Affiliated Advisors, an office of supervisory jurisdiction with independent broker/dealer Osaic, has a new affiliation model for fee-only RIAs.
The OSJ provides its current roster of 50 firms—around 100 advisors overseeing $4.5 billion in assets under advisement—with business consulting, trading, compliance, technology and marketing support. It has traditionally focused on smaller shops, with one or two advisors who value the more “personalized” scale of the service model, including well-regarded transition support and succession programs. It is the fastest-growing OSJ at Osaic, executives say.
Now, they see an opportunity to bring the same consultative service model to independent advisors who do not carry a FINRA license and have no brokerage business at all.
The target market is firms that fall into the so-called “muddy middle” of the industry—RIAs with $100 million to $250 million in AUM, said Rita Robbins, the founder and president of Affiliated Advisors.
These firms increasingly find they are too small to get a high level of service from the larger custodians but cannot easily afford to build out a self-operating firm, she said.
Advisors attracted to running their own RIA get too bogged down in the business, Robbins said, as operation costs increase, new SEC regulations are introduced and existing ones become more burdensome, technology needs escalate, and potential clients look for more personalized, and costly, services and experiences.
“A lot of advisors have been unpleasantly surprised that running their own RIA has not been the panacea they thought it would be,” she said. “All it takes is one SEC audit and you and your employees are locked in a conference room for days.”
The new affiliation model sits atop Osaic’s RIA platform now overseen by Ed Swenson, the co-founder and former chief operating officer with Dynasty Financial Partners who joined Osaic last June. In 2023, Osaic grew recruiting into the RIA channel by 178% versus the prior year, according to the company. The firm’s wealth services business has custodial ties with both Pershing and Fidelity’s National Financial Services.
RIAs joining Affiliated Advisors will operate under Osaic’s corporate Form ADV, retain their own branding and keep 100% ownership in their firm, a feature increasingly rare in the industry, Robbins said. Most aggregator models in the RIA space tilt toward equity swaps, she said, increasing the advisor’s liabilities and exposing themselves to the risks of the larger business models.
There are affiliation fees, but those costs are “de minimis” when compared to running an RIA on their own, she said. In return, advisors get access to Affiliated Advisors’ services and operation platform, including trading, technology, marketing support, compliance, business consulting and succession opportunities.
While independent broker/dealers have accommodated hybrid advisors and their fee-based business for years, most of the largest have moved to build out service models for pure-play RIAs with no brokerage business, the fastest-growing channel in the wealth management space, according to Cerulli Associates research. That group includes Osaic, as well as LPL, Cetera, Commonwealth, Raymond James and Cambridge.
According to the most recent Cerulli Edge report, released earlier this week, nearly one-third of IBD advisors have thought about opening their own RIA over the past year. Those advisors are typically looking for higher profits from the business and a greater chance to build up enterprise value in the operation, the research group said.
Options to support such a move continue to evolve, however. Almost four in 10 of those advisors, or 36%, said they would be open to retaining an affiliation with their current broker/dealer’s RIA. Slightly fewer said they would need more understanding of the various service models available before making a choice.
“Departing an employee B/D is a daunting task for advisors who have spent their careers with this type of affiliation,” said Andrew Blake, associate director of Cerulli in a statement. “Added accountability and the unfamiliar economics leave many new RIAs feeling spread too thin and unable to grow their practice as they had expected.”