Legend has it that the first RIAs roamed the Earth back when the Investment Adviser’s Act of 1940 was passed. Even the fiduciaries of the 1980’s and 90’s are considered pioneers. But it wasn’t until the ‘roll-up’ boom of the mid-2000’s that the RIA channel really started to explode. It has yet to return from orbit.
National Financial Partners, United Capital Financial Advisers, and Focus Financial Partners were among the first, and most successful, to create business models for aggregating/assembling RIAs along with their assets, under one roof. Firms like Dynasty Financial Partners and Hightower Advisors soon followed, along with substantial amounts of private equity investment.
And just like that, the RIA space entered a Golden Age.
These old-guard firms devised variations on a clever pitch for banding advisors together: by creating economies of scale, and by working together through a shared infrastructure model managed by the corporate team, advisors can do what advisors do best – advise! It was a brilliant hook, really: swap the equity in your $100m firm for that of a multi-billion-dollar one, with the promise of. . . well, something big at the end of the journey.
We all know this model. Whether you call it an aggregator, a roll-up, or a consolidator, they are all playing the same game. And the unfortunate truth is that they are more concerned with their financial outcomes than they are with helping advisors reach their growth ambitions.