John Furey On How Multi-Billion-Dollar RIAs and Private Equity Are Reshaping the RIA Landscape
Aug 22, 2023
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John Furey, Founder and Managing Partner of Advisor Growth Strategies, discusses how large RIA firms and private equity investors are reshaping the financial advisory landscape. Topics include the growth and challenges of independent advisors, the Alliance for RIAs, private equity-backed firms, breakaway brokers, small lifestyle advisory firms, asset concentration, and the importance of strategic planning in the RIA industry.
The RIA industry is being reshaped by the emergence of large firms and the influence of private equity investors, leading to a landscape with a few big firms and many small ones.
Growth-focused sales professionals have had a significant impact on the RIA industry, influencing its dynamics and highlighting the challenges faced by independent advisors in the early stages.
Private equity partnerships offer benefits such as access to capital and professional management, but successful partnerships require alignment of goals and fit.
Deep dives
The Evolving Landscape of the Advisory Business
The podcast episode discusses the significant changes that have occurred in the advisory business over the past decade. It highlights the shift towards larger and smaller firms, as well as the difference between firms that are growing organically and those that are growing at the rate of market returns. The episode emphasizes the importance of understanding these changes and their implications for the future of the industry.
The Emergence of Informed Sales Professionals in the RIA Space
The episode explores the emergence of more informed sales professionals in the RIA space and the impact it has had on the industry. It discusses how these professionals, who are focused on growth and sales, have influenced the dynamics of the industry. It also highlights the challenges faced by independent advisors in the early stages, such as the lack of infrastructure and support, and how the ecosystem for independent advisors has evolved over time.
The Role of Private Equity in the RIA Industry
The episode delves into the role of private equity in the RIA industry and its implications for firms and advisors. It discusses the initial perception of private equity as a potentially negative force, focused solely on financial returns, and explores how this perception has evolved over time. The episode also highlights the benefits of private equity partnerships, such as access to capital, professional management, and increased growth opportunities, while acknowledging that the fit and alignment of goals are crucial factors for successful partnerships.
Challenges and Considerations in M&A Deals and Integrations
The episode addresses the challenges and considerations involved in mergers and acquisitions (M&A) deals and integrations within the RIA industry. It emphasizes the importance of strategic planning, integration capabilities, and understanding the outcomes desired by all parties involved in a transaction. The episode also discusses the potential disconnect between valuations in the private market and public markets, as well as the long-term implications of leverage and debt in PE-backed firms.
The Barbell Approach: Large and Small RIA Firms
The episode explores the coexistence of large national RIA firms and small advisory firms, highlighting the benefits and considerations of both ends of the spectrum. It emphasizes the importance of specialization and deepening relationships when operating as a smaller firm, while also highlighting the synthetic scaling capabilities that can be achieved by leveraging technology and industry resources. The episode discusses the potential for concentration of assets and teams within the industry, as well as the ongoing demand for objective fiduciary advice and niche strategies.
Guest: John Furey, Founder and Managing Partner of Advisor Growth Strategies. John also created the Alliance for Registered Investment Advisors, a think tank including seven of the most successful firms that are dedicated to improving the RIA industry through a culture of continuous learning and sharing.
In a Nutshell: The large RIA firms and the private equity investors that fund them are creating a new financial advisory landscape: a handful of really big firms and thousands of really small firms. Some of these firms are growing organically, many more are only growing at the rate of market returns. Carving out a place for your firm is going to require a new level of clarity around both strategic planning and how you communicate what makes you unique to your team, clients, and prospects.
On today's show, John Furey and I discuss how large firms are impacting the evolution of financial advisory and how individual advisors and RIA CEOs should prepare themselves for the future.
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