Blueprint Bolt | 3.18.25 — Financial Revival

What We Think You Should Know

Blackstone Explores RIA Investment with $37 Billion Tactical Opportunities Unit - This could bring RIAs new growth capital through structured deals like credit rather than ownership, appealing to owners seeking alternatives to traditional private equity. RIAs may face heightened competition as funded firms scale, pushing smaller RIAs to innovate or partner up. Link

Pershing Custody Unit Developing RIA Referral Program - Pershing, BNY’s $2.7 trillion RIA custody arm, is crafting a referral program to connect wealth manager clients with leads from BNY’s corporate network, launching a pilot in fall 2025 that could rival Schwab and Fidelity’s networks and boost RIA organic growth. RIAs might gain easier access to high-value clients without steep entry costs, though Pershing’s lack of a retail market could cap its competitive edge. Link

Edward Jones Launches New Model Focused on HNW Clients - Edward Jones is rolling out Edward Jones Generations in Q2 2025, targeting clients with $10 million+ in investable assets with specialized services like cash flow analysis, trust and estate planning, and business owner support, expanding broadly by 2026. RIAs may see increased competition for HNW clients as Edward Jones leverages its 20,000+ advisors and $2.2 trillion in assets to capture this lucrative segment, potentially pushing smaller firms to enhance their own offerings. Link

Echelon: 2024 Deal Volume Breaks Records as Assets per Deal Dips - Echelon reported a record 366 RIA M&A deals in 2024, driven by a Q4 peak of 125 transactions, though average assets per deal dropped to $1.4 billion from $1.7 billion, reflecting more smaller deals and fewer $10-20 billion transactions. RIAs may find opportunities in a robust 2025 market fueled by strategic acquirers and minority investors like Constellation Wealth Capital, but the shift toward consolidation and scale could pressure smaller firms to sell or grow to stay competitive. Link

Actual AI Usage Across the Advisory World - Surveys from T3, Orion, and Advisor360° show AI adoption surging among advisors—36% use ChatGPT per T3, 68% use some AI per Orion, and 76% at large firms use generative AI per Advisor360°—with 43% planning increased AI tool investments in 2025, signaling a shift toward efficiency and predictive analytics. RIAs could gain a competitive edge with tools like Jump, Zeplyn, and Zocks for client insights and automation, though keeping pace with this trend is key as only 8% now see AI as a threat. Link

Scaling Advisors, Overrated?

ARTICLE RECAP

A freshly launched Kitces survey at this week's Future Proof Citywide wealth management conference finds that advisory teams with one advisor and two support staff hit a revenue sweet spot, outperforming larger ensembles. Michael Kitces argues scaling up often backfires due to inefficiencies.

Here’s the breakdown:

• Peak Performance: The "one+two" structure delivers top revenue per advisor, while teams of three or more see gains erode from management overhead.

• Solo vs. Supported: Solo advisors generate a fraction of supported teams’ revenue, but adding staff past two dilutes productivity with coordination costs.

• Revenue Floor: At least $3,000 per client is needed to hire support, with team design outstripping tech as the productivity driver.

• Hidden Costs: Bigger teams lose efficiency to time spent managing staff and sharing clients, a trade-off Kitces says firms must recognize.

The research underscores that small, intentional teams beat bloated scaling efforts. Link to Slides

MY TAKE

I find these insights intriguing, highlighting a lean team structure that prioritizes revenue efficiency for mainstream wealth clients. The idea is that fewer people mean less chaos, with a single advisor supported by minimal staff outperforming sprawling ensembles bogged down by logistics. This resonates for smaller practices, but I see it as just one piece of the puzzle, not the full picture for where the industry is heading.

Where the focus lands on one advisor calling the shots, I’d argue the real edge comes from surrounding that leader with specialists, think tax experts or investment strategists, to deepen client service. This setup demands more coordination, sure, but it pays off in expertise and a standout experience, something a lone advisor juggling everything can’t match. Plus, stacking a team this way builds clear ladders for younger talent, sidestepping the succession trap of a top-heavy model that leaves little room for growth.

