The largest wealth management firms are getting bigger by deploying their resources in ways that provide financial advisors with the feel and flexibility of a small company.
This week, Osaic (formerly Advisor Group), LPL Financial, Raymond James Financial Services, Steward Partners and Sanctuary Wealth unveiled significant incoming teams from wirehouses or other competitors with at least 13 advisors and a total of $1.89 billion in combined client assets. Those announcements followed a move earlier this month by TRUE Cresset | Sports + Entertainment to hire Brandon Williams as a director and wealth advisor and Jon Marc Carrier as an associate director and wealth advisor.
Before joining Cresset, Williams had managed $150 million in assets on behalf of professional athletes, coaches and front-office executives at TBH Sports, which he described in an interview as "a small boutique" compared to the multifamily office with $40 billion in client assets. Carrier had been the manager of football affairs for the Los Angeles Rams in the National Football League before taking the position with Chicago-based Cresset.
"Brandon and I's biggest attraction to Cresset was the fact that they had the access to a large firm but the specialized care of a small firm," Carrier said. "They brought both of those worlds together to provide the best for the clients."
The continuing churn comes as the number of M&A transactions, which have a recruiting angle to them as sellers examine an array of potential suitors, are tapering off in 2023 amid the higher cost of capital tied to the Fed's interest-rate hikes. The volume of registered investment advisory firms changing hands dropped 15% in the second quarter to 57 transactions, according to M&A advisory firm DeVoe & Company. For the year to date, though, the average size of an RIA seller has climbed by 9% from 2022 to $900 million in assets under management, DeVoe said.
"Although the industry is still in a heightened period of activity, 2023 is tracking toward the first down year for RIA M&A in nearly a decade," according to the firm's latest quarterly Deal Book. "As today's RIA M&A dynamics are mainly being affected by the macroeconomic environment, DeVoe & Company expects that, as the U.S. economy and stock market recover, and when interest rates decline, M&A will resume its upward climb."
LPL also made a splash this week by unveiling its third major M&A deal of the year, with an agreement to acquire the assets of midsize brokerage and RIA firm Crown Capital Securities. The incoming firm has 260 advisors and $6.5 billion in client assets.
In another recruiting move announced by the firm, a Federal Way, Washington-based team of four ex-Merrill advisors broke away to join LPL Strategic Wealth Services, which is the firm's channel of supported independence for ex-wirehouse teams. Out of nearly $19 billion in recruited client assets in the second quarter, at least $4 billion of them went to that channel and other affiliation models LPL has rolled out in recent years to supplement its traditional independent brokerage and RIA, CEO Dan Arnold said on the firm's earnings call with analysts.
One of them asked Arnold about the impact to advisor recruiting from the rebranding of Osaic and upcoming merger of Advisor Group's eight brokerages into one. The movement of advisors "has largely remained pretty flat" at a turnover rate of roughly 5% for the past 12 months, which "is a lower level" than the historic volume, Arnold said. LPL is beginning to detect some more pickup in moves in the industry's independent channel after the end of the pandemic, though.
"As we look out — and look forward — at some of what competition is doing, whether it be through integrations, restructurings, etc., those things can create more churn or more turnover in the marketplace, and we think we are well positioned across all of our different affiliation models to make sure that we can capitalize, should that opportunity increase and more turnover occur in the marketplace, that we're well positioned to capitalize and win a much bigger share of that opportunity," Arnold said.
Other advisors who made a change in brokerage or RIA years earlier are reflecting on the impact on their careers. Alex Shapses joined New York-based Summit Trail Advisors, an RIA that uses the platform of Dynasty Financial Partners, in July 2021 as a partner and the firm's head of planning services. Summit Trail built an estate planning "roadmap" for 55 high net worth and ultrahigh net worth families working with the firm, Shapses said in an interview.
"We really start to build together a full data set for the families," Shapses said. "A lot of times people aren't doing planning because it's complicated, and it's not their favorite thing to discuss. Their own mortality is never their favorite topic."
