Updated Friday, August 1, 2014 as of 8:25 PM ET
Blogs - Idea Exchange
6 Ways to Improve the Super OSJ Model
Tuesday, August 20, 2013
Partner Insights

Having had the opportunity to converse with many of the key players involved in the launch of LPL Financial’s new Enterprise Management Consulting Group – which aims to help traditional producer groups evolve their businesses to add value in new ways to the advisors they serve –I am more convinced than ever that the traditional “Super-OSJ” business model is in need of a complete transformation.

First, some context:  In the past, Super OSJs (office of supervisory jurisdiction) have typically pulled together groups of very loosely allied independent advisors by offering compliance oversight support and the ability to negotiate as a bloc for more favorable pricing with broker-dealers, custodians and third-party vendors. Recent industry developments promise to make these efforts not just increasingly challenging, but less profitable and of less value to the independent advisor.

For traditional Super OSJs to survive and prosper over the long term, they must begin to provide a more dynamic set of services to independent advisors – who increasingly are facing greater practice management, asset management and technology complexities. Indeed, such businesses need to take advantage of the opportunity that exists in the current environment to eschew the traditional Super OSJ business model and remake themselves into hybrid RIA groups that preserve the independence of their advisors, but provide a broader spectrum of services that transcend compliance and provide a firmer foundation for future growth.

Who would benefit most from such a transformation? For the most part, smaller advisory practices are not a good fit for the hybrid RIA group model of tomorrow due to budgetary constraints. Larger firms with assets under management exceeding $250 million are also frequently not a great fit. Not only can practices of this size operate on a stand-alone basis, but this segment of the independent advisor market is already saturated, having become deluged by various Super OSJ groups and other aggregator platforms seeking to land a big fish.

That leaves the overlooked independent advisor practices in the middle with assets under management ranging from $30-$100 million. Such firms are ideal for increased support because they have demonstrated a distinct need for the range of value-add services that these future hybrid RIA groups will provide, and what’s more they have achieved enough critical mass to properly facilitate continued growth and expansion.

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