How Do G2 Advisors Pay for a Buyout?

The short answer: A G2 buyout has traditionally been paid for out of the practice's own profits over several years. The common structure has been a down payment and a seller note, and some founders sell the equity in stages. At some firms, the firm itself funds part of the purchase. DeVoe & Company found that only 22% of firms say their internal successors can afford to buy out the founder, down from 38% four years earlier.

This guide is for the G2, the next-generation advisor or junior partner who wants to buy the founder out, in an RIA, an independent broker-dealer practice or a wirehouse or regional team. It answers where the money comes from and what each source costs you.

Why can a G2 rarely afford the buyout alone?

Because the price has outrun the buyer. Financial Advisor magazine's report on DeVoe's deal book for the first quarter of 2026 put the share of firms that say internal successors can afford a founder buyout at 22%, and quoted the report's explanation: the gap widened "as firm valuations have climbed faster than the capital available to emerging leaders." Mercer Capital, which values advisory firms, wrote in February 2026 that junior partners often lack the liquidity to fund meaningful purchases, and that even where outside financing is available, their borrowing is limited by personal cash flow, firm distributions and lender underwriting.

Even a financed purchase is felt at home. In Kitces.com's handbook for G2 partners, drawn from Philip Palaveev's book, Michael Kitces wrote that buying into a partnership typically involves at least a short-term step back in income to cover the down payment and the first note payments, then years of flat income until the loan is paid off, on what may be the largest debt of your life. The founder faces a matching squeeze, covered in The G2 Problem.

Where the money comes from, and what it costs

How does a seller note work?

The founder finances the purchase and the G2 repays it over time. Michael Kitces, discussing internal succession on his podcast in April 2024, described the common way these deals got done as something on the order of 10% or 20% down and a seven-year note, with the practice's profits paying the note each year, though the terms in any one practice depend on its numbers. Those are his descriptions of the traditional pattern.

Kitces also described the early years. Because the note is repaid out of after-tax profits, he said, the buyer was usually somewhat out of pocket in the first year or two, reached cash-flow breakeven as new clients and market growth added up, and saw income rise sharply once the note was paid off. His rule for the price follows from that: "You buy on cash flow." He described a founder willing to cut the price whose associate advisors still declined, because the firm ran at a thin profit margin and the note would have consumed their personal income.

What does buying in stages change?

The G2 buys the firm in slices over several years. Kitces gave the pattern as 5% or 10% of the firm first, another 10% or 20% three years later, and everything that is left three years after that, with the size and timing of each slice depending on the practice. He called it an underrated strategy that he sees used less than it could be.

The benefit is a lower stake at each step. A G2 learns how note payments and the firm's cash flows behave on a smaller debt, a bad year does less damage to a personal balance sheet, and by the final purchase the buyer may already own 20% to 40% of the firm, depending on how the earlier slices were sized, and collect its share of the profits. The cost is that the founder keeps sharing in the growth of the firm's value, so later slices can be priced at a value the G2's own work has helped raise. How to set the schedule and the price of each tranche is covered in what a G2 should negotiate before the founder retires.

When does the firm fund the buyout?

At several employee-channel firms the firm pays the retiring advisor and recovers part of the cost from the successor's side, and some firms lend to the buyer or subsidize the purchase. FINRA's Regulatory Notice 22-23 on succession planning notes that some firms provide bridge financing or other financial support to facilitate purchases. How the successor's side is funded, program by program:

• Edward Jones. The firm's Form 10-K for 2025 states that successor financial advisors receive reduced compensation for up to five years.
• Merrill. AdvisorHub reported that from January 1, 2025, inheritors receive full production credit once the firm has earned back 70% of the book's revenue, down from 80%.
• UBS. The firm's own page says the successor financial advisor funds the first 100 percent of ALFA Core, from the production on the transitioned accounts; the firm funds the rest and the ALFA Plus rate.
• Northwestern Mutual. Eligible representatives and teams receive loans from the firm's broker-dealer to support the succession of a practice, and in January 2026 the chief field officer described a $1 billion succession capital program offering debt financing for large, complex transfers of ownership, including equity partner buy-ins and succession-related sales. More on that program is in what happens to a Northwestern Mutual practice when the advisor retires.
• Wells Fargo Advisors. Its succession page lists Acquisition Capital for acquiring advisors and says they may receive a financial subsidy from the firm to aid in book acquisition.

