State of the RIA Market: Market Sizing & Practice Management Issue

Transcription

1 State of the RIA Market: Market Sizing & Practice Management Issue Karen Lanzetta Director of Market Research January 8, 2018

2 Table of Contents Page Executive Summary 3-4 RIA Market Sizing 5-19 Asset & Advisor Growth Assets per Advisor & Productivity Metrics Number of Client Relationships by Firm AUM Sources of New Client Assets & Flows Asset Shift from Active to Passive Assets Under Custody The Billion Dollar RIA Market Firm Metrics Characteristics & Challenges Intergenerational & Advanced Planning Competitive Landscape BDs With RIA Affiliation Option Page RIA Practices Practice Type Segments Services Offered by Majority of Firms Average Client & Advisor Age Advisory Fees by Client Level Revenue & Discounting by Client Type Non-Traditional Fees Breakaway Advisors, RIA M&A, & RIA Consolidators Factors Driving Breakaways Inorganic Growth Strategies Number of RIA M&A Deals Consolidators Advisory AUM Financial & Strategic Acquirers 2

3 Executive Summary In 2016, retail-focused RIAs at more than 18,225 firms managed $4.1 trillion in assets. These assets have grown at an 11% CAGR. o There are 1,455 RIA practices with >$500m in AUM. They comprise just 8% of all RIA firms but control 73% of total assets, some $3.0 trillion. o In 2016, the average RIA managed $63 million in client assets. o 38% of RIAs have fewer than 100 client relationships. Larger firms can accommodate more clients because of their scale. o Half of RIAs work with clients who have between $500,000 and $5 million in assets. For the largest RIAs, HNW households represent roundly 60% of the firms client base. Billion-dollar RIAs comprise 4% of the firms but 60% of RIA assets for a total of $2.4 trillion in assets. o At the $1 billion mark, RIAs become institutions. The largest RIAs are expanding their regional presence, some with the aim of becoming national brands. The RIA competitive landscape is changing, and the largest RIAs are becoming formidable competitors to broker-dealers. o In response, broker-dealers are increasing their RIA platform offerings in an effort to retain advisors and attract new ones. RIA practices have posted impressive growth rates. They have successfully driven productivity improvements to defend profit margins. More RIAs are unbundling with fewer services now included in the overall fee. This is particularly true for retirement planning services and concierge services. RIA fees have not changed materially over the last 4 years. Most clients are still paying between 100 and 125 bps. One study showed that fees tended to be lower for smaller clients at smaller firms versus smaller clients at larger firms. The gap between actual and expected revenue (based on stated fees and actual client mix) appears to be widening, implying that RIA firms may be expanding the discounting of their fees. o Larger RIA firms tend to do more discounting of fees, and the billion dollar firms offer the biggest discounts. This may be driving revenue yield erosion. 3

4 Executive Summary (continued) 43% of RIAs are 55 years of age or older, and 33% of RIAs (> 21,000) plan to retire within the next 10 years. These RIAs manage 39% of the channel s total assets ($1.6 trillion). o Nearly a quarter of independent RIAs who plan to retire within 10 years are unsure of their succession plan. A survey of 134 advisors identified as potential breakaways revealed their views on industry challenges and satisfaction with firm. Overall satisfaction level with their current firm stood at just 12%. o o o Less than 40% of these advisors were satisfied with their work/life balance, control over their practice, and ability to expand their client base. Half of these advisors cited legal/compliance challenges as representing their biggest concern for leaving their firm. Motivation to break away rose after advisors talked to colleagues who ve done it. 53% of potential breakaways prefer joining an established practice. While 48% of advisors are not interested in acquiring, 38% are open to it and 14% are actively searching. o Breakaway assets in 2017 set a new industry record. It s noteworthy that nearly 40% of wirehouse breakaway advisors went to independent firms. The high-growth, fragmented RIA market is ripe for consolidation. Private equity firms, broker-dealers and established RIAs are investing in the space. o o o A consolidator s platform and purchasing power could be appealing to an RIA who s feeling margin pressure and trying to build scale, reduce operational and technology costs, and maintain regulatory compliance. While advisors are familiar with the names of the major consolidators, they have limited understanding of their business models and value propositions. Each firm has a distinct operating model. As RIAs gain scale, internal succession becomes increasingly unfeasible given financing hurdles; and selling to a large financial institution may feel misaligned with the RIA s objective of independence. Selling to a consolidator, though, could provide advisors at large RIAs with a flexible exit strategy. 4

5 RIA Market Sizing

6 Differentiating Features Between Independent RIAs and Hybrid RIAs Channel Independent RIA Independent Practices Hybrid RIA Independent practices with both an RIA and an affiliation with a B/D Description of Advisor Channels: 2017 Characteristics Advisors operate with the highest degree of autonomy with no regulatory or policy oversight by a home office High degree of variety across independent practices Wide geographic dispersion Leverage clearing firms, banks, service agents, and brokerages to conduct trading, recordkeeping, and custody The practice's RIA is independently owned and operated by the advisor and not the B/D RIA assets are typically held at an RIA custodian, but advisors now have the option to custody assets with or through traditional IBDs A growing number of IBDs have launched RIA platforms to attract and retain large independent practices Doesn t include registered reps who are investment advisor reps of a B/D's corporate RIA and do not maintain an independent RIA Advisor Products & Services Fee-based Emphasize financial planning and wealth Management Products and services begin to mirror RIA channel Often choose B/D registration to maintain access to products typically available on a commission basis, including alternatives and variable products Nearly all are fee-based or primarily fee Firm Examples Fisher Investments Hall Capital Partners The Ayco Company RIA custodians: Schwab Institutional, Fidelity Institutional Wealth Services BD RIA platforms: LPL Raymond James Source: Cerulli U.S. RIA Marketplace

7 In 2016, 64,346 Independent & Hybrid Retail Focused RIAs At 18,225 Firms Managed $4.1 Trillion In Assets. Combined, Assets Have Grown At An 11% CAGR During the past 10 years, the independent RIA and hybrid RIA channels have grown total assets at annual rates of 9.6% and 8.1%, respectively. Independent RIAs Retail Focused RIAs: Assets, Firms, and Advisors Assets Firms Advisors Hybrid RIAs Independent RIAs Hybrid RIAs Independent RIAs Hybrid RIAs $1,421 $1,438 $916 $949 $1,932 $2,142 $2,322 $2,494 $1,592 $1,575 $1,353 $1,463 $1,468 $1,213 12,321 11,784 10,378 12,146 12,996 14,205 14,693 29,457 28,924 18,690 17,672 27,782 31,498 29,004 34,713 24,659 24,348 25,456 25,375 36,959 27,387 4,244 4,659 3,738 3,686 3,601 3,736 3, Year CAGR Assets Firms Advisors Independent RIAs 11.7% 7.2% 5.0% Hybrid RIAs 10.7% -5.4% 7.9% Source: Cerulli RIA Marketplace Quantitative Update

