6 Secrets to becoming a Billion Dollar RIA Frim

While billion-dollar firms might be considered a minority in the wealth management industry, more and more firms are reaching this level.

In 2012, there were more than 500 billion-dollar firms reported – up from 300 firms just three years prior. And these firms are controlling a disproportionate amount of the assets in the RIA channel, according to the Alliance for Registered Investment Advisors. In 2012, billon-dollar firms represented over 40% of all assets under management.

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The Rise of Super-sized Firms

Consolidation in the independent space is turning large firms with $1 billion in assets into $10 billion enterprises — putting pressure on small and midsize firms who do not envision selling.

While $1 billion in assets used to be enough to classify an independent firm as a so-called super-ensemble, firms in that category now have at least $10 billion in assets and bring in an average of $16 million in revenue, according to InvestmentNews' 2014 Financial Performance Study of Advisory Firms. There were 16 super-ensembles in the 2014 study of more than 300 firms, and 44% expected to make another purchase or absorb another firm.

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Morgan Stanley Lost in Court, but perhaps Won on the Larger Level

Even though Charles Schwab & Co. Inc. just lost a public and nasty $15 million FINRA fight with Morgan Stanley over a raid of its financial advisors, it may have shown the ability to use a new weapon in its arsenal: intimidation.

During the battle, the San Francisco-based brokerage giant sent a clear message to would-be raiders and would-be breakaways internally that it will go to Merrill Lynch-style lengths to mete out retribution in the form of expensive and intensive legal wrangling, says Andrew Stoltmann, a Chicago securities attorney with Stoltmann Law Offices.

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HighTower Gets $100 Million Loan

HighTower Advisors has received a $100 million credit line from two banks as it looks to boost recruiting and build out its newer offerings, including its Alliance platform.

The firm, which until this point had secured funds — around $165 million — only through venture capital or offering equity, received the credit line from BMO Harris Bank and PNC Bank.

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Klingman & Associates Hires Industry Veteran, Michael Paley, as COO

Klingman & Associates, a leading independent wealth management firm, announced today the addition of Michael Paley to the company as its Chief Operating Officer.

An almost 8 year veteran of the wealth management industry, Mr. Paley will be the firm's first ever Chief Operating Officer. This strategic hire demonstrates Klingman's ongoing commitment to not only enhance the capabilities it offers to clients but also expand the business to new clients and advisors.

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Ameriprise Makes its Move Upmarket

Ameriprise Financial is offering 150% of an advisor’s last 12 months of revenue as its base recruiting bid in an attempt to zap its recruiting efforts back from the dead, according to a Reuters article published Thursday.

The Minneapolis-based giant has had lackluster recruiting results, according to a Reuters database where it tracks firms’ numbers. The decision to jack to 150% from 120% an advisor’s last 12-months of revenues — 25% — in a public bid for advised assets was revealed in a recent call with analysts and recruiters. The new bid applies to advisors who bring in $830,000 or more of revenue. It would also pay signing bonuses of 150% for so-called “second quintile” brokers who bring in $585,000 in revenue, according to the Reuters report.

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Goldman Sachs Trader Leaves New York for $1-Billion RIA Outside Nashville

John Lueken was living the dream in New York. A St. Louis transplant, fresh out of Columbia University, he landed a job one at of the most prestigious Wall Street firms — Goldman Sachs & Co. He quickly climbed to become vice president of equity derivatives, one of the fastest growing and most profitable securities’ desks at the firm during the majority of his time there.

Lueken wasn’t one of those investment bankers who worked brutal 16-hour days, seven-days a week, like so many Wall Street soldiers whose gray hair and paunch bellies are the mark Wall Street rat-race. Lueken, 32, was actually one of the lucky few who was rising to the top fast, but still got home by 6:30 p.m. giving him plenty of time to spend with his wife and two-year-old daughter in their Upper West Side apartment. 

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Playing Offense

Remember when conservative, income-oriented investing was pretty simple? You know, hold some bonds here and buy some dividend-paying stocks there. These days, that old playbook just won’t cut it. At least that’s how some investment strategists see it.

“The paradigm of conservative investing has changed quite a bit the past couple of years,” says Mike Sorrentino, chief strategist at Global Financial Private Capital LLC. “Years ago, you could’ve bought a government bond, gotten returns above inflation and paid the bills. Those days are over.”

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New Rules for Firm Valuations

Putting a price tag on advisory firms isn't what it used to be. The traditional "two times revenue" metric is being increasingly eclipsed, say industry experts, by the use of cash flow multiples and such factors as demographics (of both advisors and clients), growth rates and depth of in-house talent.

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8 Keys to Inorganic Growth

When advisors think about growing their business and building scale, an inevitable underpinning of the strategy is either deploying a recruiting campaign to attract advisors with a book of business, or trying to develop a functional M&A plan to merge with or buy another independent advisor.