To me, the push for simplicity misses the mark for firms aiming to scale or compete long-term. A tight crew might keep costs low and profits high for a lifestyle practice, which has its appeal. But for broader ambitions, investing in a diverse, skilled team trumps raw efficiency, weaving quality and career development into the fabric of the firm, a balance I think gets undervalued in this snapshot of productivity. That said, I do agree his findings make sense for advisors serving the mass market, where a smaller breadth of service is the only way to keep it profitable, or for advisors looking to build lifestyle practices where enterprise value is less of a concern.

G2 Succession Strategies Unveiled

DISCUSSION RECAP

At Future Proof’s Citywide conference in Miami Beach, Constellation Wealth Capital’s Lisa Crafford and Summit Financial’s Ed Friedman tackled how second-generation (G2) leaders can secure a successful succession. They emphasized proactive steps over assumptions for G2s eyeing ownership.

Here’s what they outlined:

• Open Dialogue: G2s must confirm with founders that they’re seen as successors, as assumptions can lead to surprises like external hires.

• Self-Investment: Aspiring leaders should boost skills through education and training to prove capability and stay competitive.

• Equity Options: Offering non-advisors equity, like profits interest shares, aligns staff with firm success without disrupting control.

• Positioning Matters: Years of groundwork are key to being recognized internally as the future leader, reducing key man risk.

Their insights stress that G2s need deliberate preparation to inherit and grow a firm effectively.

MY TAKE

I see this article as a wake-up call for next-generation (G2) advisors, tackling a classic tale where firm owners promise succession only to sell out from under their presumed heirs. It’s crushing when that happens, especially if the G2 hasn’t built strong client ties to secure their role. Clients need to see you as the go-to person, not just a backup, so if the firm sells, you can either join the buyer or spin off with loyal clients. Without that, or if a team-based approach muddies the waters, you’re at risk. The piece urges younger advisors to ditch assumptions and have frank, pragmatic talks with owners, backed by proven results, to lock in a formal plan, ideally with legal documentation or equity terms.

Equity stands out as a game-changer here, and I’m a big proponent after seeing its pull at my prior firm. G2 advisors crave ownership, not just for future payouts but for pride and alignment with rising valuations. Firms offering equity, like through profit interest plans as Friedman suggests, gain a talent edge over those dangling high payouts without the cash flow to sustain a robust platform. I love the nod to non-advisors too; giving equity to operations or tech leaders makes the business stickier, signaling stability to investors and clients alike. Smaller RIAs often miss this until a key departure exposes the gap, but enterprise-level firms get it, building foundations beyond just client-facing stars.

The stakes are high with owners in their 60s eyeing exits, especially now when valuations tempt sales over internal transitions. If nothing’s mapped out, G2s should worry, as owners will prioritize their own gain, not bad intent, just human nature. Build a rock-solid client base that sticks with you no matter what, or push for documented equity stakes before a sale to cash in on the upside. Without that, acquisitions by larger RIAs might not offer ownership, sparking breakaways reminiscent of the industry’s wirehouse roots. This article is a solid nudge for younger advisors to act strategically, securing their future in a shifting landscape.

Attracting Top Teams Explored

PODCAST RECAP

In the latest Diamond Podcast for Financial Advisors, Jamie Campbell of Diamond Consultants’ Executive Search Group explores how a strong Employer Value Proposition (EVP) is critical for attracting and retaining top talent in wealth management. Lewis Diamond and Campbell stress its role in firm success amid rising competition.

Here’s what they highlighted:

• Holistic Approach: An effective EVP balances brand, compensation, benefits, work-life balance, recognition, career growth, culture, and job security—not excelling in just one area.

• Talent Magnet: Firms with clear EVPs see 30% lower turnover and 50% better hiring rates, as 70% of job seekers vet reputations first.

• Beyond Pay: Flexibility, equity sharing, and growth paths outweigh salary alone, aligning staff with firm goals and boosting engagement.

