:05:39,640 [Geoff Evans]
What would you say was average at that time then?
00:05:39,640 –> 00:05:43,000 [Kelsie Lenton]
Well, MGA’s today, some of them only pay two and a half.
00:05:43,000 –> 00:05:43,260 [Geoff Evans]
Okay.
00:05:43,260 –> 00:06:25,556 [Kelsie Lenton]
To me, the value of the business comes down to a lot of factors, right? People always say: “You should know your value.” And it’s like, yeah, your compliance matters. What type of clients and what type of products you have matters. It definitely matters what’s in your book of business. So, there’s a lot of factors that go into what that value is. What helped is that over the past two years, I was pretty much making his business more valuable. He’s a really good person. He’s actually still a client of mine. So I have his stuff, I’ve got his family’s stuff. Like I said, they’ve been really good that way. So, the cost might have been considered high for what most people would pay, but I got a really good book of business out of it, so I’m not going to say I was disappointed paying what I paid for it. It’s definitely been worth it.
00:06:25,556 –> 00:06:30,336 [Geoff Evans]
And was that an expensive process? I assume lawyers were at the table to…
00:06:30,336 –> 00:07:15,236 [Kelsie Lenton]
No, not necessarily. I find that’s where the MGA kind of came in, where they’re like, “These are things you should know – things to be aware of.” Also, because I have a relationship with the advisors, I was like, “This isn’t somebody who’s going to screw me over.” So, I think it’s different. If it wasn’t somebody who I had a great relationship with, I’d probably be a little bit more nervous. Where I’d be like, “We need a few more things ironed out and maybe have another professional at the table with us.” Our agreement was still pretty basic, but we did have a lot of back-and-forth discussion about what’s important. You know, like telling him that he has to carry retirement E&O (Errors and Omissions Insurance) and negotiating how long he’s going to do that. And, I just went to the compliance department and said, “What are things I should be aware of?” And, as I said, there was a lot of conversation. A lot of back and forth.
00:07:15,236 –> 00:07:25,216 [Geoff Evans]
All right, so let’s talk about your second official buy-sell agreement. First of all, did you have a vision after that first one that you just wanted to keep buying books of business? Was that the vision?
00:07:25,216 –> 00:07:26,536 [Kelsie Lenton]
No, it wasn’t really a vision.
00:07:26,536 –> 00:07:26,576 [Geoff Evans]
Okay.
00:07:26,576 –> 00:08:10,396 [Kelsie Lenton]
It was more like, you know, Kelsie back in 2014 and this advisor says, “Hey, if I retire…” and I’m like, “Yeah, cool, we could totally talk about this.” Then summer of 2017, I find out yet another advisor that I talked to – whose business I knew very well from my time at Canada Life – and who works with a lot of the types of clients that I would really like in my business. These are clients that I know are a perfect fit for clientele I want to work with. I think when we talk about buy-sells, that’s a really important thing to keep in mind: what type of clients are in that book of business? Do they matter to you? Are those people that you want to work with? Because I think that’s what makes it mostly successful. For this advisor, he had medical professionals and veterinarians and to me, it was just such a good book of business.
00:08:10,396 –> 00:08:29,716 [Geoff Evans]
Because you have such a unique background of having worked at Canada Life, having been exposed to these books of business, you have deep insight. For an advisor who doesn’t have that access, what would you encourage them to do? You wouldn’t just start chasing an advisor when you have no concept of what their book of business looks like.
00:08:29,716 –> 00:09:50,576 [Kelsie Lenton]
Yeah, you don’t. That’s just really it. In our industry, I always suggest networking is so important. You’re going to find over time, when you’re working or you’re talking to other advisors, you’re going to connect with certain ones on different levels. And to me, that’s the really important thing when we’re talking about succession planning. It’s finding the people that you share the same values with and you see things very similarly. I find you’re going to have a more successful transition with them because they’re going to probably have the clients, or they run their business in a similar way that you would. Which is going to make your transition a lot easier. But you’re going to build that relationship by having conversations like, “Hey, what’s your next step in business? What are your plans? What does retirement look like for you?” Where you can actually have that kind of conversation, right? It’s a question I still ask people. I tell people, “I have my own succession plan. How do you not? What is your goal?” Not necessarily am I willing or wanting to buy another book of business, but it’s, you know, it comes up in conversation all the time and that’s so important.
