In a time of rapid consolidation and accelerating dominance by the giants of wealth management's independent brokerage channel, the so-called small or midsize firms seem quaint. When growing colossi are gobbling up fauna, nobody wants to be the tiny fish in the sea.
But the riches of the ocean of an
"I don't care for the term 'midsize,' but that's probably where we are," he said. "We have the economics that allow us to provide the service, the support, the technology that really helps these advisors and enables them to be successful."
Austin, Texas-based Kestra illuminates one of the biggest myths about the fragmentation between big and small independent brokerages, and wealth management firms in general: that any but the largest companies are likely to go extinct. And since many of those firms are managing billions of dollars, they're not really all that miniature.
For the 39th annual edition of
"I don't think it's quite as simplistic as large and small," said Rita Robbins of New York-based
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![A bar chart shows that annual revenue in the independent brokerage channel of wealth management increased 6% year over year to $43.6 billion in 2023.](https://arizent.brightspotcdn.com/dims4/default/b7e3951/2147483647/strip/true/crop/862x525+0+0/resize/740x451!/quality/90/?url=https%3A%2F%2Fsource-media-brightspot.s3.us-east-1.amazonaws.com%2F7c%2F91%2F005590be473c9de7a9beeb5d733f%2Ffp-0924-data-fp-figure-1.jpg)
By the numbers
The annual revenue reported by firms to FP as part of the survey shows the channel's massive expansion and consolidation, as well as the enduring presence of small and midsize firms. For starters, the channel's yearly business has more than tripled between 2007 and 2023 to $43.64 billion — which is
This segment of wealth management is turning more top-heavy: over that span, the share of that revenue stemming from the 10 largest firms each year — a group that, today, includes LPL Financial, Ameriprise, Osaic, Cetera Financial Group, Raymond James Financial Services, Northwestern Mutual and Commonwealth Financial Network — has enlarged to 88% from only 54%.
A check of the top 40 firms in the rankings just 10 years earlier, in 2013, reveals that at least 20 independent brokerages, or half of that group a decade ago, have merged into larger firms or otherwise switched their FINRA-registered side of the business to that of a larger player. A shining example: Last year's group of the top 15 firms included two,
Yet the firms outside that list of the top 10 — companies such as Kestra, Lincoln Investment Planning, Independent Financial Group, United Planners Financial Services of America, PlanMember Securities — racked up $5.2 billion in revenue last year among them. Three out of that group of small and midsize firms — Arkadios Capital, Level Four Financial, LaSalle St. Securities — expanded by so much in 2023 that they were in the top 10 firms in revenue growth for the entire channel last year. And other smaller players — either among independent brokerages, hybrid wealth management firms or RIAs — are doing just fine vying with the giants for advisors and clients.
Atlanta-based RIA
Advisory Services, led by co-founder Tom Prescott, doesn't get fazed when reading stats such as the metric in FINRA's latest snapshot report noting that 82% of the industry's registered representatives work for firms
"At $8 billion, we are still small compared to the big firms," Prescott said. "Anything that's available, for the most part, at a big firm is available at a small firm."
READ MORE: The 15 largest independent brokerages in wealth management
![A bar chart tracks changes in overall, commission and fee-based revenue among independent brokerages between 2008 and 2023](https://arizent.brightspotcdn.com/dims4/default/62d86c1/2147483647/strip/true/crop/937x525+0+0/resize/740x415!/quality/90/?url=https%3A%2F%2Fsource-media-brightspot.s3.us-east-1.amazonaws.com%2F20%2Fa9%2Fc9fa569849de9d5c4eb96fef6310%2Ffp-0924-data-fp-figure-2.jpg)
Going it alone?
Companies like
CEO Bill Hamm led Independent Financial
The firm is now climbing the ranks as Hamm's family-owned-and-operated company pitches advisors on the ease of getting their problems solved via a quick call to the corporate headquarters. And it also pitches an economic case. The firm's lower offers of recruitment transition assistance, compared to the giants', bring smaller taxable income and greater value for the long term because Independent Financial doesn't charge a fee for using outside custodians, he said.
