The Wire

Some advisors are happy to be part of a small, community-oriented practice. But many advisors end up feeling constrained by the limitations and lack of capacity of a small firm, or worry about encroaching competition. What steps should motivated advisors who envision a wider horizon for their practice take to evolve into a larger enterprise with tangible market value? 

Start with a vision, then shape a strategy, says Mark Tibergien, the former CEO of Pershing Advisor Solutions, and co-author of “The Enduring Advisory Firm.”

On June 3, Ric Edelman sat down in his home office in Great Falls, Virginia, to log on to an unusual Zoom with his inner circle. For years, he had routinely chatted with the two dozen senior financial planners at his successful investment advisory firm, all loyal, long-term employees spread out from West Palm Beach to Los Angeles. Over time, he had rewarded them with fancy “executive director” titles and company stock. More than half a dozen of them had joined him on a sweaty, “guys-only” road trip through the Australian Outback in early March 2020, right before the pandemic surged. “We are a close-knit, tight family,” Edelman, 63, says. He and Jean don’t have kids, “so these guys are our children. They’re our babies.”

For smaller RIAs, winning access to lucrative custodial referral programs has historically been about as easy as getting upgraded from basic economy to first class on a United flight.

And it’s only set to get more difficult.

The barriers to entry may be getting too high for some advice businesses to even view a spot in Charles Schwab’s Schwab Advisor Network (SAN) or Fidelity’s Fidelity Wealth Advisor Solutions (WAS) program as an aspirational goal.

Sharing equity can help attract and retain talented team members, create a clear succession plan, and help de-risk ownership for advisory firms. But what’s the best way to price and distribute equity to meet a firm’s strategic objectives? John Furey of Advisor Growth Strategies joins Catherine Williams, Dimensional’s Head of Practice Management, to discuss current trends in compensation and equity planning.

In a deal that will push its tens of billions of dollars in client assets to more than triple the size of two years ago, a private equity-backed hybrid RIA is purchasing another massive practice.

Hoover Financial Advisors agreed to fold into Wealth Enhancement Group under a transaction with an undisclosed price tag that’s expected to close July 1. The Philadelphia-area practice has nine financial advisors, four seasonal tax consultants and 13 other employees managing $1.46 billion in client assets. Upon completion of the deal, the team will switch their broker-dealer affiliation to LPL Financial from Purshe Kaplan Sterling Investments.

No matter where you sit in the wealth management world, it’s impossible to miss the surging presence of outside capital in our industry. Major private equity players have taken an active hand in directly or indirectly cultivating mergers and acquisitions in the RIA space. In fact, more than 65% of the firms that completed multiple deals over the last five years enjoyed the support of a capital partner, according to Advisor Growth Strategies’ recent RIA Deal Room Report.

Is this something our industry should welcome? And what can we learn from the massive influx of outside capital?