Five of the 10 largest financial advisor recruiting or M&A transitions among independent broker-dealers this year have led to the closing or repurposing of a brokerage firm.
In the latest phase of wealth management’s ongoing record consolidation, expanding giants such as LPL Financial, Cetera Financial Group, Mariner Wealth Advisors, Captrust and Hightower are recruiting and often buying up practices or former midsize competitors. LPL picked up new teams as part of four of the 10 largest enterprises and brokerages that entered the independent brokerage channel, moved between firms or left it in 2021, according to Financial Planning’s tracking of company recruiting and deal announcements.
The 10 moves span more than 2,100 advisors and nearly $165 billion in client assets. LPL’s competitors attracted large teams and enterprises as well: At least 28 teams or enterprises with $1 billion or more in client assets changed or dropped an independent BD in 2021, compared to 13 in 2020. With more outside investors, prospective buyers and potential sellers than ever, wealth management M&A deals are always a “recruiting exercise,” with the parties engaging in “a mutual getting-to-know process,” said Rudy Adolf, CEO of Focus Financial Partners.
“They need to convince us that these are truly quality businesses,” Adolf said. The firm never invests unless both Focus and the practice are “convinced that we can add value to them,” he said. “This is the foundation of the partnership.”
Focus and other RIA consolidators and platforms usually count themselves as in a separate channel from independent brokerages, but firms entering their folds or using their services may also elect to use a BD and take on a similar structure as most advisors with LPL or Cetera. On the other side, firms such as Wealth Enhancement Group and Carson Group offer comparable setups as the RIA consolidators with the option of using LPL or Cetera’s BD. Plus, when one BD buys another BD or attracts a team that has its own BD, the incoming firm’s brokerage arm will either shut down or go to a more limited use.
With the traditional wealth management divide of brokerages and RIAs growing more blurry every year under the blizzard of M&A deals, many firms are embracing their transitional services as critical tools for wooing advisors and their practices. Independent wealth managers are making the case that they’ll provide the easiest, least-disruptive landing spots.
For example, earlier this month, Commonwealth Financial Network launched its Virtual Transition Support services, according to Nancy DiBattista, the firm’s senior vice president for transition and field development operations. At the beginning of the year, the firm rolled out a specialty suite of services specifically for breakaway brokers, following LPL, Raymond James, Kestra Financial and other rivals in offering ex-wirehouse and employee teams more structured transitions to independence with greater assistance from the firms’ …….