Adviser Career Paths Shift With the Times

Cerulli Associate’s fourth quarter issue of The Cerulli Edge – Advisor Edition suggests many finance pros simply aren’t interested in creating their own company or gaining greater firm leadership responsibilities.

In fact, Cerulli finds advisers today are far likelier to look to join an existing registered investment adviser (RIA) firm rather than start their own independent practice. Advisers joining established RIAs cite the importance of operational and legal infrastructure, “but also a sense of community.”

Bing Waldert, a director at Cerulli, says business and regulatory pressures have led to the introduction of a variety of new platforms and organizations capable of supporting independent advisory businesses. In particular, Waldert identifies the “rise of the subaggregator” as an important trend for the financial advice industry. Cerulli is naming this emerging class of firms the subaggregators because their business model in many cases escapes traditional definitions of broker/dealers (B/Ds), RIAs, or offices of supervisory jurisdiction (OSJs).

“They use the platform of a larger firm, such as a B/D or custodian, which more frequently works directly with advisers,” Waldert explains. “These firms support multiple advisory practices, with advisers operating autonomously, often across multiple geographies. They have professional leadership in place. Perhaps most importantly, the adviser’s primary relationship is with the subaggregator rather than the B/D, custodian, or platform.”

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Waldert says advisers are recognizing this evolution “and believe the rise of subaggregators is the next generation of financial firms.”

Cerulli’s reporting argues the rise of the subaggregator is happening for two reasons: “The first, as has been noted, is providing an option for advisers interested in the independent business model, but without the skills or desire to operate their own business. The second and unique reason for the rise of these firms centers on the culture and community of being part of a smaller organization.”

When considering a new firm to join, Cerulli finds advisers are generally attracted to firms that offer a high level of service and flexibility in terms of how producing advisers choose to conduct business.

“Those who moved within the past three years cite the desire for greater independence as the most important factor influencing their decision to switch firms,” Waldert adds. “By emphasizing the various options available to advisers, headhunters at B/Ds and custodians can foster trust and help steer advisers to the right affiliation model.”

Over time, according to Cerulli, these subaggregator firms will be able to build adviser teams with strong wealth management and institutional asset oversight experience. “Subaggregators need to recruit only a few teams a year to be successful,” Cerulli concludes. “This scale allows them to be more selective, taking advisers with quality business models and the right approach.”

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