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Technology > Investment Platforms > Turnkey Asset Management

One Man’s Quest to Find an Indie RIA Buyer

By Joyce Hanson

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When Harry Rady flew to New York from San Diego this week, he was on a mission: to find an independent registered investment advisor that would buy him out.

While pounding the pavement in Manhattan, the chief executive of Rady Asset Management called AdvisorOne from his cell phone between interviews with potential buyers to explain why he had come to town.

Harry Rady, CEO, Rady Asset Management“I want to merge my firm with a large RIA that has scale so I can focus on what I can do best,” said Rady (left). “Since I’ve been in New York, the response has been nothing short of remarkable. We’ll take our time to make a decision, but we hope to find a match by the end of the year. I’m conservative, but 80% to 90% of the firms I’m meeting are saying, ‘We want you to be part of our team.’”

What Rady does best is serve clients as an outsourced chief investment officer. As smart and talented as Rady may be, though, his apparent success in talking with potential indie RIA buyers may also have something to do with the current demand for outsourced CIOs who can focus on buying and selling securities.

Outsourced CIOs Come to Wealth Management

The trend of hiring outsourced CIOs, already popular in the world of endowments and nonprofits, is making inroads in the world of wealth management.

Last year, according to an SEI Quick Poll, the majority of nonprofits considered switching to an outsourced CIO model to manage assets as a result of economic conditions.

“Changing market conditions have led some to reconsider their current approach,” SEI reported. “Of this group, they cited increased complexity in investment vehicles (52%) and increased due-diligence requirements (43%) as reasons for concern. Also, 20% of respondents said their organization lacks the necessary internal resources and 25% said the number of new asset classes is a strain on their existing investment management approach.”

In Harry Rady’s world, those figures translate to high-net-worth families whose needs include wealth transfer, philanthropy, business succession planning and even aircraft management. It’s a world he knows well: Harry is the son of billionaire financier Ernest Rady, former chairman and CEO of Westcorp, a financial services holding company bought by Wachovia in 2005, and Harry has served as the CIO of his family’s multibillion dollar financial, investment and real estate conglomerate.

HighTower, BlackRock Get a Mention

Asked last week which indie RIAs he had been visiting, Rady wouldn’t say, but he did confirm that they were along the lines of HighTower, the RIA firm that has attracted a raft of breakaway brokerage teams from major wirehouses over the last couple of years. The firm’s standard approach, as led by Elliot Weissbluth, is to bring in a team looking for the benefits of independence and partnership.

Rady also mentioned that asset management giant BlackRock is now in the business of aggressively hiring outsourced CIOs.

Over the last decade, the path has been cleared for outsourced CIOs as brokers and advisors do less risk management and asset allocation, Rady asserted.

‘Advisors Want to Free Their Time Up to Manage Client Relationships’

“Brokers and advisors were picking stocks and managing money a decade ago, but over the years, broker-dealer wirehouses have mandated that advisors no longer pick individual stocks. They’re supposed to pick mutual funds, but now even that is changing,” he said. “It’s not that advisors aren’t smart and capable, but they want to free their time up to manage client relationships and bring in new clients.”

Just before he got into the elevator for his next interview, AdvisorOne had one last question for Harry Rady:

What is his advice to advisors seeking to ally themselves with larger indie RIA firms?

“I would strongly advise those people at the Merrills and Morgan Stanleys of the world to invest some time in understanding what the independent model has to offer versus the wirehouse broker-dealer model,” he answered. “The days of the big wirehouses and broker-dealers are numbered, and I tell my friends in the industry that the future is in the independent advisor space. The economics are simple: a 40% payout at Morgan Stanley, but 70% at an independent. It doesn’t take a brain surgeon to see why independent RIAs are attracting talent.”

Read How Due Diligence Can Give Advisors Confidence at AdvisorOne.com

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