Legend has it that the first RIAs roamed the Earth back when the Investment Adviser’s Act of 1940 was passed. Even the fiduciaries of the 1980’s and 90’s are considered pioneers. But it wasn’t until the ‘roll-up’ boom of the mid-2000’s that the RIA channel really started to explode. It has yet to return from orbit.
National Financial Partners, United Capital Financial Advisers, and Focus Financial Partners were among the first, and most successful, to create business models for aggregating/assembling RIAs along with their assets, under one roof. Firms like Dynasty Financial Partners and Hightower Advisors soon followed, along with substantial amounts of private equity investment.
And just like that, the RIA space entered a Golden Age.
These old-guard firms devised variations on a clever pitch for banding advisors together: by creating economies of scale, and by working together through a shared infrastructure model managed by the corporate team, advisors can do what advisors do best – advise! It was a brilliant hook, really: swap the equity in your $100m firm for that of a multi-billion-dollar one, with the promise of. . . well, something big at the end of the journey.
We all know this model. Whether you call it an aggregator, a roll-up, or a consolidator, they are all playing the same game. And the unfortunate truth is that they are more concerned with their financial outcomes than they are with helping advisors reach their growth ambitions.
Now, most of the old-guard have themselves been acquired, or have gone public, or are in a mad dash to do one of those two things. The principals at these larger-than-life firms have certainly done well – but what about the advisors?
Which brings me back to today. A new age of advisors in motion is upon us. Today’s advisor is better informed, more agile, and more empowered than ever before. Advisors in their prime do not want to be someone else’s commodity. In fact, to convince them to do business with you at all takes a hell of a lot more than a bag of short-term cash and a nebulous promise of long-term riches.
Old-think vs. New-think
Roll-ups from days-gone-by capitalized on the fact that aging advisors were well-aware that they had a short runway on which to monetize their businesses. Couple this awareness with the allure of a ‘capital event’ that would see them off into retirement, and it is easy to see why this old-think approach was so effective. One can hardly argue with the financial success that the aforementioned firms enjoyed, regardless of whether you subscribe to their methods and endgame.
New-think moves away from viewing the advisor as an expendable resource to be packaged and resold. Instead, the advisor is treated as a partner to be supported because their growth is inextricably linked to the firm’s growth. A true shift in mindset around how firms are supposed to be supporting advisors is taking place. This isn’t a choice, it’s a mandate. What worked 15 years ago isn’t compelling to today’s advisors who are looking for fulfillment beyond the size of the check that they get at transaction time.
New-think focuses on solving difficult challenges for advisors. Forget about cobbling together some cloud software, throwing in some integrations, and calling it a day. I am talking about the hard puzzles, like centralizing practice management, dedicated in-house marketing support, offering coaching support, and helping advisors achieve desired outcomes and growth on their terms.
One could go as far as to make an argument that old-think firms were simply constructing reverse-engineered wirehouses disguised in fiduciary clothing. If you ‘go independent’ only to trade one sheriff for another, and end up beholden to a non-advisor executive’s entrepreneurial vision, then did you really go independent? The truth is that the old-think model doesn’t support these advisors; instead, it is focused on financial outcomes and views advisors as managed cash flow.
For advisors who are growth-oriented, mission-driven, and marketing-conscious, new-think is the way to move forward.
Advisors have gotten the short end of the stick at old-think firms. They have grown tired of seeing executive teams, private equity firms, and the like benefit financially — while the advisors themselves represent the true asset of the firm but aren’t reaping nearly the same benefits.
Imagine a new world, one where you as the advisor could partner with a creative director, a director of content strategy, media buyers, copywriters, designers, and a chief marketing officer — all on a mission to empower you do more of what makes you a great advisor, and to accelerate your path to becoming influential in a specific market. This is rocket fuel for advisors who have identified what they are really good at. New-think firms magnify that strength, amplify the advisor’s signal, and broadcast it to the target market for everyone’s mutual benefit.
Today, a new cadre of advisor-partner organizations is committed to offer advisors a better quality of life, a battle-tested strategic marketing strategy, a collaborative partner to support their growth, a back-office team to offload non-client-facing tasks and, at the end of the day, an opportunity to participate in the upside related to the overall success of the enterprise.
Is it possible to do all this while adhering to a common ethos of growth and collective prosperity? We believe so. The financial advisor is evolving rapidly right before your very eyes – her independence is her most prized possession, along with the value she delivers to her clients. Those that came before learned some tough lessons, ones she has studied but will not repeat. Oh, and that financial reward, ambition, and success? She’ll have all that, too. On her own terms.
This article originally appeared on CityWire.
