Dick Pfister , the CEO of San Diego-based AlphaCore , says that private equity has had something to do with that loosening of the purse strings . PE firms foster a culture of more quarterly reporting , since there ’ s now an investor class for RIA chiefs to answer to , and more normal reporting leads to more confident bankers , Pfister says .
There ’ s a downside . Brodeski says leverage ratios are ticking up and that all the money flowing into the space at a time of higher interest rates means there ’ s a temptation to borrow , lever up — and possibly buy firms that are overpriced . “ PEcontrolled firms are playing with OPM — other people ’ s money ,” he says . When the market turns down , that could leave a lot of firms exposed , he adds , if they have too much debt
Alan Moore , the co-founder of the XY Planning Network , a network of young advisors who ’ ve created their own startups , says this notion of business development failure is comically wrong . The problem , in his view , lies with senior management .
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Still , according to Steve Gaven , the chief growth officer at SageView , based in Newport Beach , Calif ., intelligent use of leverage is always going to be important in acquisitions , and lenders like what they see in the wealth management space : recurring revenue streams and sticky client relationships where there ’ s not a lot of client turnover . And the markets go up over the long term , something attractive for borrowers because there ’ s growth embedded in the market , no matter what organic growth is doing ( and the stock market is , in fact , hitting new records ).
Still , why is organic growth ( in terms of new client acquisition ) so sluggish ? There are many theories about that . One is that a new generation of advisors , people who came directly out of university financial planning departments with a monastic fiduciary mission , disdain sales culture and haven ’ t learned business development chops .
Alan Moore , the co-founder of the XY Planning Network , a network of young advisors who ’ ve created their own startups , says this notion of business development failure is comically wrong . The problem , in his view , lies with senior management .
“ There are very real structural barriers that founders have put into place ,” he says about the organic growth problem . “ When the founder was starting their firm , they worked with anyone that had $ 50,000 ( or less ) in their investment account . Those
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32 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2024 WWW . FA-MAG . COM