There is something intriguing about this phenomenon: most independent advisors fail to realize that many of their peers want to do the exact same thing! I have been to more practice management forums at various conferences over the years than is probably healthy, and there is a common occurrence at each.

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5 Thoughts About How to Actually Do What RIA Experts Say to Do

You can lead an advisor to water. But why do they sometimes choose straight-from-the-tap instead of Perrier?

When it comes to practice management consulting there is often times a disconnect between the “coaching” or “consulting” — i.e. the thinking that is delivered or recommended — and the actual execution i.e. the doing of the recommended actions.

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How an Alex Brown Spin-off grew to be a $46 Billion RIA

It’s not often that people breakaway from Brown Brothers Harriman, the prestigious two-hundred-year-old New York-based private bank.

But were it to happen, you might expect them to start building a new wealth-management book of business at a $46-billion investment management firm that has its roots in the those old-money founders. 

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Cerulli: One-Third of Advisors to Leave the Business by 2024

About 98,500 advisors, or 32 percent of the total advisor population, plan to retire or exit the business in the next 10 years, a new Cerulli Associates report found. The average advisor in this industry is in their mid-50s and ticking upwards, yet only 29 percent of advisors have a succession plan, according to Moss Adams.

More than a quarter of advisors plan to sell to an existing partner, while 14 percent plan to sell to an outside buyer but haven’t identified that buyer yet, said Kenton Shirk, associate director at Cerulli. But among independent broker/dealer advisors, dually registered advisors and RIAs, greater than 20 percent haven’t identified an outside buyer.

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aRIA Releases Study on the Succession Planning Crisis Facing the Advisory Community

The Alliance for Registered Investment Advisors (aRIA), a think-tank comprised of six elite RIA firms that collectively manage more than $20 billion in client assets, today announced the publication of a new case study titled "The Cobbler's Children Have No Shoes."

Written by aRIA member, Ron Carson, Founder and CEO of Carson Institutional Alliance and nearly $4B AUA (which includes AUM*) Carson Wealth Management Group, the study highlights the succession planning crisis gripping the advisory community and offers advice on how to correct its course. 

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Why Ron Carson Brought Steve Lockshin Onto His Team

At first, the four other members of Ron Carson’s executive committee weren’t certain that they had heard correctly.

His fellow board members that oversee Carson Wealth Management, Peak Advisor Alliance and Carson Institutional Alliance wondered whether the founder and chief executive of Carson Wealth Management Group Inc. could be serious about bringing Steve Lockshin to their inner sanctum.

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Sometimes Advisers Need a Plan, Too

According to Geoffrey A. Frazier, president and relationship director of Global Financial, more than two-thirds of advisers lack a business continuity plan.

Advisers cite reasons ranging from insufficient time to develop a program, to difficulty finding the right successor, to inability to meet the cost of insurance or create an agreement, Frazier says.

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GFPC Unveils New-to-Market Succession and Business Continuity Program

Global Financial Private Capital ("Global Financial"), a Sarasota-based independently owned SEC Registered Investment Advisor managing over $3 billion in assets, announced today a new succession and business continuity program for partner advisors.

It was developed in conjunction with Advisor Growth Strategies, a practice management consulting firm, and MarketCounsel, a business and regulatory compliance consultancy. The program offers two unique programs from which advisors can choose the appropriate business continuity plan to protect the value of their advisory business.

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How Top RIAs Transition from Business Owner to Business Manager

The growth of the RIA channel can be attributed primarily to the entrepreneurial spirit of financial advisers who decided they wanted to take on the risk/reward scenario of being a business owner in addition to becoming a financial adviser.

Many advisers find the RIA model attractive, given the fiduciary construct, the ability to have control, the client experience and the fee-based orientation of the channel. I work with advisers who are seeking to build their firms aggressively and achieve the next level of growth, or solve a fundamental challenge they are facing in managing their business.

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Time to Hire a Professional Manager

For Heather Locus, a principal at Balasa Dinverno Foltz in Chicago, the ‘aha’ moment came she came back into the office after a meeting with clients and saw Susan Korin, the firm’s chief operating office, in a conference room discussing restructuring with senior advisors.

“I thought ‘This is exactly what should be happening,’” she recalls. “’I’m out helping clients and Susan is in an internal meeting helping to grow the business.’’

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HighTower Shifts into High Gear

HighTower Advisors has lured an all-women Merrill Lynch team with $320 million of ultrahigh-net-worth assets under management and another Merrill team with $700 million of AUM as part of a three week poaching spree culminating in closing $1.2 billion of assets.

The Chicago-based rollover made a habit of poaching breakaway in bunches in its early years but the flow had slowed to a trickle and more and more of the deals were not full-on purchases — but rather a renting of the platform to independents.

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