“There are so many different ways to approach independence that the solution becomes more about why the advisor is looking to leave one firm for another, and what kind of culture he or she wants,” he adds.
There are numerous ways a broker-dealer can stand out from the stiff competition, and one of them is to promote diversity at all levels. Alex David, CEO of Stifel Independent Advisors, is one such example. He’s a Black man in a leadership position in an industry dominated by white males that is constantly struggling to increase diversity.
“This is a crowded field, and some players have outsized capital. But the advisors we are attracting are the ones who want access to the decision makers,” David says. “We decided a couple of years ago that we wanted to be super focused on how to be outstanding, including having advisors and leaders who look like the people we are serving.” Almost half of the advisors at Stifel are female or people of color, he adds.
“Some people think advisors want complete independence, but they really want control backed by resources. That puts us in a unique position to offer just that,” David says.
As the landscape changes and mergers and acquisitions continue to soar, new possibilities for relationships with broker-dealers also are emerging, according to Larry Roth, managing partner of RLR Strategic Partners, a private investment and mergers and acquisition advisory firm affiliated with Berkshire Global Advisors, the international investment bank focused on financial services. Roth is also the former CEO of both Cetera Financial Group and Advisor Group.
“The landscape is as competitive as it has ever been, maybe even more so,” Roth says. “Broker-dealers are working hard to recruit advisors and to make relationships as permanent as possible. There is lots of capital for publicly traded firms and in private equity that is available.”
He points to new arrangements that broker-dealers are making to provide capital to advisors, especially those who need succession plans. One he helped develop was SuccessionFlex, a program run by AmeriFlex (which is itself an RIA and OSJ affiliate of SagePoint Financial, a subsidiary of Roth’s old domain Advisor Group). SuccessionFlex gives advisors a pathway toward a succession and continuity agreement that includes an option to sell 30% to 40% of their current revenue streams to AmeriFlex. AmeriFlex Group announced in early September that it is paying out $8 million to nine advisors who have joined SuccessionFlex.
Roth says similar programs are also underway at firms like Kestra, which created a separate business unit, Bluespring Wealth Partners, designed to purchase equity stakes in RIAs and wealth management firms to help with institutional-level support and succession planning. Kestra recently scored a major coup when it hired longtime Fidelity executive David Canter, who had led the financial giant’s RIA custody business, as president of Bluespring Wealth Partners.
Industry observers privately noted that Canter would not have made the move if Kestra had not promised to give him lots of capital to grow Bluespring. “A lot of broker-dealers are buying firms to tuck in and providing the capital for those firms to buy and tuck in others,” Roth says.
Becca Hajjar, managing principal and chief business development officer at Commonwealth Financial Network, says her firm has added 90 advisors with $7.5 billion in assets so far this year. The package for each in-coming firm is different, but is designed to encourage growth.
In June, Commonwealth announced Strategic Financial Services based in Cedar Rapids, Iowa, with $1.2 billion in assets, had joined the platform.
Jamie Price, president and CEO of Advisor Group, one of the largest networks of independent advisors in the U.S., called the current environment “a fascinating time to be in wealth management.” Advisor Group has 2,400 employees, who serve the needs of the firm’s approximately 11,300 financial professionals.
He, too, says broker-dealers are morphing into wealth management firms. “This means there will be more of a team approach and more holistic management.”
Consolidation in the industry will not stop, but that’s been advantageous to companies like his. In part the M&A is being forced on the industry because “it is almost impossible to be small these days,” Price says. “A few years ago we were seeing consolidation of the smaller firms; now we are seeing it for midsize firms. They need the advantages of scale.
The next iteration of the industry will require advisors to think about clients as whole families so they can deepen relationships. “That will make them more valuable to the broker-dealer,” Price says.
LaSalle St. Securities is a broker-dealer based in the Chicago area with $12 billion in assets and 325 independent advisors. Mark Contey, the senior vice president of business development, says the firm is celebrating its second year of a 100% retention rate for advisors.
“We are transparent and do not nickel and dime our advisors to death with fees,” Contey says. The firm added $750 million in new assets in 2021 and is on track to add $1 billion in assets this year.
“The challenge of running a day-to-day office for firms with less than $150 million in AUM may be getting in the way of growing the business,” which makes them want to have a broker-dealer to help handle those tasks, Contey says. “Coming out of Covid gave advisors an opportunity to reassess their situations.”