Recent M&A activity by DC advisor aggregators highlights even more activity smoldering under the surface driven by a rapidly maturing DC market.
Like an iceberg, above the surface I see record keeper consolidation and a bit of DCIO consolidation. But below the surface, advisor consolidation is heating up — highlighted by the recent CAPTRUST investment in Pensionmark and the sale of GRP to the firm’s advisor members.
More activity is expected, so let’s set the scene and take a look at the dynamics driving advisor consolidation.
Before the financial services industry even knew there were advisors focused on DC plans, Bill Chetney created NRP, Fielding Miller was building CAPTRUST, Randy Long was building SageView and Vince Giovinazzo was building 401(k)Advisors.
Chetney sold to LPL in 2009 (renamed as LPL Retirement Partners); Giovinazzo sold half his firm (including RPAG) to NFP more than five years ago, and the remainder about a year ago. That forced the sale of Financial Telesis — which was the broker-dealer for Giovinazzo’s group and many RPAG members — to LPL and Chetney (now GRP).
After the sale to LPL in 2009, larger NRP firms started creating their own groups, including Bukaty, RBG, Pensionmark (now, of course, clearing through CAPTRUST), GRP (which includes many former NRP advisors), and Centurion, which recently departed LPL. Other well-known super groups and aggregators (and there is a difference) include Lockton and Gallagher, which are similar to each other but different than the rest.
What’s driving the move to aggregators? The usual suspects: price compression, increasing client sophistication, the need for capital and infrastructure, regulatory pressure, more fee transparency and succession planning. But there’s also a driver that’s more emotional. Plan advisors are, by nature, sales people with little business training. They need to, and want to, collaborate with like-minded peers. But here’s the conundrum: Most advisors are lone wolves and control freaks willing to bet on themselves but no one else. For these lone wolves, depending on someone else is tough — but answering to a boss and not owning their book is abhorrent.
Advisors willing to sell or become an employee will have lots of choices, starting with Sheridan Road, NFP Retirement and SageView; RBG, Bukaty and Centurion offer an affiliate model. NFP Retirement is owned by a private equity firm with access to capital and grand expectations. SageView, which is independent, clears through Cetera, which has quickly amassed 10,000 advisors. LPL is balkanized, with various groups competing, forming and departing. And then there are the many other regional groups that are forming, like Jania Stout’s group at Hightower.
For advisors who aren't already affiliated with the solid backing of a parent organization (such as a wirehouse committed to the retirement business), going it alone in the DC practice means you have to either stay small or join an aggregator because, as Jakob Dylan wrote, “There’s got to be something better than being in the middle.” Like record keepers, advisors will either: (1) be in “401(k) Heaven,” with the resources to compete, and staying relatively small and under the radar with limited overhead; or (2) wind up somewhere else — where the weather is hotter than Florida in the summer.
