As more retirement plan advisers sell their practices, others, especially younger RPAs just building their businesses, may want to remain independent. Yet competing against large defined-contribution aggregators is difficult, and RPAs who are part of a practice that is sold may not want to join the mothership.
Chris Giovinazzo, son of RPAG and NFP founder and CEO Vince Giovinazzo, has launched Accelerate Retirement as a home for RPAs who wish to remain independent but lack the resources and brand to compete. As an independent RPA himself, Chris was lucky enough to be able to use RPAG’s tools, NFP’s registered investment adviser and Kestra’s broker-dealer. Other advisers like him were interested.
The RPAG tools are included in the NFP RIA payout, which ranges from 50% to 95% for those with more than $1 million in revenue. NFP doesn’t have a broker-dealer affiliation, so RPAs must join Kestra if they need it. Along with tools, RPAs get tech support, email and real estate on the website. RPAs are responsible for their office space, if needed, as well as staff.
Being part of a larger organization will help RPAs compete against bigger firms. They can partner with NFP on nonqualified plans as well as on larger DC plans that they may not be able to close and service themselves. They also get access to the deeply discounted flexPath collective investment trusts.
Chris Giovinazzo said he will continue to work as an RPA in Orange County, California, rather than working full-time on Accelerate and noted that the firm will be sensitive about signing up too many RPAs in one territory.
Other firms like GRP Financial and SRP, which clear through LPL, and Pensionmark offer similar arrangements and resources. GRPAA offers access to tools and tech resources but is not part of an RIA or broker-dealer.
More RPAs are choosing to sell not just as a liquidity event, but also to get referrals, especially if they are part of a benefits firm like NFP, Hub, OneDigital, MMA, Lockton or Gallagher. But being part of a larger organization as an employee is not appealing to everyone, particularly if they are still growing. Many RPAs, young and older, who didn't have equity in an RPA firm that was sold may want to branch out on their own. Even those who sell may want to start again when their payout is over, making the affiliate model appealing.
There are an estimated 25,000 RPAs, who get half their revenue from DC plans, as well as 70,000 advisers with 15% to 49% of their revenue from DC plans. and another 100,000 with less than 15% but at least one plan, according to Cerulli.
With state, city and possibly federal mandates for businesses to offer a retirement plan, the micro market, which isn't attractive to more established RPAs, is expected to explode. That will offer younger, less experienced advisers an opportunity to grow their DC practice. There will be more, not fewer, RPAs in the future.
Along with brand and tools, RPAs that are part of a group like Accelerate can partner to form a pooled employer plan or the new group of plans that are coming in 2022. They can also get better concessions with providers. When it does come time to sell, advisers can band together and get higher multiples.
And there’s always the idea sharing and being part of a like-minded community whose members do not compete against each other directly or very often.
One other important factor is Accelerate’s pedigree. RPAG developed some of the best tools in the industry over almost 30 years, including practice management resources that go beyond record-keeper requests for proposals and investment scorecards.
NFP's RIA and Kestra are sensitive to the needs of RPAs, which are different from those of traditional wealth managers. They provide RPAs with influence, especially with the broker-dealer, where they have a significant presence.
It's always good for RPAs to have options. Though Accelerate Retirement is just starting, it has the backing and credibility of one of the top three DC aggregators and RIAs. And I guess it doesn't hurt that Chris is the son of one of the DC RPA leaders and founder of one of the first DC aggregators.
Do you think the affiliate RPA model will pick up? Please leave your comments.
Fred Barstein is founder and CEO of The Retirement Advisor University and The Plan Sponsor University. He is also a contributing editor for InvestmentNews’ RPA Convergence newsletter.
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