• Culture Counts: A transparent, supportive environment prevents talent loss, weaving employee and client value propositions into a growth engine.

Their discussion underscores that a well-defined EVP drives both people and profits.

MY TAKE

I enjoyed this podcast for its holistic take on crafting an EVP for RIAs. It wasn’t groundbreaking, but it effectively refreshed my perspective on what makes a compelling offer to attract and retain top talent. In today’s competitive landscape, finding the best, most experienced people is tougher than ever, even if overall talent acquisition isn’t necessarily harder given economic shifts. As a people business, your team is your brand, and without strong players, your firm falters. The podcast reinforced the need to map out an EVP that goes beyond pay and benefits, weaving in culture, transparency, and a clear commitment to the team you want to build.

A key standout for me is the importance of career paths and growth opportunities if you want the best talent. Firms must show how they’ll invest in employees’ careers, not just view them as doing a job for the company. This means offering tangible development, like training or clear advancement tracks, to signal long-term value. Firms need to stand out with personality and stories, not just generic promises, and be upfront about expectations, whether it’s long hours or a laid-back vibe, to avoid mismatched hires. I also appreciated the nod to treating advisors and platform staff as equals, since undervaluing the latter risks disruption, especially when key departures hurt advisor experience.

A great EVP evolves with input from your team, demands honesty when things go wrong, and pays off in loyalty and growth. It’s not enough to slap together benefits and compensation; it’s about showing employees they’re part of something bigger. More firms are offering equity than ever, and if you’re not, it’s worth a look to stay competitive. This thought-provoking listen is perfect for prompting firms to build or refine their EVP with intention, ensuring they’re not just keeping up, but truly investing in the people who drive their success.

Ninety – Streamlined Business Ops & Alignment for RIAs

Ninety.io is a cloud-based platform (starting at $16/user/month) built to simplify team management and goal tracking. It integrates with the Entrepreneurial Operating System (EOS), which we discussed in last week’s newsletter, and pulls meetings, scorecards, and responsibilities into one place. This makes it a strong fit for RIAs looking to align teams and sharpen focus.

I used it at my prior firm, an $8 billion AUM shop, and it kept us zeroed in on issues that needed attention, whether we resolved them, and who had next steps. It also worked well for laying out our quarterly rocks in a public-facing way, though the software can’t do it all. Users need to invest time to vet the plan properly. That said, it delivers as promised. I think it’s a real asset for firms starting to have multiple cooks in the kitchen, helping them work on the business. It’s only useful if everyone fully embraces it and goes all in. If not, I can see why some say it doesn’t work. But does it fail? Only if you don’t commit.

Why consider it?

• Focused, efficient team meetings

• Real-time scorecards for key metrics

• Clear roles and task tracking

• Affordable EOS-aligned solution

What Might Be Worth Your Time

Upcoming Webinars

• Understanding RIA Valuations: A Guide for Today’s Market

  • Date: Thursday, March 27, 2025, 12:00 PM - 1:00 PM CDT

  • Topic: Breaks down RIA valuation methodologies, key drivers, market trends, and strategies for succession planning and maximizing firm value. Register Here

• State of the U.S. Asset & Wealth Management Industries

  • Date: Wednesday, March 19, 2025, 11:00 AM ET

  • Topic: Explores major trends in asset and wealth management, including wealth transfer, small retirement plans, and shifting product preferences. Register Here

• DeVoe & Company Webinar: M&A Trends and Strategies for 2025

  • Date: Thursday, March 27, 2025, 11:00 AM PT / 2:00 PM ET

  • Topic: Covers 2024 M&A trends, competitive shifts, and strategies to position RIAs for growth, succession, or transactions. Register Here

Past Webinars

• U.S. Registered Investment Advisors: Scale, Succession, and Growth

  • Topic: Highlights RIA market evolution, including independent channel growth, asset centralization, acquisition opportunities, and asset manager focus on billion-dollar RIAs. Access Recording