Offices of Supervisory Jurisdiction (OSJs) are evolving with the financial industry to offer more support for the advisors and firms that are part of their networks, according to a study by AssetMark Inc., a consulting and support organization for financial advisors in Concord, Calif.
OSJs that offer the most services also tend to have the most advisors that charge fees rather than commissions and take in the most revenues, says the AssetMark study.
The changes are being made on the OSJ level because of increased competition in the industry, technology innovations, added regulations and continued consolidation, says AssetMark.
AssetMark has identified three types of OSJs that exist today: the traditional OSJ where the primary goal is to provide compliance supervision; the facilitator that offers supervision plus acts as a liaison between the advisor and the broker-dealer, and the business builder, which offers the other services plus marketing, training and practice management to its advisors.
The advisors who are part of the business builder OSJs tend to generate a majority of their revenue from recurring AUM-based fees as opposed to commissions. AssetMark says for traditional OSJs 74 percent their advisors’ revenue is commission based, but for business builder OSJs 61 percent of their advisors’ revenue stream is fee based.
In the last three years, the most proactive OSJs, the business builders, have seen a 32 percent growth in revenues, while traditional and facilitator OSJs have seen a 12 percent revenue growth.
Business builder OSJs also have advisors who have higher average assets under management per advisor and higher revenue, AssetMark says.