Blueprint Bolt | 3.11.25 — Operational Momo

What We Think You Should Know

LPL Financial Sets a Bold Course with a $4 BILLION Capital Raise - Under new CEO Rich Steinmeier, LPL Financial has filed an S-3 to raise up to $4 billion, a move designed to fund organic growth and strategic acquisitions while aiming to cement its leadership in the advisor marketplace across segments of wealth mgmt. Link

CFP Board Sets Ethical Standards for AI in Financial Planning - The CFP Board has released a checklist of ethical guidelines for wealth managers using off-the-shelf generative AI tools. The new standards aim to ensure that AI is used responsibly to support, not replace, human advisory relationships while protecting client data. News Link + Guide PDF Link

SEC Explores New Guidance on Performance Metrics in Advisor Ads - The SEC plans to release two new FAQs that will clarify when advisors must display both net and gross performance in their ads. This updated guidance is aimed at resolving compliance challenges and ensuring clear, transparent reporting for individual investments and entire portfolios. Link

The T3 Tech Conference Announcements to Know About - Key product launches and collaborations from the 2025 T3 Conference include: Link

• Libretto Launches One-Click Personalized Client Letters: Libretto launches an AI tool for instant client letters.

• TaxStatus Financial Baseline Debuts: TaxStatus introduces a tool for rapid IRS data insights.

• Betterment Advisor Solutions Introduces Solo 401(k)s: Betterment unveils a digital self-employed 401(k) for advisors.

• FP Alpha Unveils NextGen Tax Insights: FP Alpha debuts an AI platform that converts tax returns into strategies.

• Syntax Data and TradePMR Collaborate: Syntax Data partners with TradePMR to boost portfolio index creation

The Great Wealth Transfer, Overhyped?

RESEARCH ARTICLE RECAP

The research article, supported by substantial data, challenges the idea that $124 trillion passing from older to younger generations by 2048 will transform markets. It argues the transfer is less dramatic than speculated, ongoing, highly concentrated among the wealthy, and reduced by Boomer debt and rising healthcare costs.

Here’s what the research highlights:

• Scale: The $124 trillion wealth transfer by 2048, against $163.8 trillion in total wealth today, won’t radically shift markets as hyped.

• Pace: $1.5 to 2 trillion moves yearly, 1% of total wealth, aligning with historical norms.

• Concentration: It’s highly concentrated; top 1% holds 25% of assets, top 20% holds 80%; only 20% of Americans inherit ($266K avg.), with 90% getting near zero.

• Boomer Challenges: Rising debt (e.g., mortgages) and healthcare costs from longer lives shrink legacies.

MY TAKE

I believe this research aligns far more with reality than the grandiose claims touted by consultancies and industry players. The "Great Wealth Transfer" has become a marketing ploy, relentlessly pushed by those selling tech, training, or services to RIAs. That said, there’s a significant opportunity for advisors targeting the top 1%, households with net worths exceeding $10 million, where substantial wealth is indeed transferring to the next generation. The catch? Most RIAs lack the capability or focus to serve this elite clientele effectively, leaving a gap for those who can.

Zooming out, I’d argue advisors should ditch this transfer hype altogether and focus on courting clients earlier in their wealth-building journey. The RIA space is growing more competitive, yet few firms have embraced programs for High Earners Not Rich Yet (HENRYs) to capture this pipeline. With market-tied revenue growth likely to stagnate, proactive outreach to emerging wealth creators is critical, something the industry has been slow to prioritize.

Another angle worth watching is private equity (PE) liquidating Baby Boomer businesses. As Boomer owners sell to PE firms, turning illiquid firms into liquid paydays, RIAs have a focused opportunity, if they can stand out. Success here demands niche expertise (e.g., tax planning, succession strategies) and relationships built pre-sale. Most firms, however, lack the in-house skills to cater to this clientele, making it a competitive niche for those who prepare ahead of time.

Scaling a Team-First Firm Without PE Cash

PODCAST RECAP

The podcast exploring the firm’s unique approach to building a modern, independent wealth management firm. Hefty describes Credent as a "forever firm" focused on full assimilation rather than aggregation, having grown to $3.4 billion in assets through over a dozen deals in two years, a trajectory built on 25 years of groundwork. The conversation covers Credent’s client-centric model, its rejection of advisor-centric norms, and its use of a private credit facility from Crestline Partners to fuel growth without selling equity. Hefty talks about his journey, aiming for $10 billion in assimilated assets by 2029.

• Mission: Rejects advisor-centric models by requiring all 13 acquired firms to adopt Credent’s brand and fee-only fiduciary standard on day one.

• Growth Strategy: Completed over 12 acquisitions in two years, targeting $350-400 mil firms to launch new teams, growing from $900 mil AUM in ‘18.

• Client Experience: Enforces a mandatory 4-6 hour onboarding process, turning away prospects who won’t participate.

• Team Structure: Employs 105-115 staff across eight teams with only 30 lead client advisors, using specialists for portfolio mgmt. & most client planning.

• Funding Choice: Secured a private credit facility from Crestline Partners in 2023, rejecting 17 equity offers to maintain advisor ownership.

