RIAs and dually registered firms are poised for further growth in 2015 and beyond. In fact, Cerulli Associates estimates these segments could have a combined industry market share, as measured by assets, of nearly 30% vs. 20% in 2013.
But what’s behind this growth story? Executives say it’s a combination of the right steps and strategies, and several of them outlined these tactics recently for ThinkAdvisor.
Independent Financial Partners, a hybrid RIA in Tampa, Florida, that uses LPL Financial (LPLA) as its broker-dealer, has added dozens of ex-wirehouse reps since its founding in 2000. It now includes over 500 independent reps and has some $30 billion in assets under advisement.
“We show them a different mentality and approach, and I’ve always been on the entrepreneurial side of the business,” said CEO William Hamm, in an interview.
“There are advisors who have an entrepreneurial take on their practice that are moving to the independent channel. This is all becoming more prevalent as the wirehouses have become part of banks,” Hamm explained.
In the case of IFP, adding wirehouse and other reps has helped it grow revenues by $15 million in 2014, as well as in 2013. That figure was nearly $30 million in 2012 and $25 million in earlier years, when as many as 300 reps came onto IFP’s platform.
“This is strictly from recruiting,” Hamm said, noting that the group had $120 million last year.
For 2015, the group has an aggressive goal: Push sales up by $50 million.
“We see this as doable, given with the fact that there are large groups out there” considering their options, he added. “They are looking to fold into a group like ours with a platform of support that lets them do their own thing. “The first step is to create a story that sells itself, and we think we have.”
IFP recruiting will be a big contributor to that growth plan, according to Louis Hanna, the group’s recruiting director. “We are seeing quite bit of opportunity as the promissory notes and retention bonuses are coming off” their scheduled timeframe at the wirehouses,” Hanna said. “And there’s movement to do business in a much more flexible model, and on the RIA side, to tuck in smaller or midsize RIAs who have stalled out or don’t want to deal with everything that comes from running such a business.”
Smaller RIA Story
Another RIA taking advantage of trends in the advisor marketplace is IFAM Capital, a partner of Focus Financial Partners.
This group is made up of former UBS advisors, who left the wirehouse a year ago. Since then, they’ve expanded sales by 25% to about $8.4 million. Plus, the asset base has grown from roughly $800 million to over $1.2 billion.
“We have great people around us. That’s the reason for our success,” said advisor Timothy Kneen, “and I’m talking about our employees and those with Focus Financial.”
“We speak with [Focus CEO] Rudy Adolph on a regular basis, and he’s not aware of any firm of our size that has left a wirehouse and grown at this rate in the first year,” Kneen explained. “At the end of the day, we couldn’t do it without their support. They took the administrative side of the business off our backs, so the principals of the firm could focus on the business. Things just took off.”
Wirehouse and other firms often discourage advisors from making a move by describing the possibility that clients and assets won’t move with them.
“We told our clients they wouldn’t miss anything as a result of the move,” Kneen said. “In fact, one large client asked us what took us so long to move? And we’ve had similar responses.”
Much of the success comes down to entrepreneurship, he notes. “Independence is not for everyone. You have to be a specific team built for entrepreneurial growth.”
— Check out How to Take Over a $1 Billion Practice on ThinkAdvisor.