F2 Strategy, a leading wealth management technology services company, has released a white paper in collaboration with Dynasty Financial Partners, LLC ("Dynasty"), a provider of technology-enabled wealth management solutions and business services for financial advisory firms. This research, aimed at empowering prospective breakaway advisors and existing registered investment advisors (RIAs) in navigating critical technology and operational decisions, indicates substantial benefits for mid-sized firms partnering with Dynasty.
F2 Strategy and Dynasty collaborated on this study between September and December 2023, with the shared goal of supporting financial advisors as they contemplate independence. This research unlocks valuable insights by benchmarking 38 Dynasty-affiliated RIAs against a wide sample of 4,669 RIA firms registered with the U.S. Securities and Exchange Commission (SEC). It focuses on the implications of technology on firm operations, growth and valuation over a five-year period, examining various technology operational frameworks to aid advisors in a successful transition to independence.
Strategic Alliances and Growth Opportunities
The study reveals compelling benefits for advisors partnering with Dynasty, especially evident for firms with assets under management (AUM) between $300 million and $1.8 billion. These partnerships enable enhanced operational efficiencies and foster aggressive business growth, underscoring the distinct advantage of aligning with Dynasty's robust platform.
One of the most striking findings is the accelerated AUM growth and heightened firm valuation for Dynasty-affiliated firms, outperforming comparable RIAs by a notable margin. This growth, quantified at a 7.91 percent higher compound annual growth rate (CAGR) over five years, demonstrates the tangible benefits of strategic partnerships in the independent advisory space. Furthermore, the data reveals that the average payout increase for independent advisors partnering with Dynasty is 42%, with many advisors expanding their gross income margin by 100% or more.
"At Dynasty, we’re committed to the role we play in guiding financial advisors on their path to independence and to creating wealth through ownership of their own firms. By outsourcing key functions, advisors are able to focus on their clients and grow their business,” said Andrew Marsh, Vice Chairman at Dynasty Financial Partners. “The current momentum toward independence, propelled by regulatory, technological and generational shifts, is marked by a growing adoption of client-first, fiduciary standards. Our collaboration with F2 Strategy is designed to equip advisors with the insights needed for this transition, highlighting the strategic benefits of collaboration with Dynasty while encouraging a thoughtful, nuanced approach to technology and operational planning based on firm size and growth goals.”
Technology as a Driver of Success
Another key takeaway from the research is the critical role of technology in empowering firms. Establishing a technology platform akin to Dynasty's proves cost-prohibitive for smaller firms, denoting a significant barrier to entry. Conversely, the study also points to the pitfalls of lower-cost operating models such as custodial-dependent or all-in-one solutions, which, while financially attractive, may compromise scalability and long-term growth potential.
For larger firms, i.e., those exceeding $2 billion in AUM, the consideration shifts towards the feasibility and challenge of developing proprietary technology solutions versus the benefits of partnering with Dynasty, weighing the pros and cons in light of staffing, cost, and growth potential.
Bryce Carter, Senior Manager at F2 Strategy, added: “Choosing the independent path is a landmark decision for advisors, and it's crucial to navigate this journey with the right partners and operating model. Our goal is to provide a useful roadmap, empowering advisors with data to align technology and operations with their longer-term vision.”
This whitepaper serves as a guide for advisors considering the shift to independence, providing a helpful resource for decision-making around technology investments and operating models. F2 Strategy and Dynasty Financial Partners are committed to supporting financial advisors through this journey, offering insights that pave the way for informed, thoughtful transitions.
For access to the full white paper, click HERE.
