Tuning in to adviser needs with ensemble practices

Feb 27, 2014 @ 12:01 am

By Tom Daley

Ensemble and super ensemble practices are becoming the most popular choice of business model for independent advisers.

Ensembles are very focused on growth and mitigate operational costs by “partnering” in a sense or outsourcing to an affiliated broker-dealer, RIA custodian or clearing firm. Very much like top law firms or medical practices, ensembles leverage outside resources to help them run as efficient organizations. Ensembles look to their partners to provide:

• Automated oversight and compliance responsibilities

• Practice management tools and strategies

• Independent investment research

• Marketing support and resources

In 2002, the average participant in a Moss Adams Adviser Compensation Study, was a sole practitioner with $350,000 in production, $25 million of AUM (assets under management) and three staff people.

Fast-forward to 2013, and the average participant is an ensemble firm with $2 million in production, $200 million in AUM and a staff of seven. (Source: 2013 InvestmentNews/Moss Adams Adviser Compensation and Staffing Study.)

This data follows a trend we've witnessed anecdotally in the marketplace as well. Here's why.

• To begin with, transitioning to a solo practice is more costly at the outset than tucking in to an existing practice. Learn more about the costs of going solo. Once established, solo practitioners are often very profitable as long as they are extremely mindful of managing expenses as they continue to grow and service their clients.

• This is not always as easy as it sounds and as an alternative, a number of these solo practitioners gravitate toward ensemble practices. These are fully mature organizations looking to their broker-dealer or clearing firm partners to provide beyond the tools needed to be professional advisers.

• By far, the majority of an adviser's operational expenses are spent on staffing—compensation, benefits and training. As part of an ensemble, outsourcing to the right broker-dealer, custodian or clearing firm cuts down on these long-term expenses while creating greater efficiencies.

• For the adviser with the desire to be independent but not necessarily an entrepreneur building a business from the ground up, the ensemble practice is attractive. In response, firms are presenting more choices for advisers than ever. Many branches and RIA hybrids have profiles and offerings that can compete head-to-head with larger firms.

And the broker-dealers aren't the only ones attracting advisers with the ensemble model. Independent RIAs are recruiting advisers with this philosophy while leveraging relationships with RIA custodians/clearing firms.

*Tom Daley is the founder and CEO of The Advisor Center, a strategic partner to InvestmentNews and the InvestmentNews Career Center.

0
Comments

What do you think?

View comments

Recommended for you

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Featured video

Events

Ric Edelman: 3 factors transforming the financial advisory industry

We are at the "knee in the curve" of a transformation of the financial advice industry, according to Ric Edelman. But what's next and how will it shape your practice of the future?

Video Spotlight

Help Clients Be Prepared, Not Surprised

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

Broker, retirement groups make last-minute pleas to change tax legislation

Pass-through provisions are target of groups representing employee-model brokerage firms, as well as retirement plan advisers.

House and Senate reach tentative compromise for tax overhaul

Lawmakers still need to get a cost analysis of their agreement, so it's not yet definite, according to a source.

Advisers' biggest fears for 2018

What keeps advisers up at night.

One adviser's story of losing his son to the opioid epidemic

John W. Brower, president and CEO of JW Brower & Associates, shares the story behind his son's death from a heroin overdose and how it inspired him to help others break the cycle of addiction.

Tax reform will boost food, chemicals, rail stocks. Technology? Not so much

Conagra and Berkshire Hathaway are two stocks that should benefit most from changes in the tax code.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print