COVER STORY

BY ERIC RASMUSSEN

THE FUTURE, WILL PEOPLE HAVE relationships with their financial advisors or with the advisors’ broker-dealers, custodians and other affiliated businesses?

It’ s an uncomfortable question. Clients rarely accept abrupt changes in their most intimate business relationships, whether it’ s with a physician or a ward of their money. But they do accept change that happens gradually. Let’ s say your longtime doctor or dentist is retiring. You might still see them in the office, but you’ re also getting used to the fact that somebody else is putting your filling in or showing you test results. Then one day you notice the names on the building, website and letterhead have changed. Your de facto arrangement has become official.

Now consider how many advisors are heading similarly toward the sunset( Cerulli Associates recently said 109,000 will retire over the next decade). If the advisors and clients aren’ t ready for a change in roles, consider who is: the broker-dealer industry.

The early 2020s have been boffo years for IBDs( the large ones, especially), who have padded their bottom lines with recurring revenue, cleaned up their debt ratings and bathed in cash sweep money during a period of heightened interest rates. They’ re also awash in money they can draw from private equity partners or public markets( consider LPL Financial’ s $ 4 billion S-3 shelf filing in early March).

The firms have a big incentive to keep client assets on their platforms and have started buying more directly into the practices of their advisors, even disintermediating OSJs. And that’ s all happening while the founding generation of advisors have begun circling the retirement event horizon— which is fuel in the tank for broker-dealers wanting to buy books.

Why? There’ s also a generation gap problem. Younger advisors come with agendas that might differ( or clash) with those of their parents and predecessors. Retiring advisors want to monetize a lifetime of hard work and cash out. The next gen wants to move up, but doesn’ t have the capital to buy in( especially into firms at nosebleed higher valuations being gassed up by private equity money). This next-gen crowd likely came into the business differently and will practice differently. They’ re very likely to become W-2 employees of an already built city, not become entrepreneur wildcatters in a Wild West town.

What also makes it weird is that these are sometimes family businesses.“ We’ ve all seen Succession,” says Kestra Financial’ s John Amore, referring to the HBO series about a family’ s horrifically messy transfer of power.

IMAGERY VIA GETTY IMAGES APRIL 2025 | FINANCIAL ADVISOR MAGAZINE | 37