The registered investment advisor market is the fastest-growing channel in wealth management, but its assets and influence are increasingly concentrating among a set of mega RIAs with nationwide footprints.
Many mega RIAs’ growth comes from frequent acquisitions of practices, from other business models or smaller independent RIAs. These firms are most often described as RIA aggregators.
Asset managers are looking to this segment of the market to provide much-needed organic growth. For some, it is the first time they are placing significant resources into covering the channel. But without understanding how these massive RIAs work, and the differences in structure and operations, it can be difficult to allocate proper resources and prioritize partnerships.
Our research has sought to break down the RIA aggregator market along the lines of centralized management and autonomy over investment decisions. Here we group firms into pure aggregators, integrators and hybrid models.
Pure Aggregators: These RIA firms acquire stakes in or the entirety of practices and provide them with an array of back-office operations, technology, business development and investment resources. Acquired entities remain largely independent from a branding, regulatory oversight and reporting, and investment decision-making standpoint.
Integrators: RIA firms that acquire practices in their entirety and transform them into essentially branches or teams within the acquiring entity. They relinquish their official branding, report trades and regulatory information through the parent RIA, and rely on centralized investment teams for research, due diligence and portfolio construction support.
Hybrids: RIA firms that have elements of both pure aggregators and integrators, in varying models. Some hybrid RIAs offer two options for acquired RIAs: join a network of affiliated but separate RIAs, or integrate into the parent firm. Other hybrid RIA aggregators allow individual practices to retain their branding or co-brand, as well as some investment selection and account management autonomy, while still reporting through the parent RIA’s form ADV and CRD identifier.
An effective sales approach to RIA aggregators starts with evaluating them individually—do their advisors match the profile of advisors who are most likely to work with us? How much autonomy and/or centralized research and due diligence support do those advisors receive? How are products evaluated and selected for consideration? What sort of expectations or partnership requirements do these firms’ centralized research teams impose?
In some cases, the asset manager may come to find their top-priority RIA aggregators are those drawing advisors that did business with the firm at their previous RIA or broker-dealer. They may see more opportunities at an integrator whose central investment committee shares a similar investment philosophy and product preferences to their own firm. Or they may see opportunity to influence individual practices through a deep understanding of their business model within a pure aggregator.
Once a firm has coalesced around priority aggregators, leadership can build an engagement and sales development strategy attuned to each firm’s business model.
National accounts coverage—and budget—may be warranted for high-value integrators with strong central control over product availability and recommendations. Dedicated RIA specialists may move the needle for large practices within aggregators that are more loosely connected to the home office, or to support national accounts engagements.
Some firms creatively position RIA aggregator wholesaler coverage within the national accounts organization, or combine it with wirehouse sales teams because of the similarities (and sometimes existing relationships) with the advisors recruited to the aggregator.
Product positioning must also align with the varying approaches of RIA aggregator business models. Some RIA aggregators lean heavily into ETFs as a vehicle of choice, and have varying degrees of receptivity to semi-liquid alternative offerings. Some partner with third parties for advisor access to UMA platforms and SMA marketplaces. Some central investment teams build their own models or collaborate with asset managers on customized portfolios for their advisors.
The entire distribution organization—from wholesalers to marketers to management—must approach the RIA aggregator market armed with a deep understanding of each firm’s unique business model, the inter-connectivity between practices and the needs and preferences of centralized investment teams. SS&C can support this effort with data, analytics, research insights and deep expertise with this large and fast-growing segment of intermediaries. Contact us to learn more.