8 Over The Next 5 Years, Growth In RIA Asset And Advisor Market Share Is Expected To Expand Particularly Among The Independent Firms Growth In Asset Market Share Hybrid RIA Independent RIA Combined Growth In Advisor Market Share Hybrid RIA Independent RIA Combined 22.7% 24.9% 23.2% 20.7% 13.9% 15.4% 8.8% 9.6% 11.9% 14.1% 8.8% 9.1% E E Source: Cerulli RIA Marketplace Quantitative Update

9 There Are 1,455 Independent & Hybrid RIA Practices With >$500M in AUM. They Comprise Just 8% Of All RIA Firms But Control 73% Of Total Assets - $3.0 Trillion All Retail Focused RIAs: Independent And Hybrid RIAs YOY Asset AUM Tier Firms % of Firms AUM % of Assets Growth 4-Year Asset CAGR <$10 m 6, % $ % 7.2% 3.1% $10 - $25 m 2, % $ % 4.6% 1.5% $25 - $50 m 2, % $ % 7.9% 4.0% $50 - $100 m 2, % $ % 4.5% 7.7% $100 - $250 m 2, % $ % 7.0% 4.8% $250 - $500 m 1, % $ % 8.6% 7.5% $500 m - $1 b % $ % 10.3% 8.5% $1 - $5 b % 8% $1, % 73% 8.2% 11.1% > $5 b % $1, % 5.5% 12.9% Total 18,225 $4, % 9.7% Source: Cerulli RIA Marketplace

10 In 2016, The Average RIA Managed $63 Million In Client Assets. Regardless Of Segment Size, Independent RIAs Had Higher Assets Per Advisor Assets Per Advisor by Firm AUM: 2016 ($ Millions) All RIAs Independent RIAs Hybrid RIAs Firm AUM <$10 m $1.9 $2.4 $0.4 $10 - $25 m $11.9 $12.9 $5.9 $25 - $50 m $22.2 $23.0 $17.8 $50 - $100 m $31.5 $33.7 $26.8 $100 - $250 m $44.1 $50.1 $35.8 $250 - $500 m $61.2 $72.6 $48.6 $500 m - $1 b $77.9 $98.4 $58.2 $1 - $5 b $93.0 $141.4 $58.9 > $5 b $154.6 $192.0 $126.4 Average Assets Per Advisor $63.2 $67.5 $57.5 Source: Cerulli U.S. RIA Marketplace

11 38% Of All RIAs Have Fewer Than 100 Client Relationships. Larger Firms Can Accommodate More Clients Because They Have Achieved Scale Number of Client Relationships by Firm AUM: % 1% 8% 1% 8% 11% 5% 8% 1,000 11% 31% 13% 18% % 24% 32% % 36% 22% % 23% 25% 16% 18% <50 14% 13% 12% 7% 6% 20% <$25m $25m to <$100m $100m to <$500m $500m All RIAs Source: Cerulli 2017 RIA Marketplace 11

12 73% Of All RIAs Have Fewer Than 100 Clients Per Producing Advisor Number of Clients per Producer: 2016 Clients per Producer <$25m $25m to <$100m $100m to <$500m $500m All RIAs < 50 66% 33% 37% 49% 44% % 32% 27% 34% 29% % 18% 15% 8% 12% % 5% 6% 4% 5% % 7% 9% 1% 6% % 5% 3% 3% 3% % 1% 2% 1% 1% % 0% 0% 0% 0% Source: Cerulli U.S. RIA Marketplace

13 50% Of RIAs Work With Clients Who Have Between $500,000 And $5 Million In Assets. As RIA Firms Grow In Size, So Does Their Percentage Of HNW Clients RIA Client Investable Assets By Firm AUM: 2016 Client Investable Assets < $25m $25m - < $100m $100m - < $500m $500m All RIAs < $100K 17% 11% 8% 4% 10% $100K - $500k 41% 34% 21% 16% 29% $500K - $2m 31% 38% 41% 30% 36% $2m - $5m 8% 12% 17% 19% 14% $5m - $10m 2% 3% 7% 13% 6% $10m - 20m 1% 1% 3% 8% 3% > $20m 0% 1% 3% 10% 3% Average Client Size $458,924 $644,306 $2,549,644 $11,221,582 $2,921,014 For the largest RIAs, HNW households represent roundly 60% of the firms client base. RIA High-Net-Worth Clientele by Firm AUM: 2016 % of HNW Clients < $100m $100m - $500m $500m - $1b $1b - $2b > $2b All RIAs None 14% 1% 1% <1% 1% 11% Up to 10% 23% 13% 9% 8% 7% 20% 11% - 25% 20% 21% 15% 11% 11% 20% 26% - 50% 19% 28% 29% 25% 21% 22% 51% - 75% 11% 21% 23% 26% 28% 13% > 75% 13% 17% 22% 30% 33% 15% > 51% 24% 38% 45% 56% 61% 28% Source: Cerulli RIA Martketplace

14 Two-Thirds Of New Clients Come From Referrals. Most New Flows Come From Existing Clients. RIAs Lose Assets Primarily Due To Regular Withdrawals RIA Sources of New Clients: 2017 Sources of New Client Flows: 2017 Referrals from clients, friends, family 67% New clients with new money 36% Personal relationships Prospecting and marketing Referrals: CPAs, attorneys, etc. 36% 22% 13% Rollovers from existing clients Regular contributions from clients Cients consolidating relationships 17% 14% 14% Transferred from another advisor 2% One-time client contributions 10% Internal referrals from BD, custodian 1% Consolidating from direct & discounters 9% 52% RIA Reasons for Client Withdrawals: % 15% 10% 5% 2% Regular income withdrawals Client passed away One-time distributions Client moved to another advisor Asked client to leave Client moved to a direct/online provider Source: Cerulli RIA Marketplace

