In an industry rife with consolidation, the founders of a new registered advisory firm think there's a distinct advantage in going against the trend.
Steven Resnik said his and his colleagues' plans for their recently established Burling Wealth Partners is to keep it out of the hands of the sort of private-equity backed aggregators that have been buying up RIAs left and right — at least for the foreseeable future. Burling Wealth, a six-person team based in Chicago, officially got up and running on Sept. 12 and can already claim $750 million in assets under management.
Resnik said he can of course make no promises that Burling will never be sold to a larger firm at some distant point.
"But the goal is, as long as the horizon that we can look out on — 10 years, 20 years, 30 years — to stay independent," he said. "We plan to use that currency to recruit talent."
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Burling's determination to go it alone marks a strong contrast with the scores of RIAs that have chosen to join large conglomerates in recent years even while telling clients and employees they'll
That figure, up 18% since 2018, puts them collectively on par with a large independent broker-dealer like LPL Financial, which reported nearly $1.6 trillion in AUM at the
Deal numbers set recent M&A records in wealth management
And there are few signs the trend toward consolidation is abating. The industry-tracking firm DeVoe & Co. recently reported there were a record 39 merger and acquisition deals for RIA firms in October. That was nearly double the number for October last year and surpassed the previous monthly high of 33, set in January 2021.
DeVoe noted that 83% of the transactions last month were initiated by private equity-backed acquirers. DeVoe had previously predicted the Federal Reserve's recent reductions in its key interest rate amid falling inflation would encourage private buyers to start looking for deals again.
"Although one shouldn't read too much into a single month of data, the surge in October's RIA M&A activity is a conspicuous spike following nearly three years of unremarkable activity," founder David DeVoe said in a statement.
Resnik himself comes from the world of private equity. He spent the past five years at The Edgewater Funds, a Chicago-based firm with $4 billion under management.
Resnik said private ownership tends to work well for advisors who are nearing retirement and are hoping to sell their books of business in the near future.
"But there are these
Resnik said private equity owners also always expect a cut of whatever revenue an RIA produces.
"That just leaves less to go around for employees," he said.
Much of Burling Wealth's current clients come through Resnik's father, Mark Resnik, also a managing director and founder of the firm. Mark comes CIBC Private Wealth, an arm of the Canadian bank that works primarily with wealthy clients.
Mark Resnik said he thinks Burling will find a sweet spot in recruiting younger advisors who are hoping one day to inherit a book of business from older colleagues.
"It happens with advisors of any age, but particularly older advisors, we're having the question: What does succession look like when the book comes over?" Mark Resnik said. "Here we have the ability to bring in advisors in their 30s, 40s and 50s to be part of a true succession plan. And, a lot of people say it, but I think we'll be able to recruit talent so that advisors who have great relationships with their clients will feel comfortable passing them on."
From tech to succession — why some RIAs look to aggregators
Retirement is also a big concern for independent advisors who have joined large aggregators, according to Cerulli. Using data from surveys of 2,000-plus advisors throughout the year, the research firm cited succession planning or exit strategies as reasons to join a large consolidator.
Cerulli estimated 37% of RIA advisors will retire in the next decade, and 35% of the assets now managed by registered advisors will be changing hands.
"RIA buyers have made significant inroads into this market, positioning themselves as a buttress to advisor practices and RIAs that understand they need an exit strategy but have been unable — or not prepared enough — to execute one independently," according to Cerulli.
But the biggest reason RIAs cite for joining aggregators, Cerulli found, is a desire for tech support. The research firm reported that 55% of its respondents cited an integrated technology system as one of the most valuable services offered by a large acquirer.
"Many consolidators have successfully constructed centralized technology platforms that give advisors access to a best-of-breed technology stack where internal technology teams manage the tools," Stephen Caruso, Cerulli associate director, said in a statement. "By plugging their advisors into a single system of record, firms can seek better efficiencies in integration and a greater overall picture of their business."
Steve Resnik said he and his fellow managing directors have found that there are plenty of third-party firms that are happy to help a small firm like Burling Wealth provide many of the same services. Burling Wealth has turned for technology support to vendors like eMoney, which provides software for financial planning, and Wealthbox, a customer relationship management system.
"We have all that infrastructure, except it's external," Resnik said. "We have a marketing group, we have cybersecurity, we have best-in-class technology."
Resnik said he thinks large aggregators play on RIAs' anxieties about the bewildering variety of tech options on offer as they try to "sell" advisors on the benefits of joining a larger partner. But there are plenty of third parties out there that are eager to help a small firm like Burling Wealth go it alone.
"I mean, the wealthtech field is amazing," Resnik said. "We've found you can piece together an ecosystem really very quickly."
