For the past decade or so, the industry’s focus has been on independent telecom advisors. And for good reason. 2022 Advisor Transition Report.
In fact, Cerulli Associates predicts that by 2025, more than a quarter of industry assets will be managed by RIA channel advisors.
Advisors to large brokerage firms are finding great success joining the ranks of independents at a time when the infrastructure and capital solutions to support these de novo businesses are more robust than ever. But while the tailwinds to support such breakaway activity continue, new trends indicate the next wave will come from her RIA channel itself.
The reason is that the growing number of employee advisors (also known as non-owner advisors, service advisors, and senior advisors) in RIAs now share many similarities with their telco counterparts. Fly the flag of the company and leverage the platform and technology that the company provides.
But as RIAs increase the company’s specialization, standardize processes to increase efficiency, and consolidate at a breakneck pace, many RIA employees find it much harder to manage on a day-to-day basis than before. I notice that. RIA owners certainly benefit from immense freedom, control, and financial wealth, but these same freedoms are almost always reserved for their owners, who are on an equal footing with their employee advisors. Not shared. And this is where the friction begins.
As a result, the movement among employee advisors has dramatically accelerated and is expected to increase further in the future. This is a phenomenon that can only be understood by clearly understanding the driving forces driving these advisors’ desire for change.
RIA owners can take 60% to 75% of the company’s revenue before they receive compensation, while employee advisors are paid salaries and bonuses. Advisors are often hired to service existing books rather than creating them from scratch, so the logic is tracked. And, of course, RIA owners have to take the initial risks and pay overheads when starting a business.
Still, many advisors, especially those who were able to bring their own clients and built meaningful practices with minimal support from the RIA, said they were undervalued relative to their financial contribution to the firm. You may feel
Also, while it would logically appear that RIA advisors have far greater control over investments and customer service than their telco peers, many RIA advisors have far less control. increase. This is because most well-run RIA efforts to expand service models and drive growth include centralizing investment management and standardized processes.
As a result, employee advisors who wish to serve their clients in a different way, or who come to believe that their RIA no longer offers a best-in-class service model, are encouraged to do so. You are more likely to consider a scenario that removes such restrictions. For example, advisors looking to expand their offerings to clients may change their jerseys as their RIA scales to offer new offerings such as tax preparation, family office services, real estate planning, business management, and differentiated alternative investment platforms. We may choose to include services and business units.
Most advisors are also growth oriented and tend to focus on how to expand their operations and continue to serve more households. Considering how today’s companies enable growth, advisors sometimes wonder how much value they can get for their costs.
We also have to take into account the inheritance dilemma. It’s no secret that many practices are run by senior practitioners without a well-thought-out succession plan. The carrot of taking over the business is an attractive proposition for employee advisors, but many are frustrated by the lack of progress in managerial promotions and stock sharing.
What’s Next for Employee Advisors?
With industry M&A momentum continuing, RIA advisors, especially those without significant equity holdings, should seek another opportunity if the company sells or is expected to sell in the future. I can. Hard work and unpredictability of the integration process.
In a labor market where more than ever legal channels are available, grasses that appear greener are often actually used. RIA advisors may join competitors with a stronger value proposition for advisors, including better ongoing compensation, a platform for growth, additional freedom and flexibility, and more day-to-day support. I have.
For RIA advisors dedicated to building their own business, partnering with a platform provider that offers supported version independence may be attractive.
In our experience, advisors who check the following boxes enjoy more compelling withdrawal opportunities and are able to request more aggressive compensation packages.
Those who have self-sourced servicing clients, as opposed to those who have less portable “strong relationships”
Whether non-solicitation, non-compete, or other post-employment restrictions are restricted or whether the firm is a member of the Broker Recruitment Protocol
・ Those who want to grow and have the desire to bring in new business
・ Those who are confident in portability
In short, the line between working for an independent firm and working for a telegraph company is beginning to blur for many advisors. Restrictions on freedom and control, and a lackluster economy were just some of the driving forces behind the big exit movement of brokerage firms, now driving a new generation of his RIA exit.