As the independent space gained more traction and the industry became more legitimized by large, successful RIAs, advisors began to leave for greener pastures (read more here). Over time, advisors became emboldened to start RIAs without the assistance of aggregators/platform providers, and felt they could grow both organically and inorganically on their own. As those firms experienced more and more success and started reaching the $1 billion, $2 billion and even $5 billion AUM milestones, they slowly turned into the very bureaucratic organizations that they had originally rallied against. Meanwhile, the younger, more entrepreneurial employees at these RIAs are now beginning to say to themselves, “There has to be a better way,” and are looking to start their own firms. Some of this is driven by the firm’s lack of succession planning and the younger employees feeling like they will never get a meaningful piece of the pie, and much of it is driven by a desire for a smaller organization with fewer clients and deeper relationships (the exact reason the original RIA owners left the wirehouse in the first place!).
While the Breakaway Advisor Movement, 3.0 trend contains many legal and compliance issues that by themselves are worthy of discussion, themessage here is that the RIA space, like many other aspects of financial services, will continue to adhere to a cycle of consolidation and disruption. As a result of this creative destruction, it will continue to attract the best and brightest due to its open architecture and unlimited opportunities to find the best models for serving both clients and employees.
Matt Sonnen is the founder and CEO of PFI Advisors.