For anybody who doesn’t know people, you have to network. You can go buy cold books of business, but I would not say that’s ideal. You should have an idea of what’s in the book of business. Knowing the person who sells it, you’re going to get a really good idea of what is in there based on the advisor’s values and how they see things and how they work, right? So, networking is so important because it’s also the connection that you have to somebody else that might help you find that book of business, and they might be like: “This would be a good fit for you.”
00:09:50,576 –> 00:09:56,536 [Geoff Evans]
So, the second book of business…, that deal goes through, and the integration is smooth?
00:09:56,536 –> 00:09:57,856 [Kelsie Lenton]
That one was a lot smoother.
00:09:57,856 –> 00:09:57,996 [Geoff Evans]
Okay.
00:09:57,996 –> 00:10:03,736 [Kelsie Lenton]
Um, well, I say it’s a lot smoother, but not really. So technically, the first book of business I bought was smooth because I did all the work already.
00:10:03,736 –> 00:10:03,876 [Geoff Evans]
Right. Right.
00:10:03,876 –> 00:11:11,175 [Kelsie Lenton]
I’ve already scanned the files. I’ve already created everything before I bought the book of business, so that was easy. I know the clients. They know me. I’ve got all their contacts. So, things like the paperwork went really well. We made an agreement because they were clients I wanted. I’ll be honest, I bought it at a three times renewal, which is probably still high for some people, considering that was a cold book of business. The clients didn’t know me in this scenario.
With this next buy-sell all these paper file boxes start showing up. Do you know what it’s like to have paper when you’re a person who doesn’t deal with paper? We’re talking 2017, and I was paperless. So, I’m getting boxes full of files, and I’m like, “Okay, I know what my life is going to look like for the next while.” And I just have to do it, right? I didn’t have a team and it’s a lot of work. You start going through the files. You start organizing them. You start sorting them. The beautiful part, because it is paper, I got to choose how I sorted it, how I filed it, how I scanned it. So I fit it into my system, but it was a lot of work. It took me a solid month of doing a lot of that type of work.
00:11:11,175 –> 00:11:24,516 [Geoff Evans]
If you were to proactively look for another buy-sell opportunity for your business and if the prospective business is built on paper versus digital, would that impact the price you were willing to pay? Did that previous experience change your approach to things?
00:11:24,516 –> 00:12:04,216 [Kelsie Lenton]
Nowadays, if you literally have paper and no electronic, you’re probably worth a little bit less because now it’s more work for me to have to actually get that organized and to get it electronic. Especially if we’re talking a substantial number of clients. If we’re talking a folder for every single client, and if they’ve been a client for many years, then you’re just going to have a stack of paper… It’s very overwhelming. So, yes, I’m going to be honest, if you are paper-based and I’m buying your practice, I’m probably going to ding you down because this is not adding value.
00:12:04,216 –> 00:12:21,456 [Geoff Evans]
So, if you were faced with a choice between two books of business that you could purchase, what kind of advice would you give to a selling advisor to say, “Here are the steps you can take to improve the value of your book of business” – based on you having purchased three different books of business? What differences would lead you to say “This business is worth more than that one?”
00:12:22,264 –> 00:14:30,193 [Kelsie Lenton]
Well, the value of the clients inside the book of business – which is something advisors should never be scared to ask about. I want to know what the renewal structures look like inside. I want to see the commission statements. Because usually renewals are based off of the commission statements. I have a right to ask that. I want to know basically what is in your book of business. I’m not afraid to tell people what’s in my book of business. I need to know if it is a ton of universal life annual increasing premiums? Is it a bunch of leveraged insurance? What’s sitting in that book of business? Is this something that in two years is going to come back to bite me because it’s not going to be in force? And are there going to be massive chargebacks? As a buying advisor, you need to know these things because that comes back on you as the person who buys it. So, it’s really important to know what’s in that book of business, right?
