The new year brings reflections on what transpired in 2023 and thoughts for the year ahead. 2023 was undoubtedly a record year for financial advisors transitioning from traditional banks/brokerages to more friendly advisor centric private wealth platforms, including the various choices of independent platforms. Even gestures by some large banks like Merill to modify their GRID’s hasn’t been enough to stem the tide of departures out of the firm, with major moves already announced in the first weeks of 2024. Furthermore, with several bank blow ups in 2023, advisors lost their trust and reliance on banking platforms. As an example, Goldman Sachs Personal Financial Management was suddenly sold (to Creative Planning) and 60% left to return to independence, despite the hawkish Goldman Sachs contracts.
The trend isn’t friendly for banks. The number of financial advisors retiring has been steadily increasing and they haven’t been replaced with the same number of savvy advisors entering the space, thus creating a shortage of financial advisors overall. Even clients’ faith in big banks appears to be diminishing, a sentiment advisors are well aware of. The overarching theme of 2023 going into 2024 is advisors assessing what is truly best for their clients. Yes, REG BI puts pressure on this issue, but as we talk to advisors, this interest comes from the heart for advisors to do the right thing by their clients despite what government regulators state and their big employers demand with oversight. Advisors are just plain tired of the ‘big man’ telling them how to run their businesses – we hear it from advisors all the time.
Currently, approximately 50% of advisors we counsel are considering their potential next move is going independent. Advisors we speak with hypothesize that within 5 years, the shift out of big wirehouses will be massive, with top talent primarily in the independent space. As advisors assess what is best for their clients, three primary themes emerge that we expect to continue.
- Custodians are a commodity, advisors are not. Essentially, products and services at most all banks/platforms are ubiquitous so advisors want firms that service them and their clients versus the other way around. They want and deserve total freedom to control their business with whatever custodian/platform that suits their needs best.
- Advisors want independence but want to be supported in ‘everything’ that entails setting up their own RIA. Supported independent platforms offer everything and more than even the largest banks operations including real estate, investment platforms, technology, operations, systems, and compliance. Advisors want to manage money just the same as they do at any large banking platform, and they are able to through independence.
- Economics, Transition Packages & Equity. Advisors realize that they can manage money at 60-70% net income operating pre-tax margins as a 1099 contractor. Also, just the same as there are recruiting wars at banks, there are large transition packages with independent platforms. Lastly, advisors note the benefits of building equity as a retirement vehicle, selling to willing VC’s at huge valuations, or purchasing other practices. Advisors are becoming ‘the house.’
As far as specific firms go, trends have emerged that peak advisors’ interest.
- Goldman Sachs Advisor Solutions (GSAS). All the benefits of an employee advisor but now as an independent RIA contractor. The custodian is attracting elite teams that want to deliver the cachet of Goldman to clients along with the access to the suite of GS investments including alternatives, institutional consulting, global research, trading, and with white glove service.
- FiNet. Barry Sommers, formerly of JPMorgan, is placing a large bet on the platform. Once again, all the benefits as an employee advisor but now as an independent RIA contractor. The firm offers substantial economic packages, a private equity sleeve if advisors want to sell equity, and one of the most robust lead sources to acquire other teams with the firm’s capital. FiNet, the Wells Fargo independent supported platform, is the only option out there that provides both the full power of a national bank with the freedom of an RIA.
- LPL. The #1 independent broker/dealer in the nation with 22,000 advisors and counting has the bandwidth to match the level of service and support an advisor needs through a wide variety of options including multi- custody. Fully independent businesses, no matter who you affiliate, including within the W2 model, and transition packages that exceed most every competitor. The new private wealth division is attracting elite teams from most every major bank in the nation.
- New Edge. Top advisory teams have flocked to the RIA given the star studded leadership team and the trajectory growth of the firm. Founders Rob Sechan, John Strauss, and led by the former UBS chief Bob McCann is a formula for what is now one of the fastest growing and profitable RIA’s in the nation. The model is an elegant and sophisticated family office solution for their UHNW clients and an economic transition package that is unmatched by most any competitor.
- Rockefeller Family Office. A bank platform that acts like an independent RIA. Greg Fleming, capitalizing on his expertise both from Merrill Lynch and Morgan Stanley, runs a boutique family office experience for ultra-wealthy clients and advisors who deserve excellence. The depth of professional expertise in tax optimization, trusts, estates, philanthropy, and concierge services is unmatched.
- Supported independent platforms including: Kestra, Sanctuary, Steward Partners, ARAX Partners among others. These firms offer everything and more than even the largest banks operations including real estate, investment platforms, tech, operations, systems, legal and compliance. Each platform has its value added including, economic transition packages, private equity options, retirement packages, and acquisition opportunities.
What we’re stuck by regarding the future for advisors was cited in a recent interview we conducted with ARAX Partners CEO, Haig Ariyan – we see this reflected in advisor moves. Ariyan stated that freedom is paramount to success for advisors going forward, this informed his decision to form his own firm in the independent space . We can’t help but be struck by 50% of advisors opting for independence and the holy host of senior management at big firms that have left to join the explosively growing RIA space. Will 2024 bring unpredictable’s? Probably yes as many are also bracing for volatility in an election year. Our prediction should more unpredictable’s occur is even more departures to independence so advisors can control their business and their financial destiny.