Handicapping the platform providers

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F3Logic, a new platform provider, has landed its first major client, marking an impressive debut in an increasingly crowded field.

F3Logic, which is also an RIA, has signed on Veracity Capital, a breakaway advisory team from Goldman Sachs-owned Ayco that previously managed approximately $2.5 billion.

“The first get is really important. That’s the good news,” says Jeff Spears, president of Fort Point Capital Partners who previously headed the now-shuttered platform provider Sanctuary Wealth Services. “The bad news is now you have to make money. It’s always a struggle in a low margin business. And there’s more risk now because assets are getting hit in a down market. And 90% of fee schedules are based on AUM.”

Most platform providers, who provide outsourced services including software, compliance and back office support, charge between 10% to 20% of the fees advisors collect, based on size of the RIA.

“It’s been a great environment for a long time,” Spears says. “Fee revenue always goes up until it doesn’t and then you need other kinds of revenue.”
What’s more, new platform providers have to compete against the outsourcing market’s 800-lb. gorilla, Dynasty Financial Partners.

Founded in 2010, Dynasty works with nearly 50 firms and has approximately $32 billion on its platform. It is also well-capitalized and has branched out to provide financing to firms. Further flexing its muscles, this year Dynasty also added a new Enterprise Group to assist advisory firms with at least $1 billion in AUM.

Sanctuary found out the hard way how difficult it was to compete with Dynasty. After going out of business two years ago, Spears wrote a brutally honest post-mortem, declaring that “My firm’s business support was ultimately viewed as an expense that could be cut and it was by many of our initial firms.”

Nevertheless, F3Logic and a host of other firms, including Tru Independence, TruClarity, Chalice Financial Network and even HighTower Advisors, whose previous business model was aggregating RIAs, have entered the highly competitive market.

“We think [RIAs with between $50 million and $250 million AUM ] are an overlooked and underserved market,” says former LPL executive Derek Bruton, COO of Chalice Wealth Partners.

F3Logic began life last year when advisors from National Planning Holdings broke away from LPL to form an RIA. The firm, which is self-funded, is also providing Dynasty-like outsourcing back-office software, compliance and legal support for a platform fee based on a percentage of a firm’s assets, says chief operating officer Richard DeSalvo.

DeSalvo, who is based in Morristown, N.J., describes F3Logic as a “virtual” firm, with personnel also in Ohio and other states. F3Logic pitches itself as a bespoke model, offering customized technology for its clients.

Veracity CEO Kevin Gray looked at several other platform providers and RIAs before settling on F3Logic. “They were willing to create a customized solution for us, and from the beginning that was our goal for clients,” Gray says.

DeSalvo envisions Dallas-based Veracity as the lynchpin of a hub-and-spoke model that will attract both large and smaller advisory firms around the country.

By contrast, Chalice Financial Network, founded by industry veteran Keith Gregg and run by COO and former LPL executive Derek Bruton, is exclusively targeting RIAs with between $50 million and $250 million for its nascent platform.

“We think it’s an overlooked and underserved market,” Bruton says. “We’re providing a tech stack, asset management and back office and compliance support.”

Bruton describes the network, which launched in October, as a “fintech membership organization for financial advisors.” Member firms pay an annual fee of $3,000 and then pay for the specific outsourced services they need on an a la carte basis.

Chalice, a division of Chalice Wealth Partners which also has an RIA and a broker-dealer, has partnered with tech firm Orion, lead generation firm ProSites and Oak Street Funding to provide loan financing for advisory firms, Bruton says.

Chalice faces stiff platform competition for smaller firms from four-year old Tru Independence, which has already signed up eight firms to date this year for a total of 17. Paces Ferry Wealth Advisors in Atlanta, was the most recent addition, joining after a breakaway team from J.P. Morgan Securities that managed around $200 million went independent.

Like Dynasty, Tampa, Florida-based TruClarity, launched in 2015, targets breakaway brokers, helping them transition to independence and charging a fee for back-office services.

Pershing alumnus Shad Besikof is the firm's president and COO. Dan Cronin, a former RBC Advisor Services and BNY Mellon executive, left his post as TruClarity’s east coast division president this summer after only a year on the job.

TruClarity is owned by a family office, Sembler Investments, and currently works with six firms with over $1.5 billion in AUM.

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RIAs Platforms Fintech Jeff Spears Derek Bruton Dynasty Financial Partners tru Independence F3Logic Veracity Capital