15 RIAs Are More Burdened With Administrative Tasks Than Other Advisors. This Cuts Into Client-Facing Activities Investment management takes a relatively small portion of RIAs time likely due to firms outsourcing investment management and systematizing trading and rebalancing. Larger firms tend to spend the least amount of time on investment management as they may have in-house team members dedicated to these tasks or use outside management to maintain efficiency. Advisors who focus less time on administrative tasks and investment management and spend more time as a relationship manager yield better client outcomes. 7% 6% 6% 6% 21% 15% 14% 17% 17% 25% 28% 21% 56% 55% 52% 55% Branch Network Advisors Advisor Time Allocation: 2017 Independent Advisors Client-facing Activities Investment management RIAs All Advisors Administrative Professional development RIA Time Allocation: 2017 Activities All RIAs Client-facing activities 52% Client meetings 20% Financial planning 10% Preparing for client meetings 10% Prospecting for new clients 8% Client service problems 4% Administrative 28% Practice management 11% Managing operations/administration 10% Compliance / Other 8% Investment Management 14% Research/due diligence/monitoring 10% Trading and asset management 4% Training/ professional development 6% Source: Cerulli Advisor Metrics 2017 and Cerulli RIA Marketplace

16 Mutual Funds & Individual Securities Are The Most Frequently Used Products By RIAs & Hybrid RIAs, Comprising 53% Of Total RIA Assets of $4,069 Billion Distribution of RIA & Dually Registered Assets: 2016 $1,236 RIA Hybrid RIA $466 $905 $288 $434 $770 $617 $130 $303 $343 $295 $148 $231 $129 $80 $196 $166 $151 $177 $170 $144 $135 $105 $127 $53 $49 $73 $43 $91 $86 Mutual Funds Individual Securities ETFs Other Advisor-sold Institutional Insurance Variable DC Annuities Alternatives Separate Accounts Source: Cerulli RIA Marketplace

17 Over the Next 2 Years, RIAs Plan To Decrease Their Allocation To Mutual Funds And Increase Their Allocation To ETFs RIA Reported Product allocation: 2017 vs. 2019E Mutual funds ETFs Individual Equity Individual Bonds Separate accounts Cash & Equiv. Variable Annuities Other Insurance Alternatives 4% 3% 4% 4% 4% 4% 2% 3% 7% 7% 6% 7% 15% 15% 21% 25% 37% 33% E Source: Cerulli RIA Martketplace

18 In 2017, RIAs Reported A 47% Allocation to Passive Strategies; 84% Indicated They Use Passive Products To Minimize Overall Portfolio Fees Product RIA Active & Passive Allocation: 2017 All RIAs Actively managed funds or separate accounts 44% Passively managed ETFs 26% Passively managed index mutual funds 21% Actively managed ETFs 9% Total active 53% Total passive 47% Factors Causing Advisors to Shift Money From Passive Equity or ETFs to Active Equity Funds 11% Expectation of flat markets 26% Expectation of market declines 33% Active mgrs lower their mgt fees 24% Other RIA Opinion on Active & Passive Management: 2017 Passive helps to minimize overall portfolio fees 84% Passive must be considered when acting as a fiduciary Active & passive complement each other Active managers are ideal for certain asset classes It's difficult to identify active managers that will outperform indices Passive can enhance returns through tactical asset allocation Returns are driven by asset allocation, so passive is more ideal than active In LT bull markets, active tend to underperform benchmarks net of fees In volatile mkts, active offers downside protection through tactical trading 45% 75% 72% 68% 67% 63% 60% 59% Source: Cerulli RIA Marketplace 2017 and William Blair October 6, 2017 Financial Services and Technology Report 18

19 Top RIA Custodians Ranked By Assets, Number of RIA Clients, Average Client Size, And Usage Assets Under Custody: 2016 ($ billions) Number of RIA Clients: 2016 $1,284 7,500 $753 $392 $200 $85 4,000 2, Schwab Institutional Fidelity Custody & Clearing TD Ameritrade Institutional Pershing Advisor Solutions LPL Financial Schwab TD Institutional Ameritrade Institutional Fidelity Custody & Clearing Pershing Advisor Solutions LPL Financial Average Client Size: 2016 ($ millions) Use of Top 4 Custodians: 2017 $364 $335 $202 $171 $98 52% 39% 27% 11% Pershing Advisor Solutions Fidelity Custody & Clearing LPL Financial Schwab Institutional TD Ameritrade Institutional Schwab Institutional TD Ameritrade Institutional Fidelity Custody & Clearing Pershing Advisor Solutions Source: Cerulli U.S. RIA Marketplace

20 The Billion Dollar RIA Market

21 Billion Dollar RIAs Represent Just 4% of RIA Firms But They Manage 60% Of The Assets Within the total population of 18,225 RIAs, there are 687 retail-focused firms that manage >$1 billion. They control 60% of the assets, some $2.4 trillion. Billion-dollar RIAs are expected to increasingly merge to form superregional brands, intensifying the disproportionate accumulation of assets in the multi-billion-dollar segment. Segmentation of RIAs 96% 4% Firms 40% 60% Assets All Other RIAs Billion $ RIAs Firm Metric Billion-Dollar RIAs: 2017 Billion-Dollar RIAs RIAs with <$1 billion Total number of firms ,538 Independent RIA ,257 Hybrid RIA 251 3,281 Total assets managed ($ bns, as of 2016) $2,421 $1,648 Independent RIA $1,403 $1,092 Hybrid RIA $1,019 $556 YOY AUM growth rate ( ) 7.2% 10.0% 5-Year AUM CAGR ( ) 9.5% 11.8% Avg headcount per practice (advisors & staff) Average client size per practice $18,765,870 $1,843,867 Billion Dollar RIA Asset Growth Rates YOY Year CAGR % 12.2% 11.0% 7.7% 8.3% 7.7% 6.8% 5.9% 7.8% 6.6% 5.2% 2.8% $1 - $2 bn $2 - $3 bn $3 - $4 bn $4 - $5 bn $5 - $10 bn > $10 bn Source: Cerulli U.S. RIA Marketplace

