Do You Have a Case of the Consolidation Blues?

Once upon a little while ago, investment advisors at certain companies were enjoying the benefits of a smaller, well-serviced broker/dealer. I’m talking about firms like Securities America, Triad Advisors, Investacorp, Securities Service Network, KMS Financial Services, FSC Securities, Royal Alliance, SagePoint Financial, and Woodbury Financial just to name a few. 

But now, advisors at these firms find themselves in the midst of the biggest broker/dealer consolidation ever to take place in the United States. About 11,500 advisors have been swept into this conglomerate and the service they were accustomed to has been disrupted or eliminated.

The parent company behind this massive rollup will be touting that advisors will enjoy the same level of attention and service. Terms like open architecture for investments, cutting-edge technology, and added value will be mentioned. But let’s be real here, the clients are the true assets in this consolidation and they will endure confusing disruption as the parent company assimilates these independent B/Ds. Massive change, new administrative burdens and logistical nightmares await both the advisors and their clients. 

As the Director of Recruiting for PlanMember Securities, I speak daily to advisors across the country.  Recent mergers and acquisitions in the B/D and RIA space have been extremely difficult for them and their clients. Re-papering accounts, sometimes several times, can be brutal. 

If you’re an advisor experiencing this today, I’m sorry to tell you that this process is not going to slow down in the near future. Why? Because private equity is at the helm of this consolidation. These firms don’t put up capital for cash flow, they do it because they are betting on increased value. 

What does this mean? Private equity firms earn money on management fees, plus carried interest on the enterprise value above a designated rate. The average timeframe to meet this goal is 5-6 years because investor capital lockup is normally 5-10 years.

Next, management will cut expenses and overhaul everything to squeeze more profit from the investment. Advisors will experience a significant reduction in the kinds of support that helped them manage and grow their practices.  During the integration, advisors will navigate the conversion instead of working with clients and growing AUM. This could set them back years.

PlanMember is a private company. If you’re seeking a partner to support the growth of your practice, an infrastructure built to manage much of your day-to-day administration, with an efficient compliance team, and a firm that delivers qualified leads in the employer group market for 403(b), 457, 401K, and other non-profit employers, then PlanMember is worth a closer look. 

Our experienced transition team and dedicated business development officers make the transition as smooth as possible, while simultaneously crafting a plan to grow each unique, independent practice.

Get out of that conglomerate or wirehouse. If you’re an independent advisor seeking tangible support for what you want to accomplish, you need to speak with me about the opportunities available nationwide at PlanMember today.