Spring has been called the season of new beginnings. So, it’s not surprising this time of year gets people thinking about switching things up on the professional front. It’s a big decision, no matter who you are; But, if you are a financial advisor, making a move to a new firm or business model can be particularly complicated. There are many constituents who’ll be impacted, including the advisor’s team and clients. And there are many options to consider. I thought it might be interesting to run through a hypothetical scenario to discuss all that goes into the assessment.
Let’s take a look at Stanley Lynch, an advisor at one of the large wirehouses. He’s been in the business for over two decades and has earned the trappings of success that accompany hard work and commitment: $450 million AUM, with $3.5 million in annual revenue, most of it recurring. He’s got a three-person team plus the support of a large staff of back office specialists. But he’s wondering if there’s more out there.
Yes, there is. A lot more.
Sometimes, that’s part of the challenge. With the growth in various business models and the explosion in technologies and service providers to support them, some advisors run into choice overload – or analysis paralysis – when they are deciding how to proceed. So, Stanley asked himself three key questions that would inform the rest of his decision-making process:
- What am I missing now that I want to have going forward?
- What do I already have that I want to keep?
- What responsibilities do I want someone else to handle?
After some reflection, Stanley had his “must have” list, which included more freedom, less bureaucracy, more of a voice at his firm and the ability to grow his income and eventually monetize his practice. He wanted to remain a hybrid business (which means having both an RIA and a Broker-Dealer solution), still have access to technology, compliance, due diligence and other back office support, and the opportunity to network with his peers. While he had a bit of entrepreneurial spirit, he knew starting – and being solely responsible for every element of a business – would be a heavy lift.
Making a lateral move to another wirehouse was off the table. While a healthy sign-on bonus would most likely be in play, the underlying issues that gave rise to Stanley’s restlessness wouldn’t be addressed.
A smaller, regional firm offering an advisor-centric culture and ecosystem had its benefits but wouldn’t offer the level of independence Stanley sought. The high cost of doing business at a regional was also problematic.
The larger, independent broker-dealers offered the supported autonomy Stanley sought, as well as generally competitive payouts, innovative technologies and support. But the firm’s built-in infrastructure meant he’d be constricted regarding custodians and technologies. Becoming an IAR of an IBD’s Corporate RIA would check a lot of Stanley’s boxes, but owning his book of business was important to him, and ultimately that option was not a good fit.
The growth of the RIA aggregator market offers advisors like Stanley a viable business model for consideration. Like all of the other options considered, there are pros and cons. The model offers breakaways the flexibility and financial upside they seek, but with the substantial tradeoff: advisors would assume additional costs and risk… significant pain points.
The increasing presence of private equity in the RIA aggregator space adds a new level of financial stability to these firms, as well as another financial consideration for advisors like Stanley – the potential to profit from a possible liquidity event in the coming years.
With all of the available options, it’s important to leverage the knowledge of recruiters/consultants with the relationships and industry expertise to help you make the move that’s right for you today and over the long term. Bridgemark Strategies’ advisor-centric approach to the science of evaluating and strategizing the next stage of your career is built upon 80+ years of collective experience.
Contact us at 704-288-4008 or firstname.lastname@example.org to find out more about our team, our monetization strategies and our comprehensive consulting guidance, or to schedule a no-obligation consultation.