Referring to
"They're good for certain advisors; we're good for certain advisors," Hamm said. "When I talk about LPL, I'm basically talking about all the big boys, because they're all doing the same thing."
The giants do carry significant advantages, though, based on the resources that they can deploy toward M&A, recruiting bonuses, technology and other services, according to recruiter Jodie Papike, CEO of independent advisor and executive placement firm
At the same time, the smaller players can remain competitive through active recruiting outreach, access to different RIA or compensation structures and certain products, and any number of factors that may emerge "when you get into the nooks and crannies and puzzles" of the business, Papike said. Bigger firms are "not going to bend off their entire model to satisfy that advisor, whereas the smaller or midsize firms can be more nimble," she added.
To be sure, those firms are confronting challenges relating to capital and the rising cost in areas such as technology and compliance that are coinciding with
Kestra spun off one of its subsidiaries, a Rockville, Maryland-based brokerage and RIA named Grove Point Financial,
Many smaller firms are "one bad regulatory event from going out of business," which is "the reason you see a lot of movement" in the ranks of midsize firms in recent years, Langlois said.
"We love the position that we're in," he said. "This is a complicated business. It has a lot of risk, and it gets more expensive to run it every single day."
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![A horizontal bar graph compares the ratio of revenue generated by the 10 largest independent brokerages out of the entire channel in 2007 to the same figure in 2023](https://arizent.brightspotcdn.com/dims4/default/e8979a7/2147483647/strip/true/crop/525x450+0+0/resize/740x634!/quality/90/?url=https%3A%2F%2Fsource-media-brightspot.s3.us-east-1.amazonaws.com%2F62%2Fdc%2Fb357e18b43cf8b066ce271f0a35c%2Ffp-0924-data-fp-figure-3.jpg)
The subtleties between 'big' and 'small'
Simultaneously, the branches of the bigger firms are arguing they can help advisors navigate the complex industry better while providing the same sense of community, familiarity and flexibility of smaller firms.
Through its resources combined with those available through Osaic, Affiliated has completed 20 M&A transactions comprising more than half a billion dollars in client assets over the past four years, launched many outsourced services for its advisors such as marketing, certified public accountants and event planning, and ensured there is "constant communication and peer-to-peer learning with our advisors," Robbins said.
"Everything you could possibly think of, we've already vetted," she said. "It's a really large firm, but we distill it down into a really individual experience for our advisors."
The smaller firms counter that leaving the big platforms can offer advisors a quicker turnaround on any requests to the corporate office compared to the larger companies, where "your input isn't asked for or really wanted in a lot of cases, and I know that," Hamm said.
Independent Financial "may be a small firm, but we have big partners" in the form of the custodial divisions of Charles Schwab, Fidelity Investments and BNY Pershing, he said. Publicly traded and private equity-backed firms must look out for their investors.
"Their first fiduciary responsibility is to their shareholders or to their owners, and sometimes that clashes with the needs of advisors and clients," Hamm added.
Furthermore, the ongoing move toward RIAs and away from commissionable brokerage business means that "the broker-dealer role becomes less important," according to Prescott of Advisory Services. Since advisors "look at their clients as their clients," more of them are seeing that the largest acquirers in the industry are getting bigger and posing the risk that one wealth management company could be sold out from under them without "passing that economy of scale" down to their advisory teams, he said.
"We're all in this business to be profitable, but, at the end of the day, who's serving whom?" Prescott said. "The more nimble smaller or medium-size firms think along those same terms, whereas the larger firms do not."
Others point out that the smaller players often have founders that are approaching retirement, and the need for a succession plan from an inevitable private equity or publicly traded investor. Some advisors want the scale, resources and economics of the biggest firms, while the smaller ones are "doing incredibly well recruiting-wise" by catering to a different group, Papike said.
"There has to be a place for smaller and midsize firms. Smaller and midsize firms can offer something that the large, dominant players can't, and that is flexibility and intimacy," she said. "There are plenty of advisors that have a business model that, for whatever reason, is not a good fit for a big firm."