“When you stop growing you start dying.” Famed American writer William S. Burroughs’ sobering thought resonates more profoundly in times of uncertainty. For wealth management enterprises and their affiliated financial advisors, successfully navigating 2023’s choppy economic, market and geopolitical waters to grow wallet share, client count and revenue has proven a daunting task.
The good news is that, even in the face of headwinds that include expanding multiples, higher capital costs and demographic shifts on both the client and advisor front, there are growth opportunities to be seized.
Importantly, while sitting back and adopting a “this too shall pass” attitude is technically a plan, it’s usually a bad one that benefits no one – except the competition.
Both organic and inorganic growth require an actionable strategy that generates measurable results. At its core, the wealth management ecosystem rewards the bold, the efficient and those who recognize that every challenge contains an opportunity waiting to be uncovered.
Our Roundtable Interviewees
For WSR’s latest Business Development Roundtable, we spoke to the following three experts who maneuver the vortex daily, to discover how their firms are addressing evolving expectations and conditions to create opportunities:
- Nate Angelo, Head of Wealth Management at Miracle Mile Advisors, a registered investment adviser that provides dynamic financial planning and customized investment management to high net worth individuals, families, business owners and institutions nationwide
- Michael Longley, Chief Growth Officer at Sanctuary Wealth, the advanced platform for the next generation of elite advisors, with a particular emphasis on recruiting wirehouse breakaways who serve high net worth clients and run highly sophisticated wealth management businesses
- Ananya Balaram, Chief Revenue Officer at Vestmark, a leading wealthtech platform that provides comprehensive portfolio construction, investment management and other related outsourced solutions for wealth management enterprises on both the RIA and broker-dealer sides of the industry, their financial advisors as well as large asset managers
WSR: Miracle Mile has recently enhanced its executive team and brought aboard Bruce Milam as its first CEO and you as the head of wealth management to balance M&A-based expansion and ongoing organic growth. As the market continues to evolve and cost of capital and demand for significant multiples remain high, how are you “balancing” your approach growth?
Nate Angelo, Head of Wealth Management at Miracle Mile Advisors: To paraphrase that famous movie line, “Growth is good.” That’s true in any environment, including the challenging one we find ourselves in today. But not every dollar of revenue is created equal. We balance our approach by anchoring our decision-making on what is best for our clients, advisors and the overall client-advisor relationship. This includes significant investment in our business with both human capital and technology to maintain strong organic growth rates, a direct result of our advisors fostering dynamic relationships with clients.
Buoying the organic growth is a disciplined approach to inorganic growth that we are able to push forward in today’s environment by doing what we have always done: carefully assessing opportunities and investing where it will have the greatest positive impact on our business over the long term. A perfect example of that was last year’s acquisition of Karp Capital Management, a $1.2 billion RIA.
Miracle Mile is consistently ranked among the fastest growing RIAs in the country. That’s because we attract and align ourselves with financial professionals who are as committed to transformational growth as we are. Our dynamic culture, innovative resources, advisor collaboration, deep client support and unparalleled business development ecosystem attract financial professionals with whom we want to work. We are extremely selective and consider deals carefully. Once these like-minded advisors experience the potential Miracle Mile offers, they’re better positioned to attain their own growth goals.
While some believe there’s never a bad time to make a good investment, some times are better than others. We will continue to leverage our experienced leadership, capacity and patience to execute on our growth strategy today and in the years to come.
WSR: Sanctuary’s focus on recruiting top-performing financial advisors from the wirehouse channel who want to go independent is well known. What wirehouse breakaway trends are you seeing, and what is your firm doing to get ahead of them?
Michael Longley, Chief Growth Officer at Sanctuary Wealth: We continue to see that the wirehouse breakaway train has left (or is leaving) the proverbial station and will continue to pick up speed as advisors head out in search of better situations and growth opportunities for themselves, their businesses and their clients. Firms like Sanctuary, which have built out expansive and open architecture platforms, cater very well to these sophisticated top-tier advisors and will continue to be outsized beneficiaries of these moves.
The trends driving advisors to independence – freedom, flexibility, control, culture and the desire to own their own businesses (and unlock the value of such) – have been accelerating thanks to the confluence of dramatic shifts in demographics, service expectations and technology.
Younger, high-touch demanding and tech savvy clients are not impressed by the impersonal brands of prior generations. They want the authenticity independent advisors can provide.
Advisors continue to vote with their feet. In 1993, 70% of advisors were employees of wirehouses. Fast forward to today, and you’ll see that 45% are independent, with only about 20% remaining wirehouse employees.
Sanctuary is especially appealing because we thoroughly understand the pros and cons of the wirehouse channel, with many of our leadership team having deep roots across Merrill Lynch, Morgan Stanley, UBS and Wells Fargo. As such, we have built our platform and company around servicing an exclusive community of top advisors from these firms. This, along with our Partnered Independence approach, gives us an advantage in helping these new business owners rapidly and profitably scale their practices. They find that with all of the new client solutions and revenue levers available to them, they can grow their business faster.
Breakaway advisors join and stay with Sanctuary because we earn their trust every day and share in their business risks. They are not locked into long-term contracts, and we prioritize helping them build equity in their own businesses versus orchestrating complex equity deals that tie them to the performance of our firm. This gives them the true independence they need to create a valuable asset they can monetize when the time comes.
WSR: Are you seeing increased demand among independent wealth management enterprises and firms, including RIAs, for tech-enabled portfolio construction and management that is much more tax efficient than ever? And if so, how is Vestmark uniquely positioned to benefit from this rising demand?
Ananya Balaram, Chief Revenue Officer at Vestmark: Yes, there has absolutely been increasing demand for tech-enabled tax efficient offerings. Given the prevalence of direct indexing and tax-managed custom SMA offerings, we view this as an area of potentially rapid growth for firms that are able to support the scale and complexity of managing each unique investor account.
We believe Vestmark is uniquely positioned, given our history as the engine behind a number of tax-managed offerings going back over a decade. We have expanded on that foundation and built Vestmark VAST, a solution that goes beyond the status quo in a couple of significant ways. First, we apply tax management to the entire portfolio, not just a portion of the portfolio.
Second, we've focused on eliminating broad assumptions that other providers make. Instead of assuming all investors pay the highest federal tax rate and pay no state income tax, we’ve created a simple user experience that uses an individual investor’s actual tax rates at both the federal and state levels in managing the account.
The flexibility of our technology platform allows us to enable this type of offering at firms that do not have the technical or operational infrastructure to do it themselves. We can work seamlessly across wealth and asset managers, creating value for both by utilizing their unique strengths combined with our engine.
The Certainty Of Uncertainty And The Inevitability Of Innovation
We are in the midst of a “perfect storm” featuring imperfect conditions, an evolving marketplace and rising expectations. Whether or not the economic soft landing comes to pass, industry players must position themselves for any eventuality.
What does this all mean? Finding the right balance between overextending and under-achieving is crucial. This, in turn, requires the effective communication of a distinct value proposition and delivering on it across market and economic cycles.
Julius Buchanan, Editor in Chief at Wealth Solutions Report, can be reached at jbuchanan@wealthsolutionsreport.com.
