Market Color: Financial Advisory Firms

Market Color: Financial Advisory Firms

We've been talking lately with brokerage and financial advisory firms about their strategic plans. The number one concern is the DOL's Fiduciary Rule and its impact on their businesses over the next few years. The rule itself is on hold, but many brokerages have already made the decision about how they will conduct business going forward, even if they haven’t stated it publicly.  

The effect for independent advisory firms planning their futures -- succession, continuation, liquidity -- has been to splinter the market.

Many large and medium-sized firms are now looking to acquire independent brokerages and advisors, but everyone we talk to is approaching acquisitions strategically, based on strict geographic needs and on how they want their business model to look in the coming years.

A minority of firms have already made a private, if not public, decision to move fully to an advisory model and they are hungry for RIAs. Advisors with substantial assets that already fit their model -- that is, are already operating as fee-based advisors -- are especially interesting to them.

The majority of acquiring firms haven't gone this far, but they are looking to build assets selectively, based on specific plans to transform their books of business or geographic footprints.

Our take is:

  1. Acquiring firms have their own particular needs and strategies for a changing market. Growth plans are more varied than in the past.
  2. There are potential suitors for most independent firms, but you'll have to look harder for the right fit. A comprehensive approach will make a difference.
  3. To maximize upfront economics and ensure a rewarding work environment, financial advisors planning for the future need to invest more in networking, listening, systematic evaluation of your own businesses and careful, tailored presentation. Using a headhunter to cold call on your behalf isn't enough in today's market.

Please call us for stories and background detail.

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