The wealth management industry is facing pressure to consolidate as the advising community tackles challenges like ever-changing industry regulation, consolidation and revenue compression. An Office of Supervisory Jurisdiction, identified by the broker/dealer as having supervisory responsibilities for agents and branch offices within its region that also supervises and provides consulting and business services to independent advisors, are not immune to this trend. In order to stay competitive and grow their businesses, OSJs should consider the many ways they can articulate their unique value and build scale into their models to attract and retain advisors who would otherwise remain self-supervising.
Demonstrate Deep Knowledge of Evolving Regulation
Considering their primary role as providers of compliance oversight, at the most basic level, it is critical for OSJs to stay up-to-date on regulatory changes to be of value to advisors. To do so, OSJs should continuously augment and update their services to be thoroughly equipped to lead advisors through necessary business adjustments. For example, as advisors continue to shift from commission-based to fee-based models, OSJs have an opportunity to convey their expertise in successfully shepherding advisors through this type of transition efficiently and thoughtfully. Vigilantly monitoring the latest regulatory changes and adapting services accordingly will ensure that an OSJ will continue to articulate its value to both current and prospective advisors in any regulatory climate.
Create a Holistic Franchise Model
Many advisors approach their work differently: some may prefer to leverage mutual funds, others manage their own portfolios, and many act as a true client proprietor focused solely on managing their OSJ business. Given this array of desired approaches, OSJs should feel encouraged to think holistically about catering to a variety of advisor needs beyond traditional compliance support alone. In fact, research suggests that OSJs that provide robust services over a wide range of areas had an average annual growth rate that was 20 percentage points higher than traditional OSJs.
OSJs can achieve this success by tapping into a “business builder franchise model,” where advisors can easily plug in to adaptable tools and services provided by the OSJ to run their own unique business more effectively and efficiently. These types of solutions may include customizable website and newsletter services that help position advisors in their own marketplaces, dynamic financial planning capabilities advisors can choose to directly manage or not, or practice management consulting services that support sustainable growth. Providing these services in a comprehensive franchise model that advisors can tailor to their own businesses will continue to become an increasingly important part of differentiating and cementing an OSJ’s value.
Leverage the Franchise Model to Build Scale
With a holistic franchise model in place, an OSJ will be well-positioned to drive efficiency and scale into the core of its business. From a compliance perspective, an OSJ’s oversight responsibilities are significantly streamlined when all of its advisors are utilizing a uniform model and set of tools. Moreover, as additional advisors leverage the OSJ’s comprehensive, customizable model to easily drive the efficiency and growth of their own firms, the OSJ itself will inherently benefit as its clients’ businesses succeed. With these newfound opportunities for twofold scale, OSJs can free up resources to focus on recruiting efforts and attracting a range of new advisors through the allure of a seamlessly adoptable franchise model.
While the current industry presents unique challenges for OSJs, it also creates critical opportunities for them to provide a differentiated, comprehensive and competitive resource to advisors. OSJs that do so will build high-quality service and efficiency into the core of their businesses, as well as the businesses of their advisors, setting the stage for mutual long-term growth.
Matt Matrisian is Senior Vice President, Strategic Initiatives at AssetMark, Inc. AssetMark, Inc. is a SEC-registered investment advisor.