PFI Advisors is going public with a service that it’s gradually been offering independent advisors who need some help, but not extensive assistance, in setting up their own RIAs.
The firm, which has helped advisors with about $34 billion move into the RIA model over the past four years, says its Affiliated Advisors service aims to support those who need help with the last step or two of “pure financial independence.”
“When we launched the firm four years ago, we focused on serving [employee] advisors breaking away from the traditional wirehouse firms — Merrrill Lynch, Morgan Stanley, Wells Fargo and UBS,” said PFI founder and CEO Matt Sonnen. “But there are many advisors moving from other groups, like LPL Financial, who want some technology or related operational support.”
In fact, an independent group with Wells Fargo Advisors’ Financial Network asked PFI for some help with its operations. “I turned it down in our first year of business. And then the team said [again] in 2017 that still needed help, and they led me to water,” Sonnen explained.
Of the $34 billion it has helped move, roughly $10 billion has been shifted by traditional wirehouse reps — meaning the majority, $24 billion, has transitioned with advisors who already had some independence but who wanted more.
While most of the industry’s 50,000 wirehouse reps are likely to stay in that channel, Sonnen says, about 10% or so may go independent. But among the 100,000-plus independent advisors, about 30-40% are interested in having their own RIA.
“We are talking about many more than 10% who want full control … including over the client experience and portal,” he said. “Their thinking is, ‘I’m doing all the work anyway, so I might as well own all the economics” of the business.
What is that final step to independence? “Advisors need to understand the RIA technology, CRM systems, trading and other services, for instance,” Sonnen explained. “We break it down for them.”
It can take 10 to 12 months for employee advisors to make the transition to independence with the help of PFI. But independent advisors looking to move off of a centralized platform and start their own RIA need about three to four months of support, according to the executive.
This work generally entails building out and integrating systems for new RIAs and ensuring that the process of moving clients and accounts runs smoothly. ”With a tighter focus, this allows for a smaller price tag than that of our full breakaway services,” Sonnen said.
In terms of PFI’s next step, “We are focusing on COO Resource, a retainer-based service that can serve as a chief operating officer or a director of operations … for existing RIAs,” Sonnen said. As with its Affiliated Advisors program, “We turned [this work] down in the past,” he added.