Mega Teams Control 42% of Advisory Market: Cerulli

High-net-worth segment attracted to mega teams because their advisors offer greater breadth and depth of expertise

Mega advisor teams with $500 million or more in AUM are best poised to attract HNW clients. Mega advisor teams with $500 million or more in AUM are best poised to attract HNW clients.

Mega advisor teams with $500 million or more in assets under management control 42% of advisory marketshare, and are best poised to attract high-net-worth clients, according to a new report by Cerulli Associates.

The 2Q edition of The Cerulli Edge—Advisor Edition, notes that while these mega teams control a sizable portion of advisor market share, they account for only 14% of the total advisor headcount.

Kenton Shirk, associate director at Cerulli, notes that these mega advisor teams are appealing to high-net-worth folks mainly because their size “allows advisors to offer a greater breadth and depth of expertise to serve the complex needs of affluent clients.”

Cerulli also notes in its Edge newsletter that mega teams enjoy many benefits, the most obvious of which are financial. “Practices that increase advisor capacity can free their top-performing producers to spend more time on business development activities that drive revenue growth.”

These practices also operate at substantially greater levels of productivity than smaller firms, as measured by AUM per headcount, Cerulli notes. “Given that staffing expenses such as salaries, benefits, and payroll taxes comprise the largest overhead costs, a higher level of productivity can greatly increase a practice’s operating profit,” Cerulli says.

Also, from a succession standpoint, large practices with HNW clients are considered “more appealing and typically garner high revenue multiples when assessing practice value,” the Boston-based firm notes.

Successful, high-performing practices are also more likely to recruit talented advisors and staff who seek opportunities for long-term career growth, Cerulli adds.

Large practices are “a fertile training ground for junior advisors because they can offer a structured career path, allowing juniors to learn various aspects of the business over a period of time,” Cerulli says. “For large independent practices, there is a greater opportunity to attract tuck-in advisors who seek the autonomy of the independent model but do not want the hassle of starting and operating a business.”

Mega teams are also “ideally positioned to make acquisitions,” Shirk adds. “Their financial success reduces the burden of financing, and the scale of their operational infrastructure makes it easier to service additional clients.”

Shirk maintains that “as a growing number of advisors near retirement age, acquisitions will help mega teams grow at even faster rates.”

Reprints Discuss this story
This is where the comments go.