Carson, Cetera and Fidelity execs urge small RIAs to scale up

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LAS VEGAS, Nev.— Massive consolidation in the RIA sector and a career path forward for smaller-scale investment advisors aren’t necessary mutually exclusive concepts, a panel of industry experts told their peers at the Carson Group’s Excell Conference on Friday.

‘One of the reasons advisors don’t want to partner [with a larger firm] is they don’t want to lose control,’ said Carson Group CEO Ron Carson (pictured), whose firm backs 74 RIAs around the country through its Carson Group Partners division. ‘My argument is that control is an illusion, because you trade one set of controls for another set of controls, right?’

Sharing the stage with Cetera Financial Group CEO Robert Moore, Fidelity Clearing & Custody Solutions EVP Matt Chisholm, Fiduciary Network CEO Mark Hurley and Riskalyze CEO Aaron Klein, Carson and his co-panelists all concurred that concentration of wealth in the RIA industry is an eventuality.

‘That’s where all the flows are going,’ he added.

Evidence of consolidation in the RIA industry is not in short supply. It can be seen in roll-ups adding new firms on a weekly basis and the planned merger between traditional RIA Edelman Financial Services and 401(K) managed account advisor Financial Engines, which will create a firm with almost $191 billion in assets under management.

So where does this leave the individual advisor who owns their own practice?

‘No one’s going out of business. Everyone’s going to have a good job,’ said Hurley, whose firm has stakes in 17 different wealth advisors.

‘You have to figure out what path you want to go. Are you going to try to grow something and scale it yourself? If you can’t do that, you have to find a way to capitalize and partner with [a larger firm].’

Trying go it alone as a purely independent shop might make life difficult for some advisors, explained Hurley, as they would pass up the opportunity to access larger firms’ back-end resources and scale.

He likened an independent advisor to a restaurant owner trying to grow their own food. Eventually, you have to make a visit to the grocery store.

‘What they’re going to have to do is partner with other firms that have the scale,’ he said. ‘To be completely independent, it’s like I run a restaurant and I literally grow my own food. Well, you actually have to go to the grocery store and buy food.’

That dynamic may ultimately create its own set of challenges for opportunistic RIAs who have already achieved scale. They’ll need to select for partner firms whose organizational and management styles and cultures fit well.

‘You can’t be all things to all partners,’ Chisholm said.

City Wire

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