$1B team exits Osaic for a more boutique brokerage

John Hicks of Ausdal Financial Partners says the recent decision of a nearly $1 billion advisory team to join his firm from Osaic is further evidence of the waning appeal of extra-large "mothership" firms.

The addition of the 15-advisor team, technically an office of supervisory jurisdiction (OSJ), to Ausdal brings the independent broker-dealer's assets under management to nearly $9 billion and its headcount to over 200. Osaic, by contrast, reports more than $700 billion under management and affiliations with more than 270 financial institutions and over 11,000 financial professionals.

But it's not just size that's the differentiator for Hicks, the chief marketing officer at Davenport, Iowa-based Ausdal. It's also that the firm is almost entirely owned by employees and advisors, he said.

That structure sets it apart from the many firms that have sold large ownership stakes to private equity outfits. Osaic, for instance, has been majority-owned by the private investment firm Reverence Capital Partners since 2019. 

READ MORE:
Osaic exec takes stock of firm's consolidation journey
Why some RIAs aren't riding the private equity wave
Osaic adds Navy Federal in big exit from LPL's incoming Atria crop
Inside Osaic's plans for Lincoln's wealth business after the $700M deal
Osaic trims fees amid challenges in recruiting, regulation and debt

Private equity unlikely — but 'never say never'

Hicks said he and his colleagues certainly aren't planning to sell Ausdal Financial to a private equity firm someday, but they also can't foreswear the idea. "Never say never," he conceded, allowing for the possibility that a truly impossible-to-refuse purchase offer might someday land on their desks. 

But like others in a small but formidable section of the wealth management industry, Ausdal executives' inclination is to stick it out on their own. Hicks said ownership by employees ensures a firm will have leaders who have "walked in your shoes, and the goals are aligned."

"A lot of people feel strongly about independence, and they want to protect and preserve that," he said.

In a press release announcing the departure of the 15-member team for Ausdal, OSJ supervisor Richard Gerepka confirmed that he and his colleagues wanted to be at a firm with "the resources of a large broker-dealer but also fosters a small-firm culture where we can maintain strong client relationships."

Ausdal Financial Partners "embodies that balance, and we believe this transition will better serve our clients' needs," he said in the statement.

Osaic's Journey to One

Greg Cornick, Osaic executive vice president of advice and wealth management, put the departing advisory team's assets under administration at $779 million. That amount, he said, grew at an annual rate of 40% from 2022 to 2024, while the OSJ was at Osaic.

Acknowledging the team's desire to be at a smaller firm, Cornick said, "Osaic remains a strong growth partner to over 200 enterprises and OSJs, with nearly two-thirds of our strategic enterprises outperforming the market last year. In fact, Osaic strategic enterprises exceeded market growth by approximately 7% last year. We wish Gerepka and his team all the best in their next chapter."

Osaic, which changed its name from Advisor Group in 2023, has been experiencing some growing pains since acquiring a series of independent broker-dealers and embarking on a plan to consolidate them all under its brand. The departing OSJ had come into the Osaic fold in 2022 with Advisor Group's purchase of Holbrook, New York-based American Portfolios Financial Services. 

In January Osaic completed what it called its "Journey to One" process — or consolidation of eight previously acquired broker-dealers under its own brand. Besides American Portfolios, those firms were: FSC Securities, Infinex Investments, Royal Alliance Associates, SagePoint Financial, Securities America, Triad Advisors and Woodbury Financial Services.

Osaic executives have acknowledged the transition wouldn't be easy and said they expected some advisors to look for homes elsewhere. In an interview in October, Dimple Shah, Osaic executive vice president and head of corporate strategy, said the attrition corresponded to what she and her colleagues expected when they embarked on the "Journey to One."

"Anytime you have a change like this, it's an opening for competitors to pitch themselves, and obviously we sit in a very competitive environment," Shah said. "We did have some advisor attrition. But I would say it was in line with what we've modeled."

The importance of staff-to-advisor ratios

Jodie Papike, the CEO of the independent advisor recruiting and executive placement firm Cross-Search, said advisors who go from relatively small firms to large ones sometimes notice the change most in the number of support staff they can turn to for help. She said she knows of a small wealth manager that has one staff member for every two advisors; she also knows of larger ones where the ratio is closer to 15 to 1.

"Many advisors are feeling that firms have lost touch with serving them and taking care of them and having appropriate back-office staff," Papike said. "If something does come up, can they call the back-office folks, and are they going to pick up the phone and have the resources to help?"

Papike said advisors tend to value having a lot of staff support but also employees with many years of industry experience.

"But people who have that level of expertise are going to be more expensive," she said. "So how much a firm is willing to spend on their back office?"

Layoffs this week

Osaic has embarked on a series of layoffs in the past year. The latest, first reported by the industry publication CityWire, came this week.

The firm said in a statement that it continues hiring and that "these decisions are not taken lightly and front line service team members were mostly unaffected by this change."

Osaic noted that firms often reevaluate their internal organization following large acquisition deals, like its recent purchase of Lincoln Financial Group's wealth businesses. "This was part of an exercise we conduct periodically to ensure we have the efficiency, expertise, skills, and nimbleness needed to achieve our goals," the firm said.

Accommodations at smaller firms

Hicks of Ausdal said he thinks a small firm can afford to have fewer rigid one-size-fits-all rules for advisors. Of course, Ausdal expects its representatives to abide by a litany of rules and standards.

But it can also try to find ways to accommodate advisors who want to try something a little outside the norm. That's a luxury few large firms — lacking the time needed to consider what would be an unruly number of individual cases — have, Hicks said.

"We're here more to help support them than to dictate to them what they can and can't do," he said.