In several of these programs the successor pays through reduced pay or production credit, for a period that varies by firm. The full successor terms, including what each program restricts, are compared in should a G2 advisor sign a sunset agreement as the successor.

Can a G2 borrow from a bank?

Yes, and more lenders now do it. Mercer Capital wrote in 2025 that debt financing has become readily available to RIAs as more specialty lenders have focused on the sector, and that it is often used to finance internal transactions as an alternative to seller financing, without bringing in an outside equity partner. Kitces made the same point from the buyer's side: many banks now underwrite advisory-firm purchases, some through SBA-backed programs, so the founder receives a lump sum at closing and the buyer makes the payments to the bank.

The government-backed route is the SBA's 7(a) program, which guarantees loans made by participating lenders. Its permitted uses include changes of ownership, complete or partial. The maximum 7(a) loan is $5 million, the term is ten years or less unless the loan finances real estate or long-lived equipment, and borrowers apply through a lender. Buying a financial advisor's book of business walks through how 7(a) financing is used in a practice purchase.

What it costs, beyond interest and fees, is personal exposure. SBA rules generally require anyone holding at least 20% of the business to guarantee the loan, and Mercer wrote that debt financing for RIAs typically requires a personal guarantee, which many borrowers oppose, and leaves the borrower more exposed to the business. One advisor who had worked with RIAs on lending told WealthManagement.com that borrowers should really understand what debt they are taking on and what the terms are, and that refinancing may not be possible in the first couple of years.

What does an outside minority investor change?

Here the founder sells a non-controlling stake to an outside investor, and the proceeds fund the founder's exit or the G2's purchase. Minority investments made up 15% of RIA transactions in the first quarter of 2026, according to DeVoe, and the capital is increasingly going to firms with less than $2 billion in assets. Financial Planning reported in November 2025 that minority deals usually involve about 20% of the seller's equity, depending on the firm and the buyer, and no more than 49.9% of the firm, and that they are drawing attention as a way to finance less-tenured advisors buying the firm from a founder.

The cost to the G2 is a third partner with its own interests. Mercer wrote that minority investors seek deal terms that protect their interest in future cash flows. Echelon Partners' 2024 deal report, quoted by Financial Planning, said some investors use preferred returns, participating debt and sophisticated governance protections, and an investment banker in the same article said many minority buyers require a first right of refusal on any future M&A transactions. DeVoe warned that governance rights, board composition and contract terms can give a minority investor substantial influence over acquisitions, leadership transitions and any future sale, and that in a number of cases investors have dictated actions or vetoed leadership proposals.

What does each route mean for the G2?

Three risks run through every structure.

Retention risk. Clients decide whether to stay, and the structure decides who absorbs it when they leave. Where part of the price is contingent, as in Northwestern Mutual's practice sales, the price moves with the assets that remain a year or several years after closing, so the founder shares that risk. A fixed note or bank loan is usually owed on its written terms whatever the clients do; how your own note reads is a question for your own counsel.

Personal debt. Lenders typically ask for a personal guarantee, which can reach the G2's personal assets if the practice falls short. Buying in stages reduces how much is at risk at any one time.

Lock-in. Firm programs collect through reduced pay or credit, and AdvisorHub reported that Merrill includes non-solicitation provisions that bar inheriting advisors from soliciting the assets to another firm. Northwestern Mutual's brochure discloses that representatives who receive its succession loans are incentivized to recommend that clients keep their accounts at the firm. Ask what becomes repayable if you leave, and when.

Taxes follow the structure too. Kitces noted that principal on a purchase is repaid from after-tax profits; how your own deal is taxed is a question for your CPA. Read every document with your own counsel before signing.

How a G2 should fund a buyout depends on the book of business, the founder's terms and the options open to you, and the specific answer comes from a conversation about what the right fit would look like, drawing on Winthrop's relationships and record of past deals, and about how culture, technology, support and service differ from one firm to the next. Founders weighing the sale side can start with Winthrop's succession planning work. The firm pays Winthrop & Co., and the advisor never pays. Request an Introduction.