ETF Trends
ETF Trends

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By Matt Sonnen

Once You Break Free of the Wirehouse, You Need to Run From the Platforms and Aggregators, Too!

There is always a dark side to success. The RIA market has been booming for years, consistently taking assets away from the traditional bank/wirehouse community, and now manages nearly $3 trillion in assets.

As the overall assets under management has risen in the RIA community, a slew of opportunistic middlemen have put up their shingles, offering “platforms” or an “aggregator solution” to help captive advisors break away and remove the operational aspects of the transition to independence – a truly valuable service that is needed by breakaway teams who have never had to manage these critical issues before.

The rub here is that these middlemen are using the lack of experience and knowledge of these advisors against them to extract exorbitant rents.  As a result, the high costs associated with the aggregators and platform providers is limiting and slowing down the breakaway movement, especially for the larger teams – a very unfortunate result for not only those advisors and their clients, but also the industry as a whole.

Related: 4 Reasons Why an ETF is Good for RIAs

In many ways, the financial crisis of 2008 was the greatest thing to ever happen to the RIA industry. High net worth clients began to value the open architecture, transparency, and conflict-free business models offered by independent advisors.

Once clients began asking for it, advisors began flocking in droves to the independent channel. Most, if not all, of these advisors had never set up or run their own business before, so a cottage industry evolved helping these teams enter the independent channel. The typical advisor thought, “I want to go independent, but I just want to focus on my clients. I don’t want to worry about running my own business.” They were flocking to plug-and-play solutions, regardless of the cost. They just had to get out of the shackles of the wirehouse world, and they needed to do it quickly.

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