We know how important it is for all of you registered investment advisors (RIAs) out there to maintain your independent way of doing business.
But what good would it serve clients were you to become terribly bogged down in back-office and supporting tasks? In some fashion—be it less face time with clients or noticeably higher overhead costs—managing tasks related to compliance, technology or marketing might force you to take precious time away from your clients.
That scenario serves clients little good, as we all know. Advisors hate it when ancillary tasks eat up too much of their time, because it robs them of the most enjoyable part of doing their jobs—working directly with clients!
We have had conversations with a couple of interesting executives that some of you principals, depending on where your practice is in its life cycle, might want to meet. You might not end up doing business with the likes of Joe Duran, founder and chief executive officer of United Capital Partners, or Rich Hughes, president of Merion Wealth Partners, but we think their names and their concepts of creating national networks of independent, RIA firms will make them very familiar to you.
At Merion Wealth Partners, based in Berwyn, Penn., Hughes says the firm is different from the typical aggregator or roll-up firm that we are all used to hearing about. Those companies expand by acquiring RIA practices or other types of financial advisory practices outright.
Things are a little different at Merion, where RIA principals sell a portion of their profit streams into Merion, in exchange for convertible shares in Merion, or for stock and cash, Hughes said in a recent conversation.
“We’re looking to help advisors take the non-revenue functions off of their plate and assimilate it into the home office,” Hughes said. Those functions could be asset management or financial planning, insurance & risk management, charitable gifting and legacies, trust and estate planning, as well as private banking needs. “Most independent advisors, don’t bring all of those capabilities to the table, under their own roof,” Hughes said. “They are good in one or two of those areas. In others, they miss out because it is outsourced to another entity.”
At least by joining Merion, the independent advisor can capture more of the client relationship by having access to all of those capabilities in one place—preferably under their own roof. Firms that join Merion also get venture capital from the deal, with gives them money to recruit advisors in their local areas and expand their practices.
Hughes says the idea is for Merion to take a more comprehensive wealth management approach to running its network, which it hopes to take national.
But words like “capture” and “merger” might be a bit too strong, a bit too committal for some advisors, especially the ones used to open architecture, the freedom to use their own judgment in many matters and all the other trappings of operating as an independent advisor. So Merion has a way for independent advisors to affiliate with the firm and use its RIA services. In exchange for an affiliation fee, those firms still get access to Merion’s back-office services, as well as convertible stock.
Hughes says three practices has joined its network, and has about a half dozen others representing more than $1 billion in assets in the wings waiting to join. They like to look at firms with between $100 million and $750 million in assets under management. But if what Hughes says is correct, we wouldn’t doubt if those averages increase after they sign on the dotted line.
Another interesting team that is building a network of RIA firms is United Capital Financial Partners. United Capital Financial is a portfolio company of Grail Partners, a firm that invests in wealth and investment management businesses. In that sense, it is very different from Merion Wealth Partners, whose model is not backed by venture or private equity capital and is designed to expand perpetually.
Still, United Capital Financial provides a lot of the same services as Merion. It provides the back-office services that take up so much time in an independent advisor’s life, and pretty much runs it for the advisor. Right now, United Capital has a network with about $8 billion in assets under management, and dispenses advice from a financial planning perspective. “Nobody is getting paid, on a national level, to be an arbiter of truth,” Duran said during a meeting with Financial Planning. “We think that there is a need in our marketplace today for a national firm that answers those questions in a systematic way, a holistic way, and in a way that is consistent no matter where they go.”
Duran is fairly passionate about his point of view, punctuating important points by jabbing at the table, or the air. Hughes is also totally convinced that this national network model will do the independent channel a lot of good.
Naturally, questions might crop up about how a national firm can be adept, flexible and focused enough on the client to call itself independent. But maybe the reverse should be true. If you all have got the right model, then maybe being known on a national level is the way the channel is, and should, be going.