How small but mighty RIAs can take the fight to larger firms

Representatives of the “small” RIA community took aim at private equity fueled conglomerates and networks in a defiant discussion at Future Proof Festival today.

Around 4,200 professionals descended on Huntington Beach in Southern California for the open-air wealth management event conceived by Future Proof CEO Matt Middleton and helped turn into reality by co-creators Ritholtz Management. And while the event represents a celebration of scale, one panel showed that smaller players within the RIA market - typically those under $500 million in AUM - can still pack a punch.

Large RIAs have continued to hoover up advisor practices, meaning the independent ecosystem is changing. Those who fled the restrictions of the wirehouses, for example, face either being swallowed up by large aggregators or having to compete against them.

Kevin Thompson, CEO and president of 9I Capital Group and moderator of the panel, told the audience that more consolidation risks a reversion to the 1980s, where there was four or five dominant broker-dealers.

“Are we just transitioning to that? Are we [heading to the point] where we just have four or five large operators that are basically gobbling everybody up? We have to be cognizant of what's going on in our own space, because it's very important,” he said. “We don't want to be that group, in my opinion.”

Chelsea Ransom-Cooper, chief financial planning officer at Zenith Wealth Partners, believes the M&A money being offered is unsustainable, although she understands why advisors are tempted to try something different and get more money in their pocket. Despite this, she said smaller RIAs have an advantage – the care they put into client relationships.

“When I see a lot of these private equity backed firms growing these big conglomerates or aggregation tools, they’re really focusing on the technology, but they're not actually focusing on the clients,” she said.

“They’re trying to acquire all of these advisors, but we really believe that if we can empower our advisors to have their own voice and lean into their ‘zone of genius’, we can be competitive because we have an incomparable culture at Zenith that allows them to serve people that inspired them to be in this position in the first place.”

Ryan Hughes, founder of Bull Oak, said smaller RIAs can adapt to change quicker but that ultimately, success hinges on good advisors giving clients genuine value. To that end, he urged advisors to remember it’s a people business and that while big firms may have an army of CFPs and qualified professionals, the most important thing is having clients who trust you.

“If you are just an asset allocator and not a real financial advisor, you're going to have a really hard time growing,” he said. “We've really embraced that. We're very planning heavy. We outsource taxes as part of our fee, and we're just trying to provide as much value as we can to our clients.”

“If you are a good advisor and you're providing good value, you are going to compete against the big firms out there,” he added.

Tech firms out in force

As in previous years, technology was a major discussion point, with booths, demos, and panels featuring the latest tools, detailing how advisors can use them and discussion around how AI is affecting the industry.

Wealthtech firms also used the event to make major announcements, with wealth.com revealing a major capital infusion and Envestnet unveiling new features for RIAs, including an enhanced fixed-income trading tool, unified managed accounts integration, and a new client portal.

Molly Weiss, group president of Wealth Management Platform for Envestnet said the offerings were the company’s response to its own 2024 Advisor Perspectives Survey, which revealed 30% believe they are not spending enough time with clients. The survey also said that nearly two-thirds of advisors assemble their tech stack with several point solutions, yet almost half would prefer to use an all-in-one platform.

Weiss said that while there used to be a belief that a multiple-point solution, which advisors implement themselves, was the way to go, people have since realized that's a lot harder than it sounds.

In her view, advisors are still struggling with the same pain points, like the time it takes to open an account, and the overhead of billing and how they charge their clients.

“We’re also working to make account opening faster,” she said. “We’ve partnered with all of the custodians, but we've entered into a tighter partnership with Fidelity to try to solve some of that [problem] and make it more real time. People talk about real time, but nobody's really doing it.”