fa ’ s 2021 ria survey and ranking
The wave of consolidation is evident in this year ’ s ria survey . Many firms that participated in the survey for more than a decade have been absorbed by giant consolidators .
cost business . There are very little variable costs in our business . … But the market also went up more than our fixed costs . So profitability in the industry I actually believe is more robust , certainly than it was a year ago at the bottom of the pandemic .”
Thus , he thinks 2021 will be more profitable than last year , which was more profitable than the year before , despite Covid-19 . Bahl & Gaynor hired three people in the months after the shutdown , including a marketing / branding specialist , a senior portfolio manager and a financial planner .
Los Angeles firm Lido Advisors is one of those firms seeking to make strategic acquisitions , and in May the firm announced it had partnered with Charlesbank Capital Partners , a middle-market private investment firm , in pursuit of growth . “ We don ’ t buy companies , we buy people ,” says Lido ’ s chief executive officer , Jason Ozur . “ So bringing in a strategic partner like Charlesbank will enable us to go upstream in our human capital acquisition strategy . … We are their first entry into the wealth management arena .” Lido , based in Century City , has 13 offices across the country in states like Arizona , Florida , California , Texas and New York .
There is fee compression in the industry , Ozur says . “ The cost of running a company , and the cost of compliance and accounting and marketing … and analysts — those costs are going up , which is making it much harder for firms to maintain those types of cost structures . Which is why you ’ re seeing a lot of M & A .” The average age of the execs ( in the 60s ) is likely also fomenting this trend . Ozur says the average age of the partners at Lido is closer to the mid-40s .
The firm came out of the family office space with a strength in alternative investments , but it has lowered its client minimums and is adding things like estate planning and financial planning and tax planning expertise . The firm is considering adding an insurance component as well . “ We are definitely moving more to a full-service model than perhaps five years ago ,” he says .
Lido made a handful of acquisitions of firms or individuals in 2020 , including a firm called Quantum Capital Management and a bond team . Lido had been self-funding these up to now , before it partnered with Charlesbank .
Ozur says the pandemic likely scared a lot of advisors into wanting to sell their firms , because if they ’ ve lived through the financial crisis and then the pandemic , they don ’ t want to lose the opportunity to get their liquidity event . But he says that if firms aren ’ t growing , they are going to be less attractive acquisition targets .
“ You see firms that try to value themselves on a multiple of EBITDA and they come to you with margins of 70 %, which is unreasonable and not sustainable , and so you take a 70 % margin and then you try to do a multiple of EBITDA , the price becomes ridiculous when you look at it on a multiple of revenue ,” Ozur says .
Talent and space
Has the coronavirus made advisors rethink what they ’ re spending on office space and human capital ?
ServiceS Offered
cATeGORy
% OF FIRMS THAT OFFeR THIS SeRVIce In-HOuSe
% OF FIRMS THAT OuTSOuRce THIS SeRVIce
AVG . % OF cLIenTS uSInG SeRVIce WHen OFFeReD
Financial Planning |
97.36 % |
1.15 % |
70.28 % |
Alternative Investing |
47.78 % |
11.04 % |
39.63 % |
Asset Allocation |
95.22 % |
0.99 % |
95.49 % |
Bond Management |
63.43 % |
13.51 % |
55.29 % |
Business Consulting |
35.42 % |
5.93 % |
13.44 % |
Charitable Counseling |
73.97 % |
3.95 % |
30.74 % |
Digital Advice Platform |
16.64 % |
2.97 % |
24.48 % |
Equity Management |
71.17 % |
6.43 % |
80.49 % |
Estate Planning |
64.42 % |
18.12 % |
56.39 % |
Exchange-Traded Funds |
77.27 % |
6.26 % |
76.30 % |
Fund Of Hedge Fund Selection / Oversight |
22.08 % |
5.44 % |
22.10 % |
Group 401 ( k ) Advice / Sales |
52.72 % |
4.12 % |
13.78 % |
Health Care |
19.93 % |
10.38 % |
28.76 % |
Hedge Fund Selection / Oversight |
25.21 % |
5.60 % |
21.54 % |
Impact Investing * |
55.68 % |
5.60 % |
17.10 % |
Index Funds |
67.38 % |
6.92 % |
72.50 % |
Institutional Fund Management |
36.57 % |
3.62 % |
39.46 % |
Insurance Planning |
63.10 % |
12.03 % |
46.83 % |
Manager Selection / Oversight |
55.85 % |
1.98 % |
71.82 % |
Mutual Fund Selection / Oversight |
80.07 % |
2.80 % |
83.61 % |
Real Estate Investment Trusts |
43.82 % |
8.57 % |
48.41 % |
Separately Managed Account |
48.93 % |
11.04 % |
37.04 % |
Tax Planning |
70.68 % |
10.54 % |
66.29 % |
Tax Preparation |
20.59 % |
15.82 % |
34.98 % |
* Category included socially responsible and sustainable investing .
july / august 2021 | financial advisor magazine | 35