To me, the value adds are things like: it’s electronic and your compliance is up to date. I know I feel like a PPI compliance officer when I say that, but you need to do it. As an advisor, when you’re taking on a book of business, you want to make sure the other advisor was compliant. Because when you take those files over, you’re taking all that risk. The risk does come on you the moment the clients become yours – the other advisor still has some risk for a while, but over time, if you don’t start getting everything up to date that comes back on you. So, it’s really important to know what’s in those files. And, to me, I feel like somebody’s business is worth more if you have a really good relationship with that advisor. Because like I said, you’re going to know what’s in that book of business and how it was built based on the relationship you’ve had with that advisor. People with the same values are probably going to have similar ways of doing business. So, there’s a lot of things to consider when you’re actually doing a buy/sell and a succession plan. Unfortunately, we never really know if it was a great idea or not until it’s done. But you also have to remember when you buy the book of business that you have to work it, too. It doesn’t just magically work for you. You have to go in and be active on that book of business. So, it’s a lot of work… but it’s worth it. I will say it’s worth it.
00:14:32,483 –> 00:14:38,184 [Geoff Evans]
So, we’ve talked about two purchases. But then there was a third opportunity that came along?
00:14:38,184 –> 00:16:09,584 [Kelsie Lenton]
There was a third one. His reason for getting out of the business was always my favorite. I’m not joking! It was that his health was slowly going down, but, his ongoing joke was that his wife bought a shotgun, and if he doesn’t leave the business, he’s afraid she’s going to use it – because she wants to retire with him, and she didn’t want to live here anymore. She’s like: “No, we’re going to BC. We’re going to retire.” She’s like: “I swear I will buy a shotgun if you don’t leave this industry.” And that was his joke: “I have to do something, I think she’s getting pretty serious.” And I was like, “Well, you’re really well insured, so, the possibilities are pretty high.” He had a really good sense of humor. He did leave eventually because his health was starting to go, and he just… He wanted to retire finally. He was probably the oldest advisor that transitioned his book of business to me. He was in his 70s when he did it. And, he just knew it was time. He’s like: “My wife wants to retire. I wanna golf. I wanna do these other things in life.” So, it’s really nice that he saw the value. But he was still a really super great advisor. He was really nice because as we started talking about completing the transition, we started sharing some split cases as well. And then I started helping with a lot of clients. I went to client appointments with him, got introductions. So, he took me around to a lot of his big clients. He had a lot of big business clients. From medical professionals to guys who just own a ton of businesses like restaurants. So, he had a very, very diverse book of business.
00:16:09,584 –> 00:16:21,084 [Geoff Evans]
I think that brings us back to the original buy-sell opportunity. And everyone is anxious to know what happened to the original relationship that you built? What happened? Did the buy/sell come to fruition?
00:16:21,084 –> 00:17:38,624 [Kelsie Lenton]
No. So the very first one – the very first book of business that I thought I would take over – he brought another advisor into the business while at the same time I’m buying other businesses. So, he brought another advisor in. His explanation, I think, more or less, was: “You bought a couple books of business, so, maybe you don’t need my entire book of business.” So, the new advisor came in. The older advisor explained “I’m just going to show him how the business works. He’s not going to be active with the clients. Don’t worry.” A month later, suddenly we have divided lists of whose clients are whose and that was kind of like the writing on the wall. I was like, “You know, I need to change MGAs. I think I just need space. This isn’t working.” I need to start doing what’s right for me because I’ve realized that in this situation I wasn’t being seen, I wasn’t being heard. It was like I didn’t matter and that hurt. It’s the world we live in. But you can’t put me in business with somebody who I’m not going to get along with or who I just don’t see eye to eye with. Because, like I said, he just started taking all the clients, and I was like, “No, this doesn’t work in my book of business. I’m not paying for half a business when I’m essentially not going to get half of it. I saw the writing on the wall. It was just like: “Cool, that’s okay. You know, I bought these other books of business. I think I’m too busy to deal with your clients. This is probably for the best.”
