RIA pitches financial advisors with 'profitability calculator'

A registered investment advisory firm is seeking to recruit financial advisors with a calculated pitch comparing its fixed fees to traditional industry costs based on assets under management.

Melbourne, Florida-based Rossby Financial's new "advisor profitability calculator" asks advisory practice owners about their firm's size, business mix, recurring and annual costs and payout rates, and estimates how much lower their fees would be with flat expenses rather than AUM-tied charges. A sample hypothetical firm with $85 million in AUM and $650,000 in yearly revenue could save more than $210,000 on its expenses and hike its gross profit by more than $129,000, according to the tool's formulas. 

Rossby unveiled the calculator with a LinkedIn post last month offering advisors a "100% payout" without revenue sharing, hidden fees or external ownership.

In a rapidly consolidating industry with giant RIAs acquiring smaller firms at record volumes and valuations, Rossby is relatively small, having reached nearly $800 million in client assets and 28 advisors since former Cambridge Investment Research, Waddell & Reed, Charles Schwab, Merrill and Raymond James advisor Andrew Evans launched the firm in January 2023. But the firm is seeking to introduce itself to more advisors with the calculator tool and a hiring push that includes advisory practice transition expert Grier Rubeling, who joined the firm last month.

READ MORE: As RIAs grow, here's how advisor compensation is changing 

A home for advisors?

Rossby "really has a different feel to it," since it only charges flat rates and isn't "giving out upfront money," asking advisors to sell their firms or operating with capital backing from a private equity firm, said Rubeling, the firm's head of marketing and business development. But she acknowledged that its setup won't work for every prospective advisor.

"We're looking to provide a home for those who really want to focus on growth and don't want to be punished for that growth," Rubeling said. "They want a partner that isn't going to gouge them as they grow but wants to encourage them to grow and to give them the room to do so, the resources to do so and to allow them to keep their money to do so."

While he said he couldn't speak directly to Rossby's ability to drive up advisors' profits, industry growth consultant Mike Byrnes of Byrnes Consulting said the calculator tool is "perfect to help them visualize" the potential economies of scale and push back against a common talking point in employee channels that any move to the independent ones is too expensive to consider. The tool could also save prospective advisors and Rossby time in the recruiting process.

Often, wealth management firms may fete advisors in meetings with a yellow notepad that an executive writes their offer on and slides across a table, according to Byrnes. The Rossby tool eliminates that "archaic" approach and answers most of advisors' questions in advance, he said.

"Now you've gotten someone who's done their own research and gotten into the lead funnel," Byrnes said. "I love this type of concept of marketing where you're actually delivering stuff that you would do in person and eliminating one step of the sales process." 

READ MORE: Edward Jones and American Funds: A 60-year revenue-sharing alliance 

Bets and tradeoffs

Rossby is deploying that recruiting pitch amid no shortage of competition that includes some other firms willing to make their cases around fees and scaled discounts from other service providers. And external service firms like AdvicePay, which is celebrating 10 years in business and over $1 billion worth of flat planning fees collected by advisors through its billing and compliance software, make it possible for advisors to use different business models at many types of RIAs and wealth management firms. That doesn't mean, however, that every advisor with a big RIA is happy in their current location. 

"One of the biggest fears for advisors right now is getting sold a bill of goods" during the recruiting phase of their moves, only to find that their new setup didn't turn out "exactly as it was described to them as the sales process was happening," Rubeling said. "When you start to ask real questions and you want to get real answers, that's where those differentiators kind of fall apart a little bit."

Rossby is betting that collecting only flat fees from advisors who join the RIA and the addition of a new chief compliance officer and chief operations officer alongside Rubeling could appeal in that environment.    

"The money in your pocket should increase significantly," Rubeling said. "The more AUM that you have built out and the more advisory fees that you are charging, the higher that your profit margin is going to be using the Rossby platform."