22 At The $1 Bn Mark, RIAs Become Institutions. The Largest RIAs Are Expanding Their Regional Presence, Some With The Aim Of Becoming National Brands Billion-dollar RIAs are becoming formidable competitors for broker-dealers. The higher up-market they go, the more difficult it is for advisors to do it all. Advisors at large RIA firms have to delegate non-business-development tasks to in-house specialists. Compliance and technology are the biggest challenges facing a quarter of these RIA firms. o More than 80% of billion-dollar RIAs rate technology selection, integration, and maintenance as a moderate or major challenge, and 74% cite compliance responsibilities as a moderate or major challenge. Characteristics Enhanced specialized nonadvisor roles C-suite professional management Private equity funding Different business lines Acquisition target Regional/niche dominance Capacity to career-path rookie advisors Primary Limitations Compliance complexity and regulatory liability Borrowing capital Costs of infrastructure Succession plan % of Advisors Citing Below As Major Challenges Of Operating a $1 Billion+ RIA Firm: 2017 Compliance responsibilities and filings Selecting, maintaining, & integrating technology Cost to maintain staff, rent and infrastructure Time required to run a business Uncertainty about future RIA regulation and oversight 9% 13% 22% 26% 26% Source: Cerulli U.S. RIA Marketplace

23 HNW Individuals Comprise ~ 60% Of Clients At Billion Dollar RIA Firms. Billion- Dollar Independent RIAs Manage More Than Twice Assets Of The Average RIA RIA High-Net-Worth Clientele by Firm AUM: 2016 % of HNW Clients $1 - $2 bn > $2 bn None <1% 1% Up to 10% 8% 7% 11% - 25% 11% 11% 26% - 50% 25% 21% 51% - 75% 26% 28% > 75% 30% 33% > 51% 56% 61% Firm AUM Assets Per Advisor by Firm AUM: 2016 ($ Millions) All RIAs Independent RIAs Hybrid RIAs $1 - < $5 bn $93.0 $141.4 $58.9 > $5 bn $154.6 $192.0 $126.4 Average RIA $63.2 $67.5 $57.5 Source: Cerulli U.S. RIA Marketplace

24 Large RIAs Tend To Offer More Services: For Example, 42% Of Billion-Dollar Teams Offer Intergenerational Planning Vs An Average Of 30% For All RIAs Advanced Planning Services Offered: 2017 RIAs Offering Intergenerational Planning: 2017 Services RIAs ($1b+) All RIAs Estate planning 77% 62% Tax planning 76% 62% Charitable planning 87% 53% Bus. planning (continuance, financing, transitions) 46% 37% Trust services 24% 19% Concierge & lifestyle svcs 17% 13% Evaluating 3rd-party lending products 23% 7% Private banking 10% 4% Total planning services All RIAs $1 bn $500 mm - $1 bn $100 - $500 mm $25 - $100 mm < $25 mm 16% 30% 33% 32% 37% 42% 46% of the assets in RIAs with > $500 mm in AUM are managed by advisors older than 55. Billion-dollar teams recognize that their legacy and future survival depends on multi-generational relationships. Intergenerational planning positions RIAs as the recipient to next generation wealth Source: Cerulli U.S. RIA Marketplace

25 The RIA Competitive Landscape Is Changing In Three Major Ways 1. The largest RIAs are becoming formidable competitors to broker-dealers 2. Breakaway advisors are increasingly choosing to tuck into large independent practices 3. Channels are blending, and the distinctions among them are becoming less pronounced They are amassing enough assets to become equal in size to IBDs and national/regional BDs. All top-10 regionally-focused RIAs would easily make the national and regional broker-dealer rankings by AUM, and many of the top 50 would as well. Broker-dealers should begin to view consolidator firms and other large RIAs as serious competitors capable of drawing away their largest and best advisors. As billion-dollar RIAs gain in size and scale, they can offer advisors similar services, pricing, and community as their BD competitors, making them well-positioned to receive tuck-ins from other channels Advisors interested in the RIA model often prefer to tuck into an existing independent practice with well-established infrastructure rather than strike out on their own. As regulatory requirements tighten and cost pressures increase, advisors see the benefits of independence but value the economies of scale that affiliating with a larger entity can offer. As the largest RIAs grow even more well-capitalized and the channel becomes increasingly popularized by high-profile departures, BDs should be sensitive to breakaway advisor preferences. Wirehouse mega-teams increasingly resemble large independent firms because of their feebased model, affluent client base, and in-sourcing of investment decisions. The largest RIAs are establishing strong regional presences through acquisition activity. Some IBDs are beginning to position themselves as RIAs because of their hybrid RIA platforms. Large BDs with multi-channel affiliation options have begun offering hybrid RIA platforms to retain their largest practices, which are the most likely to depart for the RIA model as tuck-ins. RIA consolidators are taking on the role of a BD by providing similar support services for operations, marketing, compliance, and investment strategy. Source: Cerulli U.S. RIA Marketplace

26 Broker-Dealers Are Increasing Their RIA Platform Offerings In An Effort To Retain Advisors & Attract New Ones Company Cambridge Inv. Research Commonwealth Financial Network LPL Financial Raymond James Broker-Dealers That Offer An RIA Affiliation Option: 2017 RIA Platform Has one of the longest histories of serving advisors on both a commission and fee basis, including outside RIAs. Announced its RIA platform in The rollout seems a natural progression given their high percentage of fee-based business. Launched its RIA division in 2008 and now serves 420 RIA firms with $202.4 billion in assets. LPL self-custodies assets for RIAs. Created an Investment Advisor Division in 2001 but stepped up its investment in recent years and made significant additions to management. Other Affiliation Options IBD IBD Retail Bank B/D (TPM), IBD Nt l & Regional B/D, IBD, Retail Bank B/D (TPM) RBC Advisor Svcs Acquired an RIA unit from JPMorgan Chase in September Natl & Regional BD Securities America Partnership with Arbor Point Advisors in 2013 that allows advisors to affiliate with Securities America for brokerage and join Arbor Point Advisors RIA, eliminating the hassles of running an independent RIA while retaining the flexibility to custody assets with Securities America or external custodians. The objective is to minimize an RIA s costs by limiting spending and time spent on compliance, operations, and other infrastructure. Owned by Ladenburg Thalmann. IBD The Advisor Group Offers advisors the option to affiliate under their corporate RIAs, as an independent RIA, or with hybrid registration. IBD Voya Financial Advisors Introduced a new RIA platform in 2015, citing its existing advisors' desire for greater flexibility as well as recruiting advantages as the motive for the move. The one wirehouse that offers an independent option via FiNet. It has been reported that it launched Wells Fargo Advisors a hybrid RIA option for advisors under the FiNet umbrella, although FiNet has not confirmed this Financial Network publicly and does not currently promote hybrid affiliation on its website. FiNet requires its advisors (FiNet) to custody assets through its affiliate First Clearing LLC. IBD Wirehouse, IBD Source: Cerulli U.S. RIA Marketplace