MY TAKE

I might be biased since Credent is just up the road from me in Indianapolis, HQ’d in Auburn, IN, a suburb of Fort Wayne. Assimilation vs aggregation—their approach with assimilation isn’t easy to stay disciplined to while others chase closing another deal. I’m sure there are pains we aren’t hearing about, but they seem careful in selecting teams they bring on. This approach takes the long-term view, building it the right way for where the industry is headed. Their structure, with only 30 lead advisors to 115 employees, resonates with me. They’re embracing extreme specialization and a significant platform team, which is less common at these levels.

Tying into our EOS article this week, they stress having everyone in the right seats, especially for a firm mostly made up of specialists. Their culture of people buying into the team model is critical for doing what’s best for the firm, not just individual advisors. Separating the full investment process from advisors is impressive and no tall task. I know legacy advisors love investments—it’s often the hardest to say, hey, we don’t want you focusing on that, just on ensuring clients get a great experience and all their problems are solved. That’s a big hurdle for older firms with tenured advisors. From my early career in full-time investment research, I’ve always believed it’s all in or pretty much all out—a full-time job deserving dedicated time for clients.

The most absolute interesting part was them not taking private equity, unwilling to give up control. Using private capital to grow isn’t something you heard about historically, but with the competitive RIA space, it’ll likely grow as an option for owners wanting full control. The flip side is servicing debt load through any market drawdown affecting cashflow. Hearing firsthand how 17 minority equity offers didn’t ease Credent’s control concerns—due to deal terms giving investors more say than expected, as David noted—was eye-opening.

I’ll keep watching Credent’s model, a solid example for sub-billion RIAs aiming for their spot, though it might not fit advisor-centric firms vs. Credent’s team-centric one.

Rethinking the RIA M&A Process

OP-ED ARTICLE RECAP

In this Op-Ed, Allen Darby critiques RIA auctions, arguing they prioritize price over fit. He cites a buyer’s frustration with a secretive process and PwC data showing 50% of sellers regret their deals. Darby suggests a curated cultural competition instead, using select buyers to improve outcomes beyond cash, based on his firm’s insights.

• Auction Flaw: Cites a buyer’s 13-page bid ignored despite knowing seller.

• Cultural Fit: Proposes inviting only 3-5 aligned buyers to compete.

• Deal Reality: Notes an 8x Ebitda offer can beat a 10x one in value.

• Seller Regret: References PwC’s 50% post-deal dissatisfaction rate.

• Buyer Insight: Uses Alaris’s practive of visits to understand buyers’ cultures.

MY TAKE

2024 was a record year for RIA M&A, with tons of deals lighting up the market. Traditional M&A advisory firms have been killing it, moving upmarket to snag bigger transactions. But strong demand has sparked new competition, from breakaways to firms already serving RIAs, challenging the old guard. I get why intermediaries stick to the auction process. It’s tried and true, usually delivering the highest deal price. The snag comes when 30 to 50-plus buyers chase every seller, sidelining strategic and cultural alignment as nice-to-haves. For most advisors, “best deal” still means economic value, and that’s where the focus stays.

The hitch isn’t that intermediaries don’t care about strategy or culture. It’s a matter of time and capability. Many lack deep insight into buyers or how RIAs operate, which isn’t really their gig. I’ve heard from bankers that more sellers are going solo, skipping the 2 to 8 percent deal fee or prioritizing fit over cash. For sub-$1 billion RIAs, that’s tough without finance pros who know M&A, but it’s not impossible. The market will sort itself out, offering sellers options to pick advisors matching their goals. Sellers need to huddle with their teams, nail down what matters most (price, fit, or both), then vet M&A groups, check references, and align expectations before locking in exclusivity.

New players in the space will have to innovate to stand out, which is how free markets roll and how this issue will shake out for diligent firms. Buyers still face pain with auction-heavy advisors, forcing them to decide whether to play that game and, if so, how to strategize smarter. While Darby’s push for curated fit makes sense, it won’t flip every deal overnight. Sellers and buyers should focus on what they can control: due diligence for the former, game plan for the latter. End of the day, don’t hate the player, hate the game.

Fathom – Streamlined Financial Planning & Analysis for RIAs

Fathom HQ is a budget-friendly FP&A tool (starting at $48/month) that syncs with QuickBooks and more accounting systems to streamline reporting and forecasting. It turns financial data into sharp dashboards and KPIs, making it great for RIAs prepping client or leadership updates.

I used it at my prior firm, and it handled a large portion of what we needed—though we still did much of our forward modeling in Excel. Not built for detailed forecasting, it’s still a solid value with a 14-day free trial. Great if your firm offers fractional CFO services to business owner clients, but pricier tools might suit heavier use. I’d recommend looking into!

Why consider it?

• Clean, visual reports fast

• Three-way forecasts and consolidation

• Tracks key firm KPI metrics and goals

• Low cost, high impact

The Concentration of U.S. Personal Spending

This chart shows that the top 10% of American households now drive half of all US personal spending, a significant rise from previous decades. This trend has been very favorable for the wealth management business, which primarily caters to the high earners in this segment.

That said, I believe economic and regulatory winds may be shifting, with a potential move toward increasing returns to labor rather than capital. While I do not expect this change to happen overnight, it is certainly a trend worth keeping an eye on as it could dramatically affect the topline growth our industry has seen from rising equity markets.