00:17:38,624 –> 00:17:44,484 [Geoff Evans]
So, I guess that’s the other key lesson I think you’ve shared with me previously… that it’s okay to walk away from a deal.
00:17:44,484 –> 00:17:47,024 [Kelsie Lenton]
It is okay to walk away. Mm-hmm. Yeah.
00:17:47,024 –> 00:17:53,244 [Geoff Evans]
So, when you terminated that original agreement, were there penalties? Are there issues if you walk away from a deal? Or is that not how it works?
00:17:53,244 –> 00:18:14,484 [Kelsie Lenton]
No, because we didn’t have anything official in place for me to purchase the business. It was more like: if this situation, or this situation, or this situation happens, Kelsie gets the first opportunity to buy it. That’s how the first agreement was signed. So, it wasn’t an actual buy-sell with a clear purchase date because this advisor was not ready to retire.
00:18:33,543 –> 00:18:49,344 [Geoff Evans]
So, to wrap all this up, I think what is equally fascinating to me is that, again, under age 40, and you have already put your own succession plan or emergency plan in place. What would you describe it as?
00:18:49,344 –> 00:21:06,044 [Kelsie Lenton]
I would still call it a succession plan. I know people just think a succession plan means, “I’m going to retire”. A succession plan isn’t just for retirement. And this is actually the funny part. Since we’re all advisors, we would all just assume – since we literally talk about death all the time… Like, how many policies, have you completed a death claim for because somebody unexpectedly passed away? You know, there’s things that I’m not planning to have happen, but I can’t control them. My idea is that I’m going to get old, and I’m going to retire. Somebody can take over my business. That’d be the logical process. Everybody thinks that’s how it’s going to go. Life sometimes has other plans. My clients are so important. They’re really important to me. I wanna make sure they’re taken care of because if I don’t leave them in good hands, then what kind of human being am I? I don’t plan on getting sick, I don’t plan on becoming disabled, I don’t plan on dying prematurely. None of that’s on my to-do list anytime soon. But I have a plan because if it does happen, it needs to be taken care of. I need to know that I have a plan in place, that I have somebody. They’re not currently working out of my office. I mentor her. I picked her and I thought about this for a while before I asked her. Because she values a lot of the same things I do. I just said to her, “my book of business would be so good for you. You see things how I see things. We value a lot of the same things. If something happened to me, it would be very easy for you to take over my business.” She’d have no problem. She could call these clients. I’ve already told my clients. I said, “Hey, you know, if something happens to me, I do have a gal that’s available. She will take over, or she will come in,” and they responded, “Oh, that’s good to hear.” Because, I do succession planning for people. I should have my own plan in place. But like I said, I don’t plan on dying or getting sick, but these are really high probabilities. Carriers pay out a lot of disability claims. I’ve sold a lot of those policies that people do claim on and it’s really important to have that protection in place. And it doesn’t matter how old you are, the moment you start in the business, the moment you start getting any clients, you should have a plan in place because your clients should matter so much that you want to take care of them. And I also just don’t want my family to stress about it. I couldn’t even imagine my family trying to deal with that. They’d just be like: “I don’t even know where to start.”
00:21:06,044 –> 00:21:14,284 [Geoff Evans]
I think that’s the perfect note to end on. You’ve shared the journey of buying books of business and the pros and the cons of what to look for and then just making sure your own house is in order along the way.
00:21:18,924 –> 00:21:40,084 [Kelsie Lenton]
It’s messy. It’s a lot of work. It’s a lot of fun. Maybe people wouldn’t identify it as fun. I don’t know. I just… It’s a process. It’s a process you have to be willing to do. And, you should have your own plan in place, because there’s nothing more important than protecting your own business that you’ve worked so hard on. Even if you don’t plan on buying somebody else’s book of business, you need to have a plan for your own.