27 Some Billion Dollar RIAs Are On Their Way To Becoming Super-Regional Brands. Succession And National Or Regional Expansion Are RIA Motivators The largest RIAs that have already amassed billions of dollars in AUM are increasingly merging to create super-regional firms. They have offices in multiple geographic regions and a network of branch offices across the country. The largest RIAs have well-established structure and processes. Their greatest need is for a succession solution and additional fuel to their aspiring national or regional brand. Consolidator firms that can provide capital and liquidity options represent a succession planning alternative to selling to a large organization. In addition to offering funding for a succession deal, consolidators can have a network of advisors from which to source a like-minded peer. Top-10 Billion-Dollar RIAs by 5-Year CAGR: 2016 Pathstone Federal St 53% Aperio Group 51% Creative Planning 49% Global Fncl Priv Cap 36% Scharf Investments 33% LS Investment Advisors 30% HighTower Advisors 28% Silvercrest AM Gp 27% United Capital 26% Wealth Enhancement Gp 26% Leading Consolidator Firms: 2016* Focus Financial Ptrs $77.4 HighTower Advisors $46.0 AMG Wealth Partners $34.8 Dynasty Financial Ptrs $27.3 United Capital $27.2 *AUM figures include advisory assets as of year-end 2016 and estimated brokerage assets based on average channel percentages of hybrid RIAs asset breakdown between advisory and brokerage Source: Cerulli U.S. RIA Marketplace

28 Top 10 RIAs That Would Rank Among National & Regional BDs Ranked by AUM Rank B/D Name Segment AUM ($ Bn) 2016 YOY 5-Year CAGR 1. Fisher Investments Independent RIA $ % 13.3% 2. ICMA Retirement Corp. Hybrid RIA $ % 11.7% 3. Silvercrest Asset Mgt Gp Independent RIA $ % 26.5% 4. Hall Capital Partners Independent RIA $ % 8.8% 5. The Ayco Company Hybrid RIA $ % 11.8% 6. HighTower Advisors Hybrid RIA $ % 27.6% 7. Creative Planning Independent RIA $ % 48.8% 8. Hirtle, Callaghan & Co. Independent RIA $ % 4.5% 9. Iconiq Capital Independent RIA $ % 68.3% 10. Edelman Financial Hybrid RIA $ % 20.9% Source: Cerulli U.S. RIA Marketplace

29 RIA Practices

30 Most RIAs Are Either Wealth Managers Or Investment Planners Practice Type Segments: 2016 Money manager Investment planner Financial planner Wealth manager Independent RIA 6% 32% 16% 47% Hybrid RIA 6% 45% 17% 32% Practice Type: All RIAs Assets by Channel: $ Billions Advisors by Channel # of Firms by Channel Avg AUM per Advisor: $ Millions Money manager $ ,359 2,300 $43.3 Investment planner $1, ,071 7,987 $57.3 Financial planner $ ,382 6,678 $38.6 Wealth manager $1, ,534 1,260 $107.7 Source: Cerulli U.S. RIA Marketplace

31 Rather Than Look At All The Services RIAs Offer, It Might Be More Helpful To Understand The Services Offered By Less Than Half The RIA Population RIAs that are offering an array of non-investment services may need to consider how they are compensated for this additional work and value. Enabling firms to offer a variety of services that clearly articulates the value they offer is an opportunity for RIAs. So too is helping them refine their offerings and their constituencies to optimize profitability. Services Offered By < 50% Of RIAs: 2017 Elder care planning Business planning (e.g., continuance, financing, transition planning) 38% 37% Intergenerational planning 30% Trust services 19% Concierge and lifestyle services 13% Evaluating third-party lending products 7% Private banking 4% Source: Cerulli U.S. RIA Marketplace

32 Age Distribution of RIA Advisors And The Assets They Manage Compared To The Age Of Clients They Service RIA & Hybrid Advisors & Assets Managed by Age Group Independent RIAs Hybrid RIAs 16% 13% >65 11% 14% Client Age of All RIAs: 2017 > 80 5% 32% 36% % 33% % % 31% 42% % 37% % 18% 7% % 2% < 35 Advisor Age Assets Managed by Advisor Age 18% 11% Advisor Age 12% 3% Assets Managed by Advisor Age < 40 11% 17% Source: Cerulli Advisor Metrics

33 43% Of RIAs Are Age 55 Or Older. The Average Expected Retirement Age Is Around < Advisor Age: % 11% 7% 18% 18% 18% 16% 11% 14% 31% 36% 33% 32% 25% 29% Independent RIA Hybrid RIA All RIAs Average Age Independent RIA: 53.3 Hybrid RIA: 50.4 Expected Retirement Age: 2016 < % 1% 3% 6% > 80 6% 4% Independent RIA 14% 16% 9% 13% 26% 31% 34% Hybrid RIA 36% Average Expected Retirement Age Independent RIA: 69.1 Hybrid RIA: 68.5 Source: Cerulli U.S. RIA Marketplace

34 33% Of RIAs (> 21,000) Plan To Retire Within The Next 10 Years. These RIAs Manage 39% Of The Channel s Total Assets ($1.6 Trillion) Advisors and Assets in Transition: 2016 Hybrid RIA Independent RIA All RIAs 28% 37% 33% 36% 41% 39% Advisors transitioning within 10 years Assets transitioning within 10 years Assets in Transition: 2016 Independent RIAs Hybrid RIAs Retirement Time Frame # of Advisors Assets ($B) # of Advisors Assets ($B) 5 or fewer years 4,523 $248 1,329 $ years 8,347 $735 5,382 $222 > 10 years 23,395 $1,461 19,779 $1,004 Age 60+ lifer 694 $ $264 Within 10 years* 13,564 $1,034 7,608 $571 *Includes RIAs and hybrid RIAs citing fewer than 10 years + those over 60 years of age and termed lifers Source: Cerulli U.S. RIA Marketplace

