NewEdge Advisors, a New Orleans-based RIA supporting independent financial advisors nationwide and backed by Parthenon Capital, is expanding its affiliation models for advisors to include a “W2” option, the firm announced today.
The model, which makes the advisors employees of the firm, is designed to give financial advisors greater flexibility, and opportunities to pursue growth, NewEdge Advisors said.
Under the new affiliation model, NewEdge Advisors will partner with independent advisor practices and wirehouse breakaways and invest in them to create anchor branches under the NewEdge Advisors brand, NewEdge explained. The business model also will be used by NewEdge to purchase retiring advisor’s practices.
“What differentiates us from others is that we are not just looking at firms where the founder is retiring,” NewEdge Advisors co-founder Alex Goss said in an interview. “We are looking for successful advisory practices with leaders who are in mid-career and who want to grow.”
The W2 model was developed at the request of advisors who already were part of NewEdge who wanted to acquire other practices, but did not have the capital. Using the W2 model, the firms could bring in other advisory practices to add to their growth, Goss said.
Firms that join NewEdge Advisors are allowed to continue operating as they were. They were successful using the procedures they developed and NewEdge will not change that, Goss and Neil Turner, NewEdge Advisors co-CEO, said in the interview.
“We are big believers in the fact that client relationships are built on a local level,” Goss said. The pair has no intention of altering that for the firms that join them.
At the same time, advisors who are near retirement do not want to take on more debt in order to acquire new firms. NewEdge can do that for them and they can continue to grow, Turner said.
“The model is suited to successful, rapid-growth advisors searching for scale, as well as retiring advisors seeking to transition clients to accomplished advisors at institutional valuations,” NewEdge said.
The W2 business model is being offered to existing NewEdge teams and external advisors who qualify from a growth, AUM, planning, culture and investment perspective. Reinke Gray Wealth Management in Pierre, S.D., which joined NewEdge in 2018 under a 1099 affiliation, is the first firm to change its affiliation and adopt the W2 model, NewEdge said.
NewEdge has another seven firms in the pipeline for this affiliation for 2023 and 10 more that have entered serious talks, Turner said.
"Our offering provides more choices for well-established independent advisors to shape their future," Turner said in a statement. "We’re not looking to mold a team into what we think they should be. We only work with successful practices already possessing the capabilities and capacity to handle growth.”
The employee model overcomes a growth roadblock experienced by advisors wanting to leverage the consolidation trend but lacking the resources to conduct acquisitions. By identifying and purchasing established businesses from retiring advisors, NewEdge Advisors assumes the recruiting function and financial risk, so advisors can concentrate on building client relationships and managing wealth, NewEdge said.
The W2 model “gives NextGen advisors a path to growth where they can maintain their businesses, grow assets and continue to receive competitive payouts over the long term,” Goss added in a statement. “It also gives retiring advisors confidence that their clients are moving to tenured advisors and not smaller practices that lack the capacity to absorb a new client book."
NewEdge Advisors, which serves the upper half of the mass affluent market and the lower half of the high-net-worth market, has 265 affiliated advisors in 32 states who manage $16.5 billion in brokerage and advisory assets.