Virtually everyone in America who wants an advisor already has one, according to Ric Edelman.
Edelman, the founder of Edelman Financial Engines, noted two important trends in a recent panel discussion: He pointed out financial advisors’ struggle for organic growth and the boom in mergers and acquisitions among advisories. Firms looking to grow have two primary options—attracting new clients and buying other firms. The first option is harder if, as he said, the majority of clients have advisors already.
“It’s one thing to bring in a number of clients one at a time; it’s another thing to acquire [an entire advisory firm],” Edelman said in a CEO panel discussion last month at the Wealth Management Convergence conference in West Palm Beach, Fla.
Another panelist, Richard Frick, the CEO of Gladstone Wealth Partners, said, “It’s just easier to grow [by] $100 million by bringing on a new advisor” with her own clients than doing it organically.
According to another participant, Marty Bicknell, the founder of Mariner Wealth Advisors, 88% of RIAs are not growing organically in a meaningful way. There’s also a demographic problem: “It’s no secret that the number of advisors is going down and it’s getting faster,” Bicknell added.
It’s probably a sign of the times that the firm Ric Edelman once helmed, Edelman Financial Engines, sued Mariner earlier this year for allegedly poaching 20 advisors. Yet both Edelman and Bicknell engaged each other in an extremely cordial fashion.
The profession also needs to do a better job marketing itself as a career path to young people, Bicknell said, since they’re the ones likely to engage with tomorrow’s clients. “Being a fiduciary is a noble profession, and we’ve got to get that out,” Bicknell said.
Many advisory firms are making a serious mistake by focusing almost exclusively on higher-net-worth clients, who tend to be older, Bicknell said. He noted that $30 trillion will be passed to the next generation, and advisors who ignore the young could ultimately be shooting themselves in the foot when this next generation comes into money down the road. At that point, they may be turned off by memories of firms that once viewed them as pedestrian, he said.
In a world where finding good talent remains the most pressing problem, recognizing and rewarding it is critical, the panelists said. Josh Gross, CEO of Mill Creek Capital, noted that when the Roman Empire conquered a territory, the vanquished foes were often made full Roman citizens. For similar reasons, an acquirer today might want to promote managers brought in during acquisitions who have demonstrated superior skills—and even promote these managers above the acquirer’s own team members.
If advisor consolidation and poaching is inevitable, Gross said it was in the industry’s interest to try to act in a more collegial fashion when possible, as competitors can also be good referral sources.
“We all sit on boards,” he noted. Recently, Mill Creek got a referral to manage money from an ostensible competitor who sat on the board of a charity associated with the Philadelphia Eagles.
Gross, Bicknell and Frick all had warnings to acquirers and firms that recruit aggressively. Gross said he wanted to avoid the “hire 1,000 people and lose 75% model.”
Frick noted that firms have a responsibility to remain financially strong and acquisitions can drain cash.
Bicknell said making acquisitions and recruiting advisors in a cash flow-positive manner is also critical. Mariner brought in $7 billion and 4,000 households in 2023. Bicknell told attendees that one in every four advisors Mariner added was a business development specialist.