AK Financial Group (AK), an Irvine, Calif.-based registered investment advisor (RIA) overseeing $1 billion in client assets, is partnering as a "tuck-in" with Private Advisor Group (PAG), a hybrid RIA headquartered in Morristown, N.J., the company said.
Frank Smith, president of AK Financial Group, described a tuck-in in a recent email. He said that according to his firm's definition of a tuck-in model, a smaller firm such as AK will join PAG as independent financial advisors who retain their local identity, while leveraging the larger firm’s resources and scalable infrastructure components. "AK Financial Group is joining our firm as a tuck-in and will operate under Private Advisor Group’s RIA," he said in the email.
For AK Financial Group’s founder and president, Andrew C. Karlinski, an industry veteran with more than 45 years of financial services experience, a tuck-in relationship with PAG offered benefits that would ensure his legacy and the continuation of his business.
“This is a critical step in the succession of AK Financial Group as it creates space for our entire team to stay focused on our mission to deliver a highly personalized wealth management experience that seeks to replace complexity with simplicity,” Karlinski said in a prepared statement. “Winding down my RIA operations allows me to (do) what I love most: spending time with clients and mentoring financial advisors.”
According to a news release, AK will transition its RIA to PAG as a tuck-in to drive efficiency, refocus on business development, and strengthen future succession and continuity plans, while PAG will expand its regional footprint through AK’s Irvine office and its regional branch offices, staffed by a team of 25 financial advisors and support personnel.
In an email, Karlinski discussed why he had decided to affiliate with PAG as a tuck-in after so many years of operation as an independent RIA.
“Running an RIA had become increasingly complex,” he said. “Scale and resources matter. There is immense value in partnering with a larger RIA versus continuing to run a business without scale.”
Karlinski said he was drawn to resources PAG could provide that included the firm’s practice management support; business planning and succession solutions; ability to deliver highly personalized wealth management experience; and participation in PAG’s Advisor Alignment and Equity Program, which launched this past March.
Under the opt-in program, an advisor agrees to contribute a portion of their revenue, typically between 10% and 20%, in exchange for upfront cash and equity in Private Advisor Group, which is backed by New York City-based Merchant Investment Management, which acquired a minority, non-controlling stake in PAG last year.
Karlinski indicated that the partnership with PAG was not just based on what the larger firm could offer his practice, but on trust.
“I’ve known the team at Private Advisor Group for many years and have built strong, long-term relationships with key principals of the firm,” he said in the email. “Over the years, I’ve seen how Private Advisor Group has grown its business in a quality, caring and supportive way. Their nonprofit work and dedication to giving back is impressive and reflects the same values and attitudes I have and seek in fellow business leaders. And as defenders of independence, there is a cultural fit and dual benefit in working and growing together.”
Asked where he saw his business in partnership with PAG five years from now, Karlinski said, “Spending less time on operations and compliance activities.”
“My entire team is looking forward to no longer maintaining, editing and filing our ADV, as that will be managed by Private Advisor Group as the RIA going forward,” he said. “We estimate that will free up about 20% of our time. We see our business having more capacity and being able to put more energy towards advisor growth, recruiting and helping investors.”
Karlinski said that five years from now, he expects enhanced growth for both AK Financial Group and Private Advisor Group.
“While I’ll continue to work with my personal clients under AK Financial Group’s brand, in my new leadership position with Private Advisor Group, I’ll be able to dedicate more time to recruiting and mentoring new advisors that become part of the larger firm,” he said.
Smith said in a news release that he and his team were “incredibly honored” to welcome Karlinski and his team of advisors to Private Advisor Group and looked forward to working together. In an email response for comment, he discussed his firm’s Advisor Alignment and Equity Program.
“The program is sophisticated and requires many levels of legal reviews throughout various stages,” he said in an email. “Its being introduced as a phased rollout to all advisors throughout 2022 on both an individual and firm basis so exact participants aren’t necessarily something we share or use as a metric for success. That being said, we’re very pleased with adoption to-date, and it has exceeded our initial expectations.”