35 Nearly A Quarter of Independent RIAs Who Plan To Retire Within The Next 10 Years Are Unsure Of Their Succession Plan Internal succession can be challenging for independent advisors since onboarding rookie advisors in the independent channel is driven by the individual practices rather than a centralized home office. Individual advisors need to make the decision to hire a new advisor and then they are responsible for grooming and mentoring him or her for multiple years. Practice management professionals note that advisors struggle most with the softer aspects. This includes the emotional aspects of transferring clients to a new advisor, ranked as the top succession preparation challenge for advisors, which can be challenging for advisors who have been responsible for their clients financial well being for many years. Finding a qualified buyer ranks second, reinforcing that sellers want to identify a trustworthy advisor who will provide quality advice long after transferring the relationship. Potential acquirers who are acutely focused on deal terms, valuation, or other mechanics can easily alienate a seller and jeopardize the deal. Current Succession Plan: % Independent RIA Hybrid RIA 19% 14% 18% 21% 18% 18% 13% 23% 15% Existing advisor in same practice Junior advisor or family member External sale Clients reassigned by firm Unsure Source: Cerulli U.S. Advisor Metrics

36 In The Past 4 Years, RIA AUM And Revenue Have Grown At Impressive 13% And 11% CAGRs, Respectively AUM ($ M) Revenue ( 000) Clients $358 $593 $2,282 $3, $100 - $250 $250 - $500 $500 - $750 $750 - $1 bn $1 - $2.5 bn > $2.5 bn AUM 2016 $160 $362 $596 $867 $1,448 $3,593 Clients ,170 Average Relationship Size 1,000,000 $1,405,902 $1,750,000 $1,914,179 $2,298,000 $3,121,198 Clients per Professional Revenue per Professional $376,000 $480,000 $548,000 $628,000 $609,000 $739,000 Operating Margin 20.1% 23.4% 24.4% 25.6% 27.3% 30.6% Source: Charles Schwab 2017 RIA Benchmarking Study 36

37 RIA Firms Have Successfully Driven Productivity Improvements To Defend Profit Margins. Revenue Yield Has Dropped 3 4 Bps Over The Last 2 Years AUM per client ($M) Productivity (Median Firm) Clients per advisor AUM per advisor ($M) Rev per advisor ($ 000) 71 $80 $ $538 $1.0 $63 $ Profitability (Mean Firm): Operating Margin Median Revenue Yield by Year 19% 73 15% Source: Fidelity 2017 RIA Benchmarking Study 37

38 RIAs Face Capacity Challenges As Their Practices Expand And Clients Require More Attention And Services Challenges Operating an RIA: 2017 Moderate Challenge Major Challenge Time required to run a business 53% 26% Compliance responsibilities and filings 57% 25% Selecting, maintaining, and integrating technology 58% 24% Significant operational responsibilities 60% 15% Cost to maintain staff, rent, and infrastructure 50% 14% Uncertainty about future RIA regulation and oversight 48% 13% Limited practice management support 47% 6% Limited home-office support for product due diligence or model portfolios Investor concern about working with independent firm 27% 27% 4% 3% Source: Cerulli U.S. RIA Marketplace

39 Independent RIA Major Priorities Include Speeding Up New Technology Implementations And Client Acquisition Via Social Media & Digital Marketing RIA High Priority Initiatives for 2017 Speeding up implementation of new techology Digital & social marketing to drive client acquisition Reaching new and untapped investor segments Evaluating pricing to align pricing and offerings Strategic talent acquisition and development 53% 50% 49% 48% 47% Executing a successful M&A transaction 35% Digital and social strategies are a priority for 88% of RIAs, with the digital wave no doubt linked to reaching new and untapped investor segments. Examining pricing strategies and products is a priority for 89% of respondents. Talent acquisition is a priority for 82% of advisors. In a lower-priority category is mergers and acquisitions. For 76% of RIAs, technology expenditure is more than 15% of their total budget; 55% have set technology expenses at 25% or above, and 25% are spending 50% or more of their total budget on technology. Source: Aite Group The Metamorphosis of Wealth Management: Business Anew December

40 RIAs Are Unbundling, And Fewer Services Are Now Included In The Overall Fee. This Is Especially Evident In Retirement Plan Servicing & Concierge Services % Offering Service 100% Services Included in Overall Basis Point Fee Investment management 97% 87% Difference: % Financial planning 82% 79% -3 73% Tax planning & strategy 88% 82% -6 62% Estate planning 85% 76% -9 57% Retirement plan servicing 68% 83% % Risk/ insurance planning 74% 63% % Philanthropic planning 88% 85% -3 24% Concierge services 67% 82% Source: Fidelity 2017 RIA Benchmarking Study 40

41 In 2017, 80% Of RIA Clients With $750,000 In Investable Assets Paid Between 100 And 125 Bps In Advisory Fees. The Majority Of HNW Clients Paid < 75 bp RIA Self-Reported Advisory Fees By Client Asset Level: 2017 $100K Client $300K Client $750K Client $1.5M Client $5M Client $10M Client < 75 bps 2% 3% 4% 5% 46% 77% bps 3% 16% 0% 49% 45% 17% bps 67% 58% 80% 43% 8% 5% bps 16% 14% 11% 2% 0% 0% bps 8% 5% 5% 1% 0% 0% bps 0% 1% 0% 0% 0% 0% bps 4% 4% 0% 0% 1% 1% > 250 bps 0% 0% 0% 0% 0% 0% Average Fee Source: Cerulli RIA Marketplace 2017, Exhibit 3.15 = mode 41

42 Fees Tend To Be Lower For Smaller Clients At Smaller Firms Compared To Smaller Clients At Larger Firms Hypothetical Client Size Median Effective Fees in BPs For Hypothetical Client Asset Tiers By Firm Size All Firms <$50 M $50 -$99 M $100 - $249 M $250 - $499 M $500 - $999 M $1B+ $500 K $1 M $2 M $3 M $5 M $10 M $25 M $50 M Source: Fidelity 2017 RIA Benchmarking Study 42

43 RIA Fees Have Not Changed Materially Since The Fastest-Growing Firms Show Very High Organic Growth Fees by Client Relationship Size $250K $500K $1M $2M $5M $10M $25M Fastest-Growing Firms All Other Firms Multiple 5 Yr Net Organic Growth CAGR 16.2% 4.3% 3.8x Net Organic Growth in 2016 $51 Million $14 Million 3.6x Number of New Clients in x Assets from New Clients in 2016 $45 Million $23 Million 2.0x Growth in Assets from New Clients in % 3.9% 2.4x Source: Charles Schwab 2017 RIA Benchmarking Study 43

