How does buying a book work? What incentivizes clients to stay with the purchaser? Is it just buying a lead list?

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Retention clause and non-compete are musts if buying all or part of a book. The seller and the buyer should have incentive to keep business going to buyer

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We bought a book back in 2014 from another independent RIA. Straight AUM. 100% contingent deal over 5 years. Paid a little higher premium on multiple for no cash and contingency but it has worked out well and will have it paid off in mid 2019. We were betting also that we could grow the native accounts based what we perceived was his inattention to the clients which we have done, as well we retained over 90% of the assets.

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If you are asking these basic questions I would suggest you don't. You are going to get taken like a rookie.

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I have no intention to buy. Just interested in the process. What causes a client of the purchased book to stay with the purchaser

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Depends on what you’re buying - AUM or products/service work. One of the main objectives, as a buyer, is to determine the motivation behind the sale - out of need or simply trying to find a successor. Out of need, the buyer has greater leverage. Out of successor search, typically can favor both or just the seller because the seller can control the pace.
Buying AUM - you deal with Multiples of books revenue. Can involve splits depending on the objects of the seller and the financials of the buyer.
Buying product (life, LtC, annuity) - typically not buying anything, but splits future business based on a set period of time.
All purchases can be different - find out what motivates the seller to sell and use it to your advantage.

FA2 what multiple did you pay if you don’t mind? I also like contingent, no cash.

I wouldn’t necessarily agree with IA 1’s assessment. Just don’t go in blind and naive. Ask tons of questions like you are now and ensure you are fully informed. Anyone looking to buy a book of business is going to say no a whole bunch of times before they find the right one to say yes to. Depending on the size of the book it also may be worthwhile to hire a consultant to help advise on the process. Even if you don’t think you would buy a book the fact that you’re asking the question indicates there may be a time that you would consider it. But specific to your question, the reason our clients stayed with us is because first and foremost we did a good job of onboarding them and explaining to them how important they were to our business. Then we continued to develop the relationships like any good client manager would do and looked for opportunities to deepen the relationship and grow the assets. A lot of them had money elsewhere or in held away accounts that the prior advisor wasn’t touching or even asking about. It’s not rocket science but it does take effort to cultivate it. We lost less than five accounts and the primary reason was a lack of alignment with our investment approach and outsized expectations for returns.

@IIA 1, we paid 2.75X

I paid for 1st book - all AUM - 1.75x - no cash - contingency plan - 5yr.
Book 2 - AUM and Products - no cash, 5 yr transition - 50/50 split on only new business generated from that book within 1st 3 years.

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