Wealth Strategies

Perspectives On The US Advisor "Breakaway" Trend - Part 2: Case Study

Eliane Chavagnon Editor - Family Wealth Report August 22, 2014

Perspectives On The US Advisor

Family Wealth Report speaks to Erik Strid, principal of Concentus Wealth Advisors, which partnered with Dynasty in February of this year, joining from Wells Fargo Advisors.

In the second part of a feature (see part one here) looking at firms targeting the independent channel and the so-called "breakaway" trend, Family Wealth Report speaks to Erik Strid, principal of Concentus Wealth Advisors.

Concentus partnered with Dynasty in February of this year, joining from Wells Fargo Advisors. The firm's primary service is wealth and financial planning for individual families, with an emphasis on estate planning, family governance and training for next generation wealth inheritance.

Working with around 100 families concentrated in the US Mid-Atlantic region, Concentus manages around $400 million in assets directly, with about $2 billion in total client assets that it oversees and advises on.

1) Quite simply, what prompted your move to independence?

Basically, I have wanted to become independent since I joined my father’s wealth management team at Merrill Lynch back in 1993. My primary reason for this has been that I have always believed that the most sophisticated and wealthy families most appreciate the objectivity and conflict-free advice of an independent advisor. My belief was always that I could serve clients better this way, and thus attract more desirable clients to my practice.

I also have always been an entrepreneur at heart, and for many years struggled with the bureaucracy, red tape and restrictions of a large institution. I get a huge emotional lift out of knowing that I am building my own firm to benefit myself, my family, and my partners and associates.

2) Was it a big decision to make? What were the main factors you had to consider?

This was indeed a big decision, and as I suggested above it took almost 20 years to finally take the plunge. Among other things, I always knew that starting our own firm would require capital to get started, and part of this is the reality that big firms do a fairly good job of tying advisors in to the firm via deferred compensation and forgivable loan schemes. 

So there were some personal financial planning considerations. It is also true that the initial firm setup and development of our infrastructure was somewhat intimidating, as well as the need to manage business elements such as benefit plans, payroll, tax planning, etc. which I had never done before. In other words, it took some time to feel confident enough that I had become “seasoned” enough as a business person to juggle all of these elements. Finally, we felt very confident that our clients would follow us to our new firm, but the truth is that you never know until you try. Any advisor leaving a firm worries about his clients coming with him.

3) Were you worried that by no longer being affiliated with a “big brand” you may lose clients?

No I was not. In my view, I always felt that the most discriminating and sophisticated clients are attracted to independent advisors who can help them pick and choose among the “big brands” in an objective and unbiased way.

In other words, we still help our clients to take advantage of the products and services and capabilities of the “big brands,” but we do so as their objective advisor and advocate.  I always felt this put me in a much stronger position with my clients than any “brand” driven solely by products or services.

4) How has the move affected how you operate and work with clients?

This move has opened so many exciting avenues for us in working with clients – primarily in our ability to offer clients innovative services which we were always restricted from offering.  We now can truly bring the entire world of financial serviced to our clients, because now we do not care what firm offers them products and services, instead we can sit on the same side of the table with them and help them to objectively shop for the best of breed across the entire financial landscape.

5) What are your views on the “breakaway” trend? Where is the industry heading?

I believe that there are two important trends in place that will be interesting to watch.  On the one hand, I believe that there is a huge draw for advisors like me to go independent: advisors in their forties or early fifties who have had a certain measure of success and experience, so they are confident enough to break away, and are growth-oriented and entrepreneurial – but young enough to have the energy to do it. 

However, the other factor is that there are not many advisors like that. The average age in our business continues to creep up, and many of the most successful advisors are somewhat older, and have built very large balances in their firm stock and deferred compensation plans. 

I think many of these older advisors don’t have the energy to break free, and also feel as though then don’t have enough time to recapture the deferred comp they would leave behind. So, I believe that the pace of breakaways will be restricted by this fact.

However, I also think that as time goes on that many of these older advisors may begin to decide to retire, and find that the firms’ “Sunset” programs are inadequate, and may turn to other independent advisor firms as an alternative – perhaps selling their practices or “tucking in” to other advisory firms.

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