44 Larger RIA Firms Tend To Do More Discounting Of Fees, And The Billion Dollar Firms Offer The Biggest Discounts. This May Be Driving Revenue Yield Erosion The gap between actual and expected revenue (based on stated fees and actual client mix) appears to be widening, implying that RIA firms may be expanding the discounting of their fees. Discounters are those firms with a 10+ bps gap between expected and actual revenue as expressed in bps. In Fidelity s recent study, 64% of firms were considered to be Discounters; and the median gap was 21 bps. Expected vs. Actual Fee Revenue in BPs Expected revenue yield Actual revenue yield % of RIAs Discounting Their Fees By Firm Size 79% 70% 73% 57% 61% 40% Discounters Gap <$50M $50-99M $ M $ M $ M $1B+ Implied Discount by Firm Size: Discounters Only (bps) Source: Fidelity 2017 RIA Benchmarking Study 44

45 44% Of RIAs Charge For Financial Plans. Roundly 19% Charge Hourly Fees, And 21% Have Annual Or Retainer Fees 52% % of RIAs Who Charge Nontraditional Fees By Practice Size 2017 Fee for financial plans Hourly fees Annual or retainer fees 39% 21% 22% 17% 19% 47% 26% 23% 39% 9% 20% 44% 21% 19% Percent of RIAs Who Charge Nontraditional Fees by Channel: 2017 Independent RIAs Hybrid RIAs All RIAs 50% 44% 39% 23% 21% 19% 19% 21% 16% <$25M $25M - <$100M $100M - <$500M $500M All RIAs Fee for financial plans Hourly fees Annual or retainer fees Modular and Comprehensive Financial Planning Fees: 2017 Plan Type Average Minimum 1 st Quartile Median 3 rd Quartile Maximum Targeted planning to address a specific client need $1,350 $100 $750 $1,000 $1,500 $6,000 Comprehensive financial plan $2,692 $125 $1,250 $2,500 $3,500 $10,000 Source: Cerulli U.S. RIA Marketplace

46 Breakaway Advisors, RIA M&A and, RIA Consolidators

47 A Survey Of 134 Advisors Identified As Potential Breakaways Revealed Their Views On Challenges For The Industry And Satisfaction With Their Firm Profile of the Broker who is likely to transition to independence in the next 2-3 years Average AUM Average age 46 Average tenure at current firm Average tenure as an advisor $274 m 12 years 18 years Overall Satisfaction With Current Firm 12% ^ 0% 100% Areas of Strongest Dissatisfaction With Current Firm: Cited By More Than 50% Of Advisors Surveyed 1 Corporate culture 2 Leadership/strategic direction 3 Career opportunities 4 Compensation Brokerage Industry Top 3 Challenges Regulations/ Regulatory environment Changing Compensation Structure Public Trust/ Reputation 54% 46% 85% < 40% of Advisors Are Satisfied with Work/Life balance Control over your practice Ability to expand client base Ability to offer superior service Compensation Career advancement 20% 19% 30% 29% 38% 37% Source: TD Ameritrade Institutional December 18, Break Away to Independence Survey 47

48 Most Advisors View Breaking Away As A Team Effort. They re Confident Clients Will Follow Them, But They Still Have Nagging Doubts About Compliance They Have Confidence in Both Colleagues & Clients Expected Sources for Support After Going Independent 58% would break away as a team 66% are extremely confident their colleagues/ team would follow 71% are extremely confident clients would follow Colleagues gone independent RIA custodian Events and conferences Trade journals Thought leadership/blogs Social media 11% 9% 7% 2% 43% 70% Doubts About Going Independent Concerned about legal/ compliance issues Transition too hard & will lose clients & revenue Managing own business seems difficult Practice isn't large enough to become RIA Won't be able to grow as RIA without brand-name & budget 10% 10% 16% 25% 49% Motivation To Break Away Rises After Advisors Talk To Colleagues Who ve Done It 55% of advisors have interacted with others who ve already gone independent, and here s the impact Did not have any impact Less motivated to leave current firm 15% 28% 57% More motivated to leave current firm Source: TD Ameritrade Institutional December 18, Break Away to Independence Survey 48

49 Higher Payouts Are A Big Draw For Advisors Contemplating Independence. So Are Less Burdensome Regulatory Oversight & Greater Autonomy Major Reasons IBD Advisors Prefer The RIA Model: 2017 Major Factors Attracting Employee Advisor Breakaways: % payout 45% Higher payout 65% Greater marketing flexibility 44% Greater autonomy 52% Reg. oversight less burdensome 39% Ability to build financial value 50% Flexibility of fee levels & structure 39% More personable culture 39% Increases financial value of practice 37% Control of inv. Decisions 38% Paying for unused svcs at BD 35% Ability to select tech systems 24% BD not adding enough value vs cost 31% Appeal of indep. to clients 20% Appeal of indep. model to clients 31% Reduced use of prop. prod. 20% Operate exclusively as a fiduciary 28% Elimination of sales quotas 17% Flexibility to select tech systems 27% Lower minimum production 16% Source: Cerulli U.S. RIA Marketplace

50 Breakaway Advisors Accounted For $136.8 Bn In Asset Shifts as of 12/28/17. Independent Firms & Regionals Were The Primary Beneficiaries Of The Assets Breakaway Advisor Channel Shift Assets $136.8 Bn Bank, IBK, Ins. Regional Wirehouse Independent $14.5 $5.1 $85.0 $32.1 Advisor Exits $21.6 $24.4 $17.7 $73.1 Advisor Destination Regional Top 10 Firms Winning Assets (Net) Bank, IBK, Ins. Wirehouse Independent Firm Assets ($ mm's) Category Raymond James $18,369 Independent Dynasty Financial Partners $15,160 Independent Cetera $7,265 Independent Ameriprise Financial $6,117 Independent RBC Wealth Management $6,075 Bank/Ibank Hightower Advisors $4,685 Independent First Republic Securities $4,350 Bank/Ibank Triad Advisors $4,340 Independent JPMorgan Chase & Co. $4,112 Bank/Ibank Janney Montgomery Scott $3,015 Independent Top 10 Total Asset Gains $73,488 Destination for Assets Leaving Wirehouses Regional Bank, IBK, Ins. $20.3 $18.6 Other Wirehouse $13.4 $32.8 Total = $85.0 billion Independent Top 10 Firms Losing Assets (Net) Firm Assets ($ mm's) Category Morgan Stanley Wealth Mgt -$19,563 Wirehouse UBS Financial Services -$17,913 Wirehouse Wells Fargo Advisors -$14,950 Wirehouse Bank of America Merrill Lynch -$14,731 Wirehouse SunTrust Investment Services -$2,003 Bank/Ibank National Planning -$1,987 Independent Edward Jones -$1,642 Regional MML Investors Services -$1,264 Insurance BD Royal Securities Company -$1,100 Independent HSBC Private Bank -$1,092 Bank/Ibank Top 10 Total Asset Losses -$76,245 Source: Investment News, Advisors on the Move, December 28,

