August 2020 - Dan's Monthly Musings

The emergence of the Mega-RIA and the survival of the Wirehouse

We are witnessing a powerful new force in the advice business, what we refer to as the MegaRIA. They are going to be the new kids on the block in gaining market-share in acquisitions of other firms, and garnering new client assets. They will very effectively compete with everyone from Vanguard to the Broker-Dealers, and to other wealth managers including smaller RIA’s, TrustCos, and Family Offices.

What do they look like?

  • $5B - $100B in aum
  • excellent bench of Millennial (and younger) Advisors, Portfolio Specialists, and Back Office personnel
  • understanding of, diligence over, and access to True Alternatives
  • offering deep expertise in things other than “Investments” encompassing: Risk/Insurance; Retirement Planning; Legacy/Charitable Planning; Estate, Trust and Business Planning; Tax Planning; Credit & Lending; Family Office services including Real Estate and Bill Paying truly integrated and highly functioning IT, Compliance, Disaster Recovery, Digital Communications
  • some will have marketing acumen, others are seeking it – ONE OF THE TRULY HARDEST SKILLS IN OUR ECOSYSTEM IS PURE SALES; GETTING PEOPLE TO TRUST YOU WITH, AND GIVE YOU THEIR MONEY
  • provide “no question succession” for advisors, their clients and their clients’ families
  • have the balance sheet, resources, and intellectual capital to weather any storms (COVID 19, anyone?)
  • have purchasing and pricing power
  • function as real businesses, not "practices”


Who will the winners be amongst this group? In our opinion:

  • those that have capable staff dedicated to acquisitions and integrations
  • those who have a reason and a vision other than just “getting bigger”
  • those with funding sources other than their own balance sheet- i.e., Permanent Capital from the right private equity, minority investors, or parent co
  • those who understand and “own” their market niche
  • those with an opinion (it could be “this is our model, do you fit” –or- “show us your model, we will fit it into ours”). Both are radically different but both work

Because of the difficulty in organic growth (see above comment on Sales), buying AUM and clients is and will continue to be a speeding locomotive, for the revenue growth factor as well as the aging out of the Advisor population and other drivers. One of the options, aside from buying firms, that gets a lot of press is recruiting Breakaway Brokers (I hate this term but we all know what it means). Does this portend the death of the Wirehouse? Not by a long shot:

  • RIA’s had a moral high ground over the Wirehouses in that they were Fee-based, not Commission-based. How many high-end Wirehouse Advisors AREN’T Fee-based nowadays?
  • Same with proprietary product. That game changed years ago, and the Wirehouses have made massive investments in Product Diligence and Analysis on “outside” products. And there are still many successful RIA’s who are discretionary advisors selling their own composites and portfolio management expertise; in fact we can’t believe how many there are still around and flourishing. Isn’t that a “proprietary product”?
  • Wirehouses have figured out how to quarantine their best producers with retention and succession programs.
  • If you keep your nose clean and follow the rules, as a Wirehouse Advisor you are backed by teams of Attorneys to protect you from the legal and regulatory jungle. I have friends who strongly disagree with this based on personal experience but things have changed in favor of the (clean) advisor.
  • Life as a successful Wirehouse Advisor doesn’t suck. Sure, you have to deal with “The Corporate Suits” but you don’t have to worry about the myriad of things that you do when you own your own business. NOT EVERYONE IS AN ENTREPRENEUR; IN FACT VERY FEW OF US ARE. And if you are successful at getting and keeping clients, you can make a really good living with a good pension and nowadays you have a swimlane to pass on your client base and monetize it

There will always be a small population of successful Wirehouse Advisors with the ego drive and energy to “own it”, but if you think the Wirehouses are sitting ducks, think again. Oh by the way – the Wirehouses (and throw in the Global Banks and TrustCos, pretty much the same thing) still collectively are the biggest force in the HNW/ UHNW world, market-share wise. Now would some of these teams enjoy life more tucked into a Mega-RIA as opposed to opening their own shop?

Now you’re on to something.



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