COVER STORY
Thousands of other advisors have followed a similar path . To retain these advisors , most of the biggest broker-dealers , including LPL Financial , Raymond James , Commonwealth and Cambridge , have established custodian operations for those seeking to go fee-only .
Volatility May Increase Succession Events
Dave anticipates that the fall of 2024 should continue to see a robust environment for recruitment , with high valuations and multiples , even as little blips of volatility have shown up in the markets . In fact , a little bit of volatility might actually increase recruitment opportunities , he says , especially for advisors who might be ready to sell their practice and retire .
“ Just like clients will be taking some action between now and the end of the year as it relates to their portfolios and their investments , I think you ' ll start to see advisors also starting to make more decisions and looking to advance their vision , their business plan , as we enter into a little bit more turbulent times ,” he says , adding that the impetus is simple . “ If I ' m an advisor looking to sell my practice , I ' m thinking , ‘ Do I want to go through another choppy market over the next six to 12 months and take my clients through that ?’”
Far better to exit when markets are at a relative high , clients are happy and valuations rewarding , he says . “ And I think all of those things are there .”
An estimated 30 % of advisors are set to retire over the next 10 years , and with that , the discussions about recruitment invariably include talks of liquidity and succession , Dave says . “ It ’ s front and center with almost every discussion that we have .
“ You have teams that are multi-generational , where you ' ve got partners that may be much closer to retirement ,” he says . “ And you ' ve got potentially a younger generation on the team that may be looking for an event that takes care of the older partners who are closer to an exit , while at the same time serving their own need to grow and serve clients .”
To address the issue of liquidity and succession , firms have had to get creative to differentiate themselves . For example , Becca Hajjar , managing principal and chief business development officer at Commonwealth Financial Network , headquartered in Brookline , Mass ., says that her firm has leaned into its next-generation advisor experience with a suite of training options to prepare them for succession , including yearlong coaching programs that turn nextgen professionals into firm leaders .
“ They ’ re brought into the Commonwealth community ,” she says . “ So they have peers who are going through the same thing , whether they ' re going through our training , they ' re part of a business development group , or they ' re joining a study group .
There are different ways that we get them involved .”
Frank Smith , the president , CEO and managing director at Private Advisor Group , a $ 35 billion hybrid RIA in Morristown , N . J ., and one of LPL Financial ’ s largest offices , says that his firm has exploited its position in the industry to recruit some of the leading advisors in the marketplace . One of the things it has done to make itself attractive , besides being a good destination , is to hold itself out as an attractive acquisition target as well , a possibility that Smith says has been lightly explored .
There is no dearth of options . In 2020 , former Cetera CEO and LPL president Robert Moore invested in Private Advisor Group and is now executive chair .
But even bigger players are circling the business . In August , Rise Growth Partners , a recently created , private-equity backed aggregator , acquired a minority interest in another large , New Jersey-based , LPL-affiliated hybrid RIA , Bleakley Financial Group , which oversees about $ 10 billion . Moreover , LPL itself has indicated it is making direct investments in firms within its network .
“ It ' s the life cycle of our business , too ,” Smith says . “ The next phase for us as we continue to build and grow and recruit is [ that ] at some point we are going to monetize the firm . And the headline there is we ' re not going to do it in a disruptive way .”
Through an “ alignment in equity ” program , Private Advisor Group is buying small stakes , say 10 %, in some of its leading affiliated firms , in exchange for equity participation in the monetization event . “ Now they know they own a piece of our upside , and we own a piece of their revenue . This puts us on the same side of the table ,” Smith explains . “ The big show is when we monetize at some point in the future , the advisor practices that are equity participants have the opportunity to roll in more revenue if they want and maximize that upside .”
Lots Of Support Buoys Recruitment
Another facet of recruitment today , one that ’ s not about money , is addressing what advisors need as part of their transition . “ In addition to wanting more alignment with us , they want to off-load even more things than maybe historically they thought they would off-load as an independent advisor ,” Smith says about advisors he ’ s trying to recruit to his firm . “ Independent advisors historically thought they had to be the CEO , the CMO — all the things — and now they ’ re saying they just want to meet with customers .”
So Private Advisor Group is moving toward a more fully supported independent model where the firm can offer its advisors marketing services , technology curation , access to custodian relationships at scale ,
OCTOBER 2024 | FINANCIAL ADVISOR MAGAZINE | 41