Rise of the Super Models
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The Three Super Models Explained

This series discusses the new business models that have emerged to support independent financial advisors.

Read Rise of the Super Models: Myths and Realities in the Financial Services Industry

Read Rise of the Super Models: Missing Pieces and New Gatekeepers.

Now that you understand the challenges and opportunities, let’s dive into the three Super Models. Here they are, with key characteristics in bullets, followed by a more detail description and links to case studies based on interviews with real firms who are paving the way for others in the financial services industry:

The Super OSJ

  • The Office of Supervisory Jurisdiction is a branch office of a larger independent broker/dealer or registered investment advisor.
  • The OSJ’s profit is derived from providing support for traditional advisor business models (multiple Solo, Silo and/or Ensemble practices).
  • Advisors receive a payout based on production and/or client assets under management.

The Super Ensemble

  • Business is a fully functional retail advisory firm.
  • Advisors come together to serve clients and build a brand.
  • The profits are derived from the partners’ joint efforts; they maintain one P&L
  • The advisor-partners share profits and equity in a single business entity.

The True Enterprise

  • Business is a fully functional retail advisory firm.
  • Professional staffing model and career paths (think legal, accounting, medical).
  • Services provided by company employees and salaried advisors/planners creates the profit.
  • Key employees may receive incentive-based bonuses, or even become company shareholders over time.
  • The business is designed to outlive founders and current professionals and/or partners.

The Super OSJ Model, Explained

The Super OSJ is an actual business, sometimes founded and managed by a former advisor who is licensed by the Financial Industry Regulatory Authority and/or the Securities and Exchange Commission as a principal. Its revenue and margin is derived from providing services to various types of advisor practices. The OSJ itself is not in the business of delivering advice or working directly with clients. The Super OSJ or large registered investment advisory network is a business-to-business model, whereas The Super Ensemble and The True Enterprise models are business-to-customer models.

The Super OSJ or large RIA network creates revenue in the same way that WeWork franchise owners earn a profit, by providing services to the business owners.

WeWork facilities, or similar shared workspace service companies, are popping up in various cities. You walk into a WeWork office and ultimately find 50-100 small businesses in various stages in startup and growth operating inside this shared facility. The business participants get a place to meet each other if they’re all in the same company. They get a professional suite of technology to plug into, typically plug-and-play phones, Wi-Fi, video-conferencing capabilities and conference rooms for in-person meetings.

While WeWork, as its core, provides turnkey office space, typically at a lower cost (at least initially) than going out in one’s own, there’s another key reason that people operating in WeWork will say when asked why they are there: There is a social aspect to it. They have other like-minded people with whom to interact.

There is also the collaborative aspect of it. You’ll find story upon story of how business owners became acquainted and ultimately merged or partnered on a project due to their connection at WeWork.

People who use WeWork can tap into additional support and services by being part of that community. WeWork also brings in outside speakers to talk about how to raise capital for business needs, how to create a marketing and PR plans, how to use social media or create video clips, etc.

The Super OSJ model is similar to the WeWork business model in a number of ways.  

You can have your own practice but still find people to talk to, people to have your energy drink of choice with every day and share ideas. It’s not quite as lonely as working at home. It’s good to be out in the world, among other professionals. There are economies of scale.

While Super OSJ principals may be motivated to help the advisor-business owner in their branch office do well, they’re not directly tied into how well each advisor-business line does. They try to fill their office and sell additional services such as renting out conference rooms and that sort of thing.

The Super OSJ environment pulls together people who really want to be in the profession, still be part of a community and collaborate with others, but for their own reasons don’t want to join a Super Ensemble or True Enterprise model.

The Super OSJ, in a nutshell:

  • The OSJ is built to support retail advisors who have their own clientele.
  • The OSJ receives fees, often in the form of a “haircut” on the commissions and/or advisory fees the advisor realizes from their work with their clients.
  • Advisors have their own book of business and, oftentimes, their own brand.
  • Advisors enjoy the best of both worlds—support from a larger firm and like-minded colleagues with a large degree of freedom to run their own P&L as they see best.

Read corresponding case study: Super OSJs, Like Stratos Wealth Partners, Offer “Supported Independence” to Entrepreneurial Financial Advisors.

The Super Ensemble Model, Explained

The Super Ensemble is a large firm, typically a fee-based advisory business where multiple partners share equity in one practice. There could be more than one rainmaker. You’ll see this with the breakaway brokers: a billion-dollar group leaves a wirehouse and joins one of the IBDs with a good fee-based independent model. Or the advisor group establishes their own RIA firm, sometimes with the help of one of the big custodians, most of which have groups of business consultants and transition teams ready to assist with almost any question or resource needed.

Sometimes several practices merge into one. They start to have consistency in terms of the client-service experience and in terms of the brand. Super Ensemble business owners share equity in one practice but, unlike the True Enterprise Model, Super Ensemble operations tend to be advisor-heavy and advisor-focused.

Prior to recent regulatory interference, smaller professional practices such as legal, medical or dental offices tended to work in a similar way. Several professionals in one firm with support staff serving a common group of clients. Being part of a team allowed for a more reasonable work-life balance and ownership is typically reserved for the professional. 

The Super Ensemble, in a nutshell: 

  • The business is a fully functional retail advisory firm.
  • Advisors come together to serve clients and build a brand.
  • The profits are derived from the partners’ joint efforts; they maintain one P&L.
  • The advisor-partners share profits and equity in a single business entity.

Read corresponding case study: Super Ensembles, Like Crosspoint Wealth Advisors, Provide a Great Example for Solo Advisors and Shared Support Silos Considering Their Options.

The True Enterprise Model, Explained

The True Enterprise is a fully functional retail advisory firm where the focus is on making a professional staffing model work. As the business grows, they’re adding employees, not additional partners per se. It’s not that there isn’t an opportunity for people to move into partner roles, because there are; basically think about this as if you were going to open another McDonald’s. You’d be very interested in hiring and keeping good employees, using professional managers to run the business divisions, maintaining a unified message and brand in your targeted markets, implementing a consistently successful marketing strategy, and so forth.

You have the business model; you hire employees to staff it. A True Enterprise Model.

It does not rely upon super-human effort to simultaneously sustain growth and a consistent client-service experience. It enables motivated people to stay focused on their preferred functional role and ultimately to do their best work. 

These are the functions that have to be done well in order for a professional advisory business to succeed and sustain margins:

  • Business Development (Marketing/Prospecting)
  • Client Onboarding (Sales)
  • Financial Planning (Case Design)
  • Client Relationship Management
  • Client Service
  • Investment Management
  • Compliance
  • Business Management
  • Technology
  • Human Resources

This business model is designed to outlive founders and current professionals or partners. It’s a true business, not a practice. This is an important distinction. We tend to think about this model as comparable to a local, regional or national accounting firm where standardized processes and consistent branding result in sustainable growth. There is planned succession for all roles in the firm and as a result they’re able to attract and retain talent. 

The True Enterprise, in a nutshell:

  • The business is a fully functional retail advisory firm.
  • There is a professional staffing model with career paths (think legal, accounting, medical practices).
  • Services are provided by company employees and salaried advisors/planners create the profit.
  • Key employees may receive incentive-based bonuses, or even become company shareholders over time.
  • The business is designed to outlive founders and current professionals or partners. 

Read corresponding case study: True Enterprises, Like EMM Wealth, Provide a Unified Experience to Clients and Stand the Test of Time.

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