51 A New Record Was Set For Total Breakaway Assets in In Addition, Nearly 40% Of Wirehouse Breakaway Assets Went To Independent Firms AUM Associated With Departing Advisors ($ Bn) $92.9 $87.0 $77.0 $134.0 $129.1 $136.8 AUM Associated With Departing Advisors By Segment $8.0 $8.9 $10.2 $3.2 $3.3 $2.4 $64.9 $56.1 $51.5 $45.9 $5.2 $58.6 $69.7 $ % $16.8 $18.7 $12.8 $24.4 $29.4 $32.1 $25.0 $14.5 $5.1 Bank, IBK, Ins. $4.9 Regional Wirehouse 22% Independent YTD ' YTD '17 Bank, IBK, Ins. $4.2 Regional $16.6 Indep $18.2 $19.5 Total: $58.6 Billion Other Wirehouse Destination for Assets Leaving Wirehouses 2016 Bank, IBK, Ins. $4.7 Other Wirehouse $21.8 Regional $21.7 $21.5 Indep. Total: $69.7 Billion Bank, IBK, Ins. Regional YTD 12/28/17 $20.3 $18.6 $13.4 $32.8 Total: $85.0 Billion 61% Other Wirehouse Indep. Source: InvestmentNews Database 51

52 53% Of Potential Breakaways Prefer An Established Practice. 48% Of Advisors Are Not Interested In Acquiring, But 38% Are Open To It & 14% Are Actively Searching Desired Transition Approach for Employee Advisors Who Prefer Independence: 2017 Join an existing practice as a partial owner or principal 48% Start a new practice with another advisor(s) 28% Start a new practice as the lead advisor 19% Join an existing practice as an employee 5% Acquisition Demand by Channel: 2017 Advisors' Interest in Acquiring a Practice Wirehouse National and Regional B/D IBD Independent RIA Hybrid RIA Insurance B/D All Advisors Not interested in acquiring a practice Open to an acquisition, but not actively searching Actively searching for acquisition opportunities 55% 56% 49% 41% 32% 67% 48% 33% 25% 41% 41% 43% 22% 38% 12% 19% 10% 19% 24% 11% 14% Source: Cerulli U.S. RIA Marketplace

53 YTD 9/30/17, There Were 114 RIA M&A Transactions With Average AUM Of Sellers ~ $700 mm. Consolidators Accounted For Nearly Half Of The Transactions Number of RIA M&A Deals Average AUM of Established RIA Sellers - $ Bn $673 $917 $1,068 $706 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q YTD Q3 '17 Acquisitions of Established RIAs by Buyer Category 2% RIA Consolidator Bank Other 8% 3% 52% 42% 14% 3% 8% 11% 44% 48% 46% 47% 39% 32% YTD Q3 '17 Source: DeVoe & Company, Q RIA Dealbook 53

54 36% Of Elite RIAs* Would Attempt M&A In The Next 1 2 Years, Up From 26% Of Elites In 2016, Signaling That Industry Consolidation Is Still Underway % Of Elite RIAs Planning To Expand Through M&A In The Next 1-2 Years Inorganic Growth Strategies Being Considered Over The Next 1-2 Years 36% Acquire an individual adviser and his/her clients 36% 31% 26% Acquire another advisory firm 16% 31% Merge with a firm of similar or equal size 10% 11% Obtain a capital investment from a third-party 9% 8% Merge with a strategic partner (i.e. roll-up firm or fncl services holding co) 7% 10% 2016 Elite RIAs 2017 Elite RIAs Elite RIAs All Others Source: BlackRock 2017 Elite RIA Study *Elite RIAs constitute the top quartile of RIA firms as measured by revenue, assets under management, personnel and productivity. 54

55 The High-Growth, Fragmented RIA Market Is Ripe For Consolidation. Private Equity Firms, BDs & Established RIAs Are Investing In The Space While breakaways provided the initial influx of affiliates for platforms and aggregators, several are now pursuing relationships with established RIAs. Platform Dynasty Financial A consolidator s platform and purchasing power could Providers $19 be appealing to an RIA who s feeling margin pressure and trying to build scale, reduce operational and Focus Financial technology costs, and maintain regulatory compliance. A key challenge for platforms in the long run is the Financial HighTower $29 risk of attrition as an RIA builds scale and Acquirers infrastructure and decides to forego paying a platform fee and instead operate more autonomously. AMG Wealth $35 Platforms need to consider service and pricing models that evolve with their clients needs over time. Mariner Wealth $13 As RIAs gain scale, internal succession becomes increasingly unfeasible given financing hurdles; and selling to a large financial institution may feel Strategic misaligned with the RIA s objective of independence. Acquirers United Capital $17 Selling to a consolidator, though, could provide advisors at large RIAs with a flexible exit strategy. Beacon Pointe Consolidators Advisory AUM: 2016 ($ Bns) $8 $66 Source: Cerulli U.S. RIA Marketplace

56 While Advisors Are Familiar With The Names Of The Major Consolidators, They Have Limited Understanding Of Their Business Models & Value Propositions RIA Consolidators Segments Description Types Examples Platforms Financial Acquirers Strategic Acquirers Allow RIAs to "rent" an end-toend operating and support platform and do not take an equity stake in affiliates Systematically acquire RIAs to aggregate individual firms in a fragmented market and realize financial gains through a liquidity event or cash flow distributions Large RIAs that systematically acquire advisory firms to grow market share, enter new geographic regions, and achieve other growth-oriented strategic objectives RIA-Branded Platforms: Positioned exclusively to support RIAs IBD Legacy Platforms: Independent BD that introduced a platform for RIAs Aggregators: Acquire small, independently operated businesses in cash and equity deals with the objective of achieving economies of scale by centralizing operations, applying professional management, and eventually realizing a substantive liquidity event Portfolio Acquirers: Purchase minority or majority stakes in established RIAs and build a collection of RIA investments held in a portfolio construct N/A Dynasty Financial Partners HighTower Network LPL Hybrid RIA model Raymond James Hybrid RIA affiliation HighTower Advisors (partners) Focus Financial AMG Wealth Partners Private equity firms United Capital Mariner Wealth Advisors Beacon Pointe Wealth Advisors Source: Cerulli RIA Marketplace