I’ve met with a number of very impressive entrepreneurs—some I’d even call visionaries—who have launched or are about to launch serious and legitimate wealth management firms. Sure, with the industry climate as it is, this may not be such a surprise. But the real story here is that these firms are part of a whole different breed—a new-fangled, modern twist on registered investment advisory firms—emblematic of how the industry landscape has expanded to address the changing needs of the advisor population at large. The model I’m referring to is “quasi-independence.”
You’ve likely heard the name before; HighTower led the way with the model back in 2008. Yet today’s industry climate has been perfect for quasi-independence to come into its own, paving the way for what some might call “quasi-independence 2.0.”
Independence has become all the rage because many uber-entrepreneurial advisors want what it offers: ultimate freedom and control, ownership and the ability to build a brand and legacy. But what about those folks who are looking for more autonomy than what they see as employees of big brokerage firms but way less than being fully independent? That’s where quasi-independent firms come in.
The quasi-independent space is gaining steam and it’s where most of the expansion in today’s landscape is happening. First Republic Wealth Management, William Blair, Snowden Lane and Steward Partners are a few well-established examples of options in this category. Chicago-based Cresset Wealth Advisors, launched last year, and Greg Fleming’s Rockefeller Capital Management are about as exciting as it gets and will surely attract the advisor elite with value propositions, partnership potential and deal terms that make them unique and well worth exploring.
Quasi-independent models are characterized by the following:
- They’re boutique shops with W-2 models.
- They offer aggressive recruiting deals, often a mix of cash and equity.
- They typically offer partnership equity (with a seat at the table in building the firm).
- They offer third-party custody with an institutional custodian (Schwab or Fidelity).
- They have access to a unique and amplified set of investment solutions.
- They provide cutting-edge technology.
- They are lead by industry stalwarts who bring with them years of experience.
- They have strong balance sheets due to capital backing by private equity or by owners and board members themselves.
- They provide the compliance and back office support that so many wirehouse advisors have come to depend upon.
These models allow advisors to replicate everything they’re currently offering their clients—from a product, solution, service and technology standpoint—at absolutely no cost or detriment to them. The less restrictive, more creative and entrepreneurial environment ultimately allows for a superior service model. And, in most cases, the horsepower of the leadership team is nothing short of spectacular.
So, what’s the hitch?
There really isn’t one, except the concern that some of the newer firms are just that—new. Will they get off the ground? What if they don’t execute on their plans? What if they can’t get access to the capital they need for sustained growth?
All valid questions, and for sure, some advisors (many early on) will head for the hills—or at least wait until these firms gain critical mass. But, the most open-minded advisors of the lot will join because they are looking for:
- A ground floor opportunity to help shape and build a best-in-class firm.
- Extra attractive early adopter economics.
- The opportunity to be a lightening rod, enticing other like-minded advisors, who together can develop a stronger team and foster growth within this new culture.
- A highly customizable platform built to suit the needs of their clients best; one that’s flexible enough to help grow their businesses as they see fit.
And, advisors know that, even in the worst-case scenario, they’re still protected because of the safe asset custody with a multitrillion-dollar custodian, and an industry landscape that has expanded to offer support and access to anything and everything that an independent advisor could need.
The very definition of open architecture means that an advisor can access best-in-class solutions yet is not beholden to any one of them. This creates a simple, nimble way for an advisor to plug in and unplug as need be.
Quasi-Models Are Something to Be Excited About.
For years, advisors in hot markets, like Vail, Colo., Santa Barbara, Calif., Short Hills, N.J. and Westchester County, N.Y. have said, “If a boutique firm had interest in opening in my market, I’d be interested.” To those folks, we say, “Your time has come.”
While the names of the firms may be somewhat unfamiliar at the start, they all offer similar value propositions, like the ability to gain equity, a meaningful seat at the table to create something new and exciting, plus a great way to build wealth beyond just revenue generation on their personal book of business.
So if you’re feeling constricted by the big firms, but not quite “entrepreneurial enough” to go it alone as an independent, then this is a really exciting option. And, they’re looking to open in virtually any market where a top advisor with a great business sits. So, take some time to get to know the quasi-independence and the players in the space—it’s a model worth your consideration.