New Transition Trends

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In 2015, Cerulli Associates surveyed advisors regarding their prospects for transition. The chart below represents the results:

*Source: Cerulli Associates in partnership with the Investment Management Consultants Association, Wealth Management.com, The Financial Planning Association, and on Wall Street.

Almost five years has passed since this data was collected and our industry is not the same. I believe there are several ways this survey could be improved.

First, there are inherent inaccuracies with how respondents are segmented. Instead of grouping all advisors together, they should be organized by AUM. Logically, a $1B IAR may think differently than a $30M advisor about opening his/her own RIA. As an advisor’s AUM gets larger, it demands attention from service providers. This increases advisors’ opportunity to negotiate from strength and reduce vendor costs, overhead, and total expenses for clients. Because of these benefits, the likelihood that an advisor would consider starting a firm of their own would grow larger.

Next, I believe there is fifth, evolving category that was not offered as a possible choice in this survey. It’s still new but those that understand it see it as a true path to their entrepreneurial goals. I like to call it, “RIA in training”. This is ideal for advisors with a strong, growing asset base and come from a more captive environment like an investment bank. IARs and Registered Representatives oftentimes want to be an independent RIA but realize there is more that they first must learn. High level topics of interest on this path include thinking like a CEO, understanding business and regulatory risk, personal branding, running an RIA for profit, and obtaining margin.

This journey begins when an advisor joins a firm as an IAR with the agreement that they will be leaving in 12-24 months to form their own RIA. Their hiring firm acts as a mentor, architect, and business guide to help build the foundation for the advisor’s new business. Here, they will begin to recruit, hire, find real estate, file with the regulatory agencies, create financial proformas, and build a successful business model. Furthermore, the IAR can leverage their current firm to access multi-billion-dollar pricing with enterprise level agreements from vendors. In return, the current firm will ultimately become the middle and back office for the advisor’s billing, accounting, and regulatory guidance when they begin their new firm. This model delivers real value to the host firm and the advisor’s new RIA. I believe it’s truly a win-win for all involved.

I believe that education is the ultimate elixir for students that wish to grow. This model provides the teaching advisors’ need to better themselves professionally and found a firm of their own. There are some firms that claim they provide this model but it’s more of a compromise in the sales process than a core part of their business model. This business charter is built on selflessness and is always focused on serving others.

f3Logic was founded with this model at the core of our business. We noticed this trend early and built our business to support advisors’ dreams. Are you an entrepreneur stuck in a captive sales force, wishing to move forward? If so, there are solutions and we can help.

Rich DeSalvo

CEO and Founder

f3Logic, LLC

Where Fiduciary Freedom is First

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Advisory services are offered through f3Logic, LLC, a registered investment advisor.