I had the privilege to address the CFA Society of Los Angeles this past Wednesday night, and we inevitably discussed trends in the breakaway advisor movement. While many have detailed the fact that wirehouse advisors are being pushed into independence by the changing culture, over-bearing compliance, constantly shrinking payout grid, etc., of their employers, I chose to highlight the pull that advisors are feeling toward the independent industry as it continues to evolve and support larger and more sophisticated firms.

While there may be a few lingering souls within the banks/brokerage firms that feel RIAs are simply a home for those that “couldn’t hack the cutthroat sales environment of the wirehouse,” they are now few and far between. Advisors no longer risk losing sophisticated clients due to the lack of infrastructure in the RIA channel; it is clear they can support high net worth clients and their complex needs as their own RIA. Despite what wirehouse managers would like their advisors to believe, the numbers don’t lie: Cerulli just reported that RIAs grew assets by 6% in 2015, while the wirehouse asset base shrank by nearly 2%.

Billion-dollar firms used to be considered unicorns in the RIA industry, but $1 billion of AUM is now simply table stakes to be invited to the party. Just in Southern California alone, you have Bel Air Advisors with $7 billion; Halbert Hargrove with close to $4 billion; Corient Capital with $2 billion (they left Merrill Lynch a year ago); Gupta Wealth in San Diego was approaching $2 billion when it merged with Creative Planning, forming a $20 billion RIA in the Midwest – just to name a few.

The Bay Area has firms like Parallel Advisors with $1 billion; Hall Capital with $7 billion; Aspiriant with $9 billion; Presidio Advisors was $4 billion and just merged with $9 billion Tiedemann to make a $13 billion behemoth…

These firms are using both organic and inorganic strategies to reach the new “unicorn” status of $10 billion, leveraging their own personal niches that appeal to clients and advisors alike. At this point, wirehouse advisors simply can’t deny the legitimization of the RIA industry. They see the proliferation of billion-dollar RIAs, and they are well aware of the technology and investment options available in the independent space. This awareness continues to draw advisors to the RIA channel.

The question still begs, are advisors being pushed or pulled into Independence? In the immortal words of Forrest Gump, “I think maybe it’s both. Maybe both are happening at the same time.”


Subscribe to PFI Advisors’ Blog to receive our practice management content directly in your inbox.

You have Successfully Subscribed!

Share This