Building Scale Doesn’t Necessarily Mean Selling Out


After an Independence Day weekend on the beach, I’m tanned, rested, and I’ve got "E Pluribus Unum" on my mind.


Based on the stats out there that 70% of all RIAs are solo shops, plenty of advisors out there seem locked in "pluribus" mode.


That’s fine, if your vision of independence entails going it alone for a few decades and then selling out when it’s time to retire.


Some people like being the sole captain of their own destiny.


But the fact is, there are advantages that come with scale, and scale doesn't necessarily entail joining a big firm or hiring a lot of junior advisors to work for you.


A lot of the M&A we’re seeing these days represents informal combinations of equals, all of whom remain the primary contact for their existing clients and actively prospect for more. None of the partners sells out and money rarely changes hands.


Instead, everybody gets a share of a new, larger entity that has the scale to get better outcomes for everybody at the table.


More advisors on the team give you the capacity to provide a higher level of service to more clients, and the more AUM you have, the more likely it is that those clients will get access to more and better products at lower overall cost.


Turning the financial advisory business into a team sport also helps by giving you added breadth.


Team members can share specialties -- for example, if you know a lot about estate planning, adding a partner who’s done work in college funding can help round out your marketing proposition and, again, ultimately work on your clients’ behalf.


You can bounce ideas off each other, provide second opinions, even backstop each other’s work if you’ve built up that kind of trust. There's comfort, creativity, and strength in numbers.


Succession tends to take care of itself.


And don't forget, simply having two or more advisors under the same roof lets them share rent, technology costs, support staff, and other expenses -- and maybe even get a better deal on everything from compliance to insurance.


For advisors who consider themselves lone wolves, this might be pointless.


Others may benefit from the story of how 13 fiercely independent little colonies got together and grew into a global powerhouse.


The question is how you find your natural allies in the industry.


You can approach competitors in your region who fit your ethos to see who might be willing to team up.


Or you can grow across state borders by finding like-minded advisors who might be a good fit. I do a fair amount of consulting in this field and find that it works a lot like recruiting.


The difference is that instead of being the "recruit" looking for a firm to join, you’re looking for a firm -- or individual advisors on the move -- willing to combine with yours.


Either way, it can be a lot of work finding the right partner, but the rewards truly are huge.

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