Beacon Pointe Wealth Advisors, a Beacon Pointe Advisors firm, has added its fourth advisor partner in the shape of Independent Financial Advisors - a Riverside, CA, registered investment advisor with $100 million in assets under management.

Independent Financial Advisors, which is also affiliated with a CPA firm, is comprised of James Valmonte and Teri Parker, who join as managing directors and equity partners.

Beacon Pointe Advisors is an employee-owned registered investment advisor that provides fee-only services. Its BPWA subsidiary, meanwhile, is an “enterprise building partnership” between BPA, advisors and clients. It offers joining firms access to its brand, investment resources and reporting capabilities, as well as marketing and public relations support and a built-in succession plan.

Family Wealth Report spoke to Matt Cooper, president of Beacon Pointe, to discuss the latest deal and how the move reflects wider industry trends.

First, Cooper highlighted that running a business is “clearly different than working as an advisor in front of clients.”

He said: “What we do is try to take a lot of the complexity and the non money-making activities off of the advisor’s plate and let them focus on what’s most important: serving their clients, the relationship with their clients and finding more clients.”

Cooper explained that being a larger firm means there is scale to drive better pricing and products from vendors to then pass along to partners. In terms of marketing, for example, the firm recently took someone on who has “completely revamped” its branding, online and social media strategy.

The point here is that smaller firms “can’t afford to hire a dedicated person like that as a resource,” he said, adding: “Lay on top of that our research process and reporting, and then taking compliance off their chest because compliance is becoming more complex and expensive. So there is quite a lot of value there by partnering.”

The “two Es” of the deal

According to Cooper, the economic aspect of the deal is “normally an easy conversation,” whereas the complicated part is more emotional.

It can be difficult for a smaller RIA to “give up their name on the door,” or relinquish control on a day-to-day basis as - although they may not be big - “at least they’re the king,” Cooped said.

So the emotional concerns are just as important, if not more so, than the economic ones. It's about giving smaller RIAs that feeling of control and autonomy so they still feel like they're running their own business. 

That being said, he highlighted: “If you looked back ten years from today, the emotional part of the deal was a much bigger hurdle than it will be looking forward ten years.”

And the reason for this is demographics, with one issue being that advisors are edging closer to retirement. Given this, they need to start establishing a succession plan for themselves, their family and clients, he said. The other issue is that the market is becoming more mature and sophisticated, and smaller advisors are “starting to see real margin compression.”

“And it’s not margin compression in that their clients are necessarily saying ‘give me a lower price,’ it’s margin compression in that there is better, bigger, larger-scale competitors in the marketplace that are able to deliver more services and value to clients for the same fee dollar that the client is paying. So I think that’s causing many to re-think the opportunity of partnering,” Cooper told this publication.

Advantages of a CPA affiliate

BPWA said Independent Financial Advisors is poised to grow “quickly” from $100 million to $250 million, on a trajectory towards $1 billion.

In terms of the main drivers behind this rapid growth, Cooper said the CPA firm which has an ownership stake in the deal - Roorda, Piquet & Bessee - has “significant clients” that until now were “not as confident in making the referral” but now have the value proposition that they need.

According to Cooper, the addition of an RIA with a built-in CPA affiliate partnership is a “mutually beneficial growth engine.”

“The CPA firm is really sitting on an unbelievable mountain of business and referrals,” he said. 

Beacon Pointe growth

In November 2012, BPWA took on California-based Wealth Management Network in a move representing the third deal it had struck in the previous 18 months. Advisors had previously joined in Scottsdale, AZ, and San Jose, CA.

BPWA said it expects “more deals to come” and is looking to expand into the Northwest, Denver, CO, Dallas, TX, Boston, MA, and Connecticut markets, with the aim of establishing between 35 and 40 offices over the next ten years.

The firm is on the hunt for advisors in the $100 million - $300 million range to join as regional partners and is currently in discussions with “multiple firms,” it said.