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July 2016

RIA Movement Inspires More Shops to Target Breakaways


By Danielle Verbrigghe July 21, 2016 –  Published in FundFire

As the RIA channel continues to lure advisors, a range of firms are competing to provide them with financing, guidance and back- and middle-office support.

In March, the head of advisor recruiting firm Old Greenwich Consultants launched RIA Capital Solutions to target breakaway advisors with approximately $400 million or more in AUM. The new firm refers advisors to a lineup of partners that offer access to services such as equity and debt financing, back- and middle-office support, custodians, compliance, brokerage and turnkey investment advisory platforms.

Jeff Bischoff, who runs Old Greenwich Consultants, says he decided to launch RIA Capital Solutions to address financing-related challenges that he realized were holding some advisors back from breaking away from their current firms to launch an RIA. Echelon Partners, a boutique investment bank focused on asset and wealth management, is identified as a financing partner on RIA Capital Solutions’ website.

“We’ve arranged for friendly capital, favorable terms on debt financing and unique sorts of structures that mitigate the risk of going independent,” Bischoff says.

This week, RIA Capital Solutions announced it had partnered with Tru Independence, a firm that launched in 2014 to offer a suite of turnkey back- and middle-office services to RIAs, including an investment advisory platform with a menu of managers selected by LCG Associates.

“What I like about them is they’re a boutique,” Bischoff says. “They’re accessible, and they’re highly transparent.”

Since it first launched in 2014, Tru Independence has successfully helped several breakaway teams launch RIAs. In March, Washington Park Advisors, a $400 million firm that was previously part of Lateef Investment Management, launched on the Tru Independence platform. A UBS advisor with $400 million founded Las Olas Capital Advisors, with help from the platform, last summer. Encompass Wealth Advisors was the first RIA launched on the platform, by a team that had previously overseen $650 million at Morgan Stanley Wealth Management. In total, nine teams have partnered with Tru Independence, according to a spokeswoman.

RIA Capital Solutions also has a partnership with FallLine, a high-end brokerage platform targeting advisor breakaways launching hybrid RIAs. FallLine was founded last year by veteran private banking executive John Straus, who had previously led private banking divisions at UBS, J.P. Morgan and Morgan Stanley.

These newer entrants compete with established players offering financing and support to RIAs. Dynasty Financial Partners, which launched in 2010, also offers financing, and a range of back- and middle-office services, along with guidance and a road map for breakaway teams looking to launch an RIA. Dynasty has been able to attract a number of the largest breakaway teams. Most recently Dynasty attracted a $750 million team from Lebenthal Wealth Advisors, which launched YorkBridge Wealth Partners. In April, Dynasty lured a team of former Merrill Lynch advisors with $400 million in client assets, as reported.

“Most of the larger, more sophisticated breakaways that are occurring are doing it with a partner model,” says Shirl Penney, president and CEO of Dynasty. “While it’s not exactly rocket science going out and building the infrastructure to launch an RIA, it’s a lot of work. It’s a lot of moving pieces.”

Dynasty provides a turnkey experience, guiding advisors through the process with a road map, which outlines steps. Those include everything from establishing an operating agreement, setting up payroll, accounting, a legal structure, bank accounts, benefits and staffing, securing startup financing, retaining a lawyer to review existing employment agreements and following broker protocol, according to a firm document. Other services offered include help leasing office space, setting up office technology, compliance, arranging a custodian and clearing firm, preparing marketing and public relations materials and preparing for an actual launch, the document states.

The approach seems to have taken off, attracting a number of high profile teams. Dynasty now has 37 partner RIAs, with more than $20 billion in assets, Penney says.

Bill Willis, president and CEO of recruiting firm Willis Consulting describes firms like Dynasty or Tru Independence as RIA facilitators, connecting advisors to the financing, services and support that they otherwise would have to round up elsewhere.

“They are the shepherd and wholesalers of products and services to take you from the known to the unknown comfortably,” Willis says.

But these are only a few of the business models available for advisors looking to establish an RIA.

“There’s a growing wave and a growing number of models out there certainly, compared to what was out there five years ago,” Willis says.

Other firms offering different models, such as Focus Financial Partners and HighTower Advisors also target breakaways looking to launch RIAs. Other full-service brokerages, such as Raymond James, have set up RIA affiliation models to accommodate the growth of the channel.

These firms take aim at a potentially lucrative market, as the RIA channel continues to grow market share. Earlier this year Aite Group projected that RIAs may grow their slice of the market to 17.1% of total wealth management industry assets by 2019, compared with 14.7% or $2.8 trillion, in 2015. At the same time Aite projected that the wirehouses’ share of the pie will continue to decline, dropping to 30.7% in 2019 from 33.6% in 2015.

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