Advisors, Tech in Focus at New Conference

The future of advice and wealth technology took center stage at the inaugural Wealth/Stack conference in Phoenix in early September. The inaugural event, organized by Ritholtz Wealth Management and Inside ETFs, drew a crowd of 700-plus advisors and other guests.

In his opening keynote speech, Orion Advisor Solutions CEO Eric Clarke made the case for why (and how) “technology acts as a catalyst for measurable growth.”

The executive said Orion’s 2,000-plus clients have about $900 billion in assets and most, 92%, “do not have a broker-dealer affiliation.” This means the advisors look to their technology partners “to help them innovate, disrupt and win.”

Clarke says the recipe for successful advisors includes these ingredients: a well-defined value proposition, incredible client experience, operational efficiency and the ability to execute its growth strategy. “A TD Ameritrade Institutional study found firms focused on efficiency grow twice that of other firms.”

Clients are the means to that growth, according to Clarke. That means advisors must turn clients into advocates by maintaining “touchpoints” with them and providing excellent service. He then pointed to a Pershing study showing advisory firms investing in their client experience (CX) “are growing five time that of other firms” — Carson Wealth, for instance, is spending about $50 million on it.

Other keys to success, in Clarke’s mind, are “innovating on your value prop, disrupting your business model and ‘future proofing’ your business.” These steps, he says, should give advisors what they need “to win more than your fair share.” Again, Clarke said, “Use technology to do these … things.”

Thanks to firms like Amazon, Apple, Netflix and Uber, “The expectations that our clients now have are vastly different than what they used to be,” he said. “Don’t look at the financial competition for client expectations.”

As for how advisors can best build their brands, “Think about building financial awareness and literacy via [a marketing] campaign,” Clarke said.

He then shared that Orion will roll out a pilot marketing and prospecting service for a few client firms now experiencing growth that’s “behind” their goals. “We want to enable them to do marketing campaigns” as part of a larger business-building road map, he explained. The program is set to be offered to its broader client base in 2020.

M&A Momentum

“There is an unprecedented level of activity” for mergers and acquisitions in the advisory space, according to FP Transitions President David Grau, and not just for large deals. Firms with assets of $4 billion or less are also active in the marketplace.

“More people are contemplating selling what they’ve built,” Grau explained during a panel discussion at Wealth/Stack. This month, FP Transitions has worked on about $40 million worth of sales and expects to see 20 transitions, he added.

“The buyers are lined up deep and have bank financing. Five years ago, there was no such thing,” Grau explained. “Now, everyone’s talking to banks.”

Ken Auspaker, a managing director of Evercore, says the wirehouse firms and large consolidating RIA platforms are providing financing, too. “There are lots of opportunities for RIAs.”

Rather than focusing on what price they are paying, potential buyers should focus on other terms, Grau says: “Take valuation off the table. The seller’s going to win that. How about the transition plan to get 95% of clients over [to the buyer] and getting the payment and finance terms [you want]? Don’t worry over the price. It’s the [other] terms and taxes.”

As for succession planning, advisors need to get real, the panelists said. “It’s great that there’s a bull market” for advisory-firm M&As, said Lake Avenue Financial CEO Alex Chalekian. “But you don’t want to wait until you have to make a move.”

Grau explained: “Many advisors are thinking, ‘Someday when I leave, I will find out what the 85:1 [ratio of buyers to sellers] can bring me.’ But … only one in 10 will sell, not the rest.”

In order to sell, you have to build a practice that is sustainable, meaning it has a succession plan “that outlives you,” he said, “and that lives the length of your clients’ lifecycle.”

And, Grau adds, advisors can’t just recruit, train and retain advisors overnight. “It takes 10-15 years for a good succession plan, so … start now,” he said.

Service Growth

RIA Oasis President Kristen Schmidt suggests advisors think beyond succession planning. “Lots of firms are going into M&As to acquire a service they cannot now offer,” she said.