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Advisors and Their Affluent Clients are No Longer Looking the Other Way When it Comes to Independence


As advisors make the move to independence, their high net worth and ultra-high net worth clients reap the benefits of a more personalized approach.

There was a time in the not-too-distant past when advisors and firms alike thought independence was only for those whose clients were “regular folks” of average wealth—that is, with respectable assets, yet limited needs beyond “plain vanilla” financial management. And top advisors who served the ultra-wealthy would never have considered leaving behind the big brand name upon which they built their businesses to strike out on their own—certain that no firm but the biggest could support their clients’ unique needs.

That is, until they did.

Consider Frank Ghali’s exit from Goldman Sachs in 2017 to start his RIA firm with $12B in client assets; or the recent headline-making departure from Merrill Lynch by the $5B New York City team led by Eric Bodner and Ben Sax who formed Kore Private Wealth. When these advisors left the wirehouse world, they took along with them clients who had investable assets in the $10m to $50m range.

To them, and many others who made the leap, it suddenly became clear: The independent space offered advisors an opportunity to replicate the platform found at the wirehouses, as well as deliver customized services once limited to only the uber-wealthiest of clients (think billionaires like Michael Bloomberg, Bill Gates, and Mark Zuckerberg) by way of the Single Family Office (SFO) model.

The Changing of the Guard

Shirl Penney, President and CEO of Dynasty Financial Partners, says, “The ultra-wealthy have been using a truly independent advisory model via the Single Family Office for the last century.” The premise of a Family Office is that there is separation between the advisor and custodian, investment solutions, and any of the services and capabilities used to support the families – allowing the advisor to remain agnostic and at arm’s length in his approach, ultimately dedicated to best serving his client’s needs with complete objectivity. Over time, however, the SFO model became expensive and untenable to maintain. And advisors serving a less affluent client base wanted in on the same action.

Bill Loftus, one of the founding partners of the $2.4B firm Coastal Bridge Advisors, discussed his team’s 2008 decision to break away from Merrill Lynch with me on a recent podcast. “Our [clients] were asking for things that we just couldn’t get inside the wirehouse. And more conversations than not ended with us having to say, ‘Oh gee, we are restricted from doing that.’”

Over the past decade in particular, as more and more wirehouse advisors serving affluent families became frustrated by the limitations on their ability to deliver personalized, bespoke services to this constituency, the most entrepreneurial of the lot recognized the opportunity to become independent business owners.

And thus, the Multi-Family Office or MFO model was born, and with it, a whole cottage industry designed to support top breakaway advisors and their clients. As if out of nowhere, attorneys, accountants, consultants, bankers, lenders, investors and the like flocked to the space. Essentially, the playing field has been leveled, giving these new firms the means to replicate and often improve upon the services they could deliver to their clients.

And it’s not just new names or players that are getting on board. For example, Schwab and Fidelity – the two biggest custody and clearing firms in the industry – recently launched separate divisions to offer high-touch, customized service and Family Office capabilities to advisors serving the UHNW space.

“We’ve seen a real momentum of UHNW-focused, large teams breaking away from traditional brokerage firms,” Eddie Brown, the Head of Schwab Advisor Family Office, shared in a recent conversation. “These advisors want to be able to leverage a team of experts relative to digital capabilities, value-add services, subject matter experts, banking and lending, philanthropy, trust and estate planning, etc.”

Related: A Conversation with Shirl Penney: What’s Driving the Momentum Towards Independence – And Will it Continue?

Actually, the industry overall has answered the call to offer these services and support in a big way. “The rise of the UHNW-focused RIA or MFO has allowed affluent clients who are covered by these RIAs or MFOs to get advice from the RIA, have assets sit with virtually any executing custodian counter-party, and get products delivered in a competitive pricing process across the Street. All while having cutting-edge reporting technology for clients and advisors to tie it all together,” says Dynasty’s Penney.

The Push Back Perception

Increased credibility and support for the independent space notwithstanding, many advisors still carry the concern that their clients are married to names like Merrill Lynch, J.P. Morgan, UBS and the like, and that robust services cannot be replicated outside of this domain. Yet the exact opposite is more often the case.

“Our clients are probably among the most sophisticated clients you’re going to find. They’re entrepreneurs, they’re CEOs of companies,” Loftus said. “Their needs are very, very complicated and we are able to solve those needs and delight them, in a way that most wirehouse teams can’t” because of the guardrails around platform and services. In the case of Loftus’ team, their move to independence “increased their ability to delight” their clients so much that they grew an astonishing 600% organically in just 10 years. As he tells other advisors who believe their clients will push back on a decision to go independent, “The proof is in the pudding.”

An advisor who services wealthy clients wants nothing more than to go the extra mile for them. Oftentimes, though, it requires that advisor to “color outside the lines”—thus, toggle between remaining compliant and ensuring client loyalty. As such, UHNW focused advisors and their teams working in the big brokerage firms find themselves in an increasingly vulnerable state—a state that has given many just the push they needed to more seriously consider starting their own firm or joining any one of the growing number of well-established MFOs.

To be sure, we’ve said it many times before: Independence is not for everyone. But for those with entrepreneurial DNA and the realization that the pain of staying has become great enough, there is an exciting world beyond the major brokerage firms that offers the ability to serve those with even the most sophisticated requirements.

But if the only thing stopping someone from considering independence is an outdated belief that clients would be unwilling to embrace such a change, it’s time to revisit those thoughts and all that the space has to offer.

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