Virtually everyone in America who wants an advisor already has one, Ric Edelman told attendees at the Wealth Management Convergence yesterday in West Palm Beach, Florida, who added that this explains a number of conundrums facing the advisory business, including the struggle for organic growth and the boom in mergers and acquisitions.
Firms looking to grow face two primary options—attracting new clients, the majority of whom have advisors, and buying other firms, he said.
“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 on a CEO panel he moderated.
As one of the three panelists, Richard Frick, 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 in the panel, Martin Bicknell, founder of Mariner Wealth Advisors, about 88% of RIAs are not growing in a meaningful fashion. Bicknell said that wealth technology, which he defined as applications specifically targeting wealth management firms, making it different from broader fintech, will ameliorate the organic growth challenge by helping advisors scale their businesses.
Part of the problem can be traced to demographics. “It’s no secret that the number of advisors is going down and it’s getting faster,” Bicknell added.
But when it comes to recruiting, he also added that the profession needed to do a better job of marketing itself to young people considering career options, as they are 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.
Bicknell also said that many advisory firms are making a serious mistake by focusing almost exclusively on higher-net-worth clients who tend to be older. “People want our advice and it’s our responsibility,” he said.
Mariner manages about $100 billion and, though he and Edelman didn’t say it, the latter built an even larger firm focusing on middle-class Americans largely ignored by most of the wealth management business.
Advisors could ultimately be shooting themselves in the foot, Bicknell said. There is about $30 trillion being inherited and young clients of tomorrow with little assets today who will come into money down the road may be turned off by memories of firms that once viewed them as pedestrian, he said.
In world where finding good talent remains the most pressing problem, recognizing and rewarding it is critical, panelists said. Josh Gross, CEO of Mill Creek Capital, noted that when the Roman Empire conquered a territory they often made its leaders full Roman citizens. In some cases, an acquirer might want to promote member of management of acquired firms above their own management teams if they have demonstrated superior skills, he said.
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 recruited 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 entail sending money out the door.
Bicknell also 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 one in every four advisors Mariner added was a business development specialist.