White Papers

Q&A: Learning From The Industry's Growing Group Of "Super-Ensemble" Advisory Firms

Eliane Chavagnon Editor - Family Wealth Report March 23, 2015

Q&A: Learning From The Industry's Growing Group Of

A group of around 250 "super-ensemble" firms, those with over $1 billion in AuM, are setting new standards for the advisory industry, according to a new report. This publication looks at what have been described by Pershing as leading growth strategies and how smaller firms can mirror the success of their larger peers.

A recent report by Pershing Advisor Solutions claimed that a group of around 250 “super-ensemble firms”—those with over $1 billion in assets under management—are fast setting new standards for the advisory industry.

Pershing said "super-ensembles" scale primarily through strategic and organic means, although they are also interested in growing through acquisitions and mergers. Indeed, over a third are “actively searching for acquisitions” and 6.3 per cent are interested in a merger with a similarly-sized firm. Other steps to success, the firm said, involve strategic partnerships and aggressive marketing, as well as: recruiting individuals with experience working in larger organizations; focusing on culture; and dedicating resources to management (even if this is unaffordable full-time).

Family Wealth Report asked Gabe Garcia, a director at Pershing Advisor Solutions, to expand on what some of the main points highlighted in the report - entitled Super-Ensembles: The Firms Who Are Shaping the Future of the Industry - suggest about the industry's changing landscape from both a client and business perspective.

What do the insights gleaned from the super-ensembles report suggest about how rapidly the structure of the US wealth management space is evolving? 

We are clearly in in the transition from first generation to second generation in the independent advisor space. As the industry matures and transitions, the pace of change will continue to accelerate. The combination of new leaders with new ideas, the changing demographics of wealth and financial needs – combined with new technology to engage and deliver services – is exciting.

How are end-clients responding? Or to what extent are they aware of change taking place?

We are at the tip of the spear in 2015. Clients are responding with their dollars. They know how they want to be served and the experience they desire. However, the public at large is unaware that the RIA model exists.

The loyalty displayed by high retention rates and organic growth of clients and new assets demonstrates that, when clients find out about this model, they tend to choose it.

The reality is that they can get access to everything through an RIA that is available through a large corporate brand. That has leveled the playing field when it comes to choice. Unfortunately the marketing spends are disproportionately tilted to the large brands. As far as the evolution of the business and the business changes, those are things not readily apparent to investors at large.

If the future of the industry is indeed being shaped by around 250 (perhaps more) advisory firms, which kinds of players do you anticipate will be the biggest winners and losers?

The biggest winners are clients. Firms may benefit from bigger open-architecture platforms, access to the best technologies, professionally managed firms, as well as quality and qualified professionals to serve the complex needs. I don’t believe there are losers, only choices that advisors and advisory firms need to make.

Whether firms choose to aspire to be $10 billion in AuM or remain a $500 million firms with 10 FTE, the lessons and best practices will benefit all.

Register for FamilyWealthReport today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes