Put another way, while the Super-OSJ office provides required supervision and may offer additional services that help its advisors, it’s ultimately not a business entity that holds much value.
RIA Advantages
This has implications. It means that a Super-OSJ office isn’t likely to garner outside equity investment or be owned by multiple shareholders.
An independent RIA, on the other hand, can be structured as any kind of entity with multiple ownership—limited liability corporation, an S-Corp or a C-Corp. Each structure carries with it specific requirements of owners, but the common thread they have the potential to be cash-generating entities and are inherently valuable.
As such, an independent RIA can receive investment from sophisticated partners, such as private equity investors, family offices and even broker-dealers. It can also get creative with ownership structure by, for example, offering equity to its IARs, as we have done at the AmeriFlex Group.
This IAR-ownership model, we’ve found, resonates strongly with advisors who are closing in on retirement and who may have spent their careers as reps on someone else’s corporate RIA platform. Being able to buy into an independent RIA is a way for advisors to participate in the growth that they are supporting through the client service they provide, while, as an IAR, still leveraging the services they lighten their administrative burden.
Maintaining Relevance
An advisor-ownership model also gives would-be hybrid RIAs something they wouldn’t have been able to command if they were only Super-OSJs: Relevance with advisors.
In the end, this is an example of what the versatility of the hybrid RIA model can enable—a way not just to attract advisors, but to retain them. Being a hybrid RIA can help firms go beyond the transactional relationships between Super-OSJs and reps and enlist partners in every sense of the word, who (quite literally) have a vested interest in the success of the firm and will stick with it for the long term.
Thomas Goodson is president of The AmeriFlex Group, an advisor-owned and -operated hybrid RIA in Las Vegas with more than $4 billion in total client assets.