Advisors are more likely to join an existing RIA firm as an owner or principal than start their own independent firm, according to a new report by Cerulli Associates.
"Many advisors are daunted by the task of forging their own path and the accompanying headaches," Bing Waldert, director at Cerulli, said in a statement. "Advisors considering the RIA channel are increasingly looking to join existing firms that can provide them with not only the necessary operational infrastructure, but also a sense of community."
Advisors who also want to be principals are increasingly looking to affiliate with firms Cerulli is calling "sub-aggregators," who can provide platforms and support but are not broker-dealers or super-OSJs.
Summit Trail Advisors, an RIA recently launched by former Barclays Wealth Management advisors with four offices spread across the country, and Steward Partners Global Advisory, a two-year old firm using Raymond James Financial Services platform that recruits advisors in the Northeast, were cited as prime examples of sub-aggregators in the fourth quarter 2015 issue of The Cerulli Edge-Advisor Edition.
WHAT'S THE APPEAL?
These type of firms are appealing to advisors interested in the independent business model, "but without the skills or desire to operate their own business," the report states. Another calling card, the report adds, is the opportunity to be part of the "culture and community" of a smaller organization."
The rise of firms like Summit Trail and Steward Partners also underscores the importance of scale and partnerships, according to Cerulli.
Raymond James, for example, underwrites forgivable loans extended to advisors Steward Partners is trying to recruit, the report notes. And Summit Trail, which is affiliated with Dynasty Financial Partners, benefits from Dynasty's deals with Callan Associates for traditional asset management due diligence and with Wilshire Associates for alternative investments research.
The evolution of the so-called sub-aggregators comes with "mixed results" for the asset management and wealth management industries, according to Cerulli.
For IBDs and custodians, these platforms "make it easier for advisors to go independent because they can choose from a variety of support structures. On the other hand, sub-aggregators can demand favored pricing from B-Ds and custodians; these demands raise the bar in terms of the services needed to attract and retain advisors."
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