Opportunity To Launch With Capital From Day One For Breakaway Advisors

Breakaway Advisors Have Opportunities To Join RIAs As Meaningful Partners Or Access Capital Immediately To Launch Their Own Firm

Landing spot for breakaway advisors

There’s a growing trend of breakaway advisors joining the RIA world. Several platforms have developed that provide a landing spot for breakaway advisors, which can be good solutions for advisors depending on their book of business, goals and abilities. 

Today the door is wide open for advisors overseeing $500 million in assets under management (AUM) or more to launch their own independent business or become a meaningful partner in a traditional RIA on day one.

Meaningful Partners

In the current environment, large aggregators and acquirers have more deals than ever in the pipeline because the market correction encouraged firms and advisors to explore joining a larger platform or acquirer. In turn, these large firms became more selective in whom they pursue and what type of value they offer.  

This dynamic causes some sellers to receive offers below expectations, but creates an opportunity for strong regional RIA firms to increase their status. The opportunity for a breakaway advisor to join a regional RIA as a meaningful partner is compelling, and the value creation for the advisor and firm is significant and immediate. 

The transition of assets is also more certain because of the established firm, which means many of these firms can access capital quickly. As a result, the breakaway advisor can choose a mixture of equity and cash at what can often be the highest possible valuation of their book.  

Since the breakaway advisor is joining an established firm, their client assets can receive an enterprise valuation. 

Of course, the key is sourcing these firms and structuring a transaction that rewards and protects both groups through a transition, and this is very achievable in the current environment.

Opportunities For Capital At Launch

As strong advisors have proven themselves dependable on the launch of a new firm and the transition of assets, several sources of capital are open to backing them at launch, including both equity and debt structures. To gain access, the advisor must clearly present their strategy, as well as plans and projections for the next three years.  

Plan the next three years

To present realistic financials, advisors must understand the norms around capital providers’ expectations for profitability and growth. In addition, to craft the future firm’s story, advisors must  comprehend how capital providers will evaluate the projected business.  

Technology has become a tailwind in this process, as the technology to manage a firm has evolved significantly over the last several years, making tasks less manual and labor intensive, so that less human capital is needed to manage a firm at launch. For example, we have multiple clients managing over $2 billion in AUM with fewer than 10 total employees, including advisors.  

Technology is a tailwind

Of course, an advisor could elect to use their own capital, but this usually results in a limited infrastructure and a weaker firm at launch. Capital allows the advisor to focus on hiring the right team and adding the right technology for a strong foundation.  

Living The Dream

Some voices in our space seem determined to convince advisors that running a firm while serving clients is a herculean task, but I will tell you from the front lines that is not what I see. The reality of wealth management today is that some advisors do have time to both serve their clients and develop a firm. The quality of the people in our industry and advancing technology have given many top performing advisors strong control of their schedule.  

Is it easy? No, but the strain is overhyped, and you shouldn’t fear it if you have the dream and drive to build your own firm. Many advisors have told me the joy and freedom they feel from launching their own firm reenergizes them. 

Recently a client’s wife said she felt as if she had a new husband after 20 years of marriage, all of which he had spent in a wirehouse. He said, “Once I got away from all the bureaucracy and client conflicts, I really started enjoying my work and life so much more, and I was much happier at home.” Today he and his firm of eight employees manage over $1 billion in AUM.

If you are an advisor with $500 million or more in assets, you have more opportunity than ever to have greater freedom and control of your life and business. If you also have the determination and aspiration to have ownership in part of a firm or your own firm, don’t doubt yourself – you can achieve it. 

John Langston is Founder and Managing Partner of Republic Capital Group.

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