A mass migration of advisers

We’re in the early stages of another mass migration event involving financial advisers. And in a way, what’s happening now began 30 years ago.

When I started in this business, I had two options: One was to join a wirehouse, where I could cold-call until my fingers bled, and the other was with a life insurance company, where I was taught that practically everyone with a pulse was a hot prospect.

To my knowledge at least, back in the day there were no “fiduciary” firms offering independent advice. If I wanted to go into the financial advice field, it was through one of those two tracks, so I initially chose the life insurance route.

I lasted just a couple of years.

When I could no longer stomach the near-constant conflicts of interest that existed, I searched for a better model for my employment and my career, only to find that none really existed.

That’s when a business colleague and I took a leap of faith, leased a small office, filled out the required forms for the Securities and Exchange Commission, and launched an RIA.

But perhaps a bit surprisingly, we suddenly found ourselves not merely working as independent advisers, but as small business owners who’d really had that title thrust upon them merely because we saw no other route to making a living while being able to advise clients as fiduciaries 100% of the time.

Though I didn’t know it then, my career path was not unique.

That’s because the fact is that literally tens of thousands of financial advisers have had the same experience of starting out their careers at large companies steeped in conflicts of interest before eventually breaking out to start their own firms.

Today, there are more independent financial advisers than there are advisers working at national firms. (These advisers are either affiliated with an independent broker-dealer or operate as a fee-only firm, utilizing the services of a third-party custodian.)

The problem is that most independent advisers didn’t choose to go it alone because they wanted to run a business. Most that I know don’t enjoy things like managing employees or dealing with leases and cybersecurity. They’re independent because it was a better solution than working for a national firm.

Yet here we are, witnessing another mass adviser migration.

Burnt out by the grind of running a small business, many firm principals are merging with other firms and creating national brands. Advisers who started their own businesses to escape the confines of the old model are finding that by merging with larger fiduciary-minded firms, they have greater autonomy and more time to focus on clients.

Much has been written about the need for succession planning, and it’s true that the advanced average age of advisers is clearly playing a role in driving M&A. But most of the transactions we’re seeing aren’t to enable an adviser to retire.

On the contrary, just like the one that began 30 or so years ago, this mass adviser migration event is also being driven by advisers who are looking for a better path forward — one that will provide both the autonomy and the advisory model that they desire, without the headaches of running a business.

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with $13 billion in AUM.