Six RIA companies are driving a mini-renaissance after the 2008-'09 crisis exposed the brokerage industry's dearth of creativity, never mind integrity

June 14, 2017 — 9:56 PM UTC by Brooke Southall

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Brooke's Note. We cringe away from publication-generated "top" lists because they are inherently corrupt. The makers of the lists are generally ingratiating themselves with the people on the list by paying them by some indirect means. See: Michael Kitces attacks CNBC for its top-100 fee-only list because so many listed RIAs disclose non-fee comp on their ADVsThe claims of virtuous methodologies by the publications as to what makes the listed honorees "top" are usually easy to poke holes in. See: Does Barron's really have a bead on the best financial advisors in America? Yet I'd have to admit that few people, aside from me, are really complaining too loudly about the making of lists. What they lack in fairness and journalistic integrity tends to be made up for in getting past a Lake Wobegon swamp where all dwellers are above average. As imperfect as the lists are, they still represent the closest approximation of a third-party-generated ranking available to their consumers. Lists bring focus to bear on a finite number of players who did something right. Those redeeming characteristics represent my rationale for why we are running an RIA Power Player series despite the hazards. In a further attempt at bringing some integrity to the process, we are defining "power" more like "potential." The companies we are writing about are still a drop in the ocean of diffuse RIA power. But they have shown enough power to create a credible narrative about why they may yet be seminal in the RIA business.

The business of making and distributing fiduciary advice remains disorganized, fragmented and at times helter skelter -- but the RIA business as monolith is coming down the tracks like a sweetly rolling locomotive nonetheless.

The overall classification of RIA business has a staggering $4.5 or $5 trillion in aggregate managed assets but it is still a business of middling triumphs for any given person or firm. Leadership, mojo, mind share and momentum shift monthly -- sometimes weekly -- in the business of registered investment advisors and the vendors that support them.

Hot players in the last decade have included: RIA custodians, performance reporting firms, rebalancing firms, CRM software firms, financial planning firms, TAMPs, ensemble RIAs, robo-RIAs, hybrid RIAs, national brand RIAs and virtual (aka call center) RIAs.

There was even one wild attempt at creating a co-op of all big RIAs. (Remember Advizent?) 

Mercury poisoning

What drives up the mercury in any of these industry subsegments is the fleeting conviction that a new technology or business model has finally come along to break the bottleneck stopping up the scaling of the delivery of financial advice. See: The 6 biggest trends affecting the RIA business.

Take CRM: It was going consolidate the desktop, making infinitely more client contacts possible. See: 5 ways for stressed-out advisors to build a more efficient practice.  

TAMPs were going to free up advisors from concerns about investing so they could prospect and serve clients. See: Why Valerie Brown is doing 19-whistlestop tour with her new CEO to sell -- ironically -- deep price cuts and a TAMP-for-millennials.

Rebalancing was going to do the same thing -- but more organically. See: One firm's odyssey to upgrade its rebalancing system with Tamarac.

National RIAs were going to brand, technologize and acquire small RIAs, making said mom-and-pop firms obsolete. Ric Edelman and David Bach go their own ways after super-partnership dissolves

Recall when social media was going to obviate marketing expense and time, ushering in a referral boom? See: 5 ways for RIAs to avoid social media and 'holistic' wealth management overreaches in a share-happy e-world.

Young adult phase

The fact that none of these movements ended up reigning supreme takes nothing away from the energy, creativity and momentum they've contributed to an RIA industry passing out of its adolescence and entering into its more disciplined -- yet still idealistic and risk-taking -- young adult phase.

It is against this backdrop that RIABiz will present, over the next few weeks, a series of profiles of executives and their firms that have sparked the latest confluence of ideas, capital and inflow of tip-top talent to the RIA business.  

It's a business that is absolutely kicking butt. Virtually all net asset growth in the wealth management realm goes to RIAs and practices that most closely mimic it -- and not the brokerages that once ruled the realm. See: Merrill Lynch's second act for RIA reinvention is revealed but may yield 'field day' for classic RIAs in the short term.

Running with a powerful pack, these Power Players have pulled ahead in myriad ways. Each has come a long way in the RIA industry in the past decade and is positioned to consolidate power by executing a business model that didn't exist before. See: How many RIAs are there? No, seriously, how many?

Power Players 2017:

Power Player: Jon Stein's braggadocio about how Betterment is the next Amazon may be a blind distracting from stealth IPO moves and surgical deployment of a flesh-and-blood workforce

Power Player: Bill Harris raises yet another $40 million on strength of winning big accounts willing to pay a grown-up price

Power Player: Joe Duran powers beyond old 'roll-up' labels even as his United Capital roll-up shifts into a higher gear

Power Player: Larry Raffone is racing to 'lock up' the 401(k) market by taking its robo head start and combining it with a semi-national RIA

Power Player: Addepar's Eric Poirier drags RIAs to seek alpha in a beta world even as the advisors demand -- and get -- eMoney and FolioDynamix connections

 

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