Designing the Super OSJ of the future

The groups will expand beyond compliance to provide advisers with turnkey solutions, training programs and even succession planning

Feb 23, 2018 @ 1:48 pm

By Rich Whitworth

At an industry event last year, I caught up with a friend who runs a prosperous independent producer group that supports both his personal book of business as well as those of other successful advisers — or what some in the profession call a Super OSJ, or super office of supervisory jurisdiction. Up until now, his success has hinged on providing solo independent advisers and other small-sized firms with compliance and regulatory oversight.

Recently, though, a potential recruit asked him "what else" he could do for him, echoing skepticism from others in the industry who feel that compliance support alone is no longer a viable value proposition for Super OSJs. More than ever, advisers are under pressure to deliver an advice-centric experience, meaning selling products is taking a back seat to providing clients with personalized service, and this shifting dynamic equally applies to providing professional services to other financial advisers.

Because of this, some industry observers have sounded the alarm about the Super-OSJ model in general, predicting that the shifting demands of the marketplace could spark its imminent demise. Those concerns, however, are probably exaggerated. Indeed, while we are no doubt likely to see consolidation and realignment within the Super-OSJ space, the model itself will endure as groups adapt to what clients need from their adviser, and, in turn, what advisers need from a facilitating partner.

(More: For small B-Ds, becoming part of a branch office of a larger firm is a viable exit strategy)

Here's what the Super OSJ of the future has to look like:

Compliance and supervision remain important. While Super OSJs can no longer hang their hat on supervision alone, the fact is that this is a highly regulated industry and compliance has to be a top concern for advisers. As the demands of the marketplace evolve, supervision continues to be a core part of any Super-OSJ offering, even if it's not the only part. The same can be said about administrative support and office space. To be sure, these costs are key considerations for margin-challenged solo advisers and other small firms, but given the realities of the fiduciary era, other factors have become just as critical.

Integrated technical expertise and improved access to third-party vendors. With the emphasis now on advice and traditional asset management functions having been largely commoditized, advisers have to focus on making personal connections and providing first-rate client service. Combined, these factors minimize the importance of advisers' technical expertise. Super OSJs of the future will fill this role for them, offering a range of turnkey solutions — including investment research, paraplanning resources and insurance expertise — that will save advisers time and, since they can negotiate as a bloc with third-party vendors, money.

Structured training programs and dedicated practice management support become the norm. The Super OSJ needs to build training programs, not only to onboard recruits and fulfill continuing education requirements for existing advisers, but to provide added practice management support. As advisers face rising client expectations, increased competitive pressures and continued regulatory challenges, they will need to have access to a broader selection of tools to help them grow their businesses in these challenging times.

Built-in succession planning. Many solo or stand-alone advisory practices throughout the country do not have a succession plan in place. Super OSJs often create service and business model alignment among their advisers and are perfectly positioned to help advisers find internal succession planning partners. The key will be to have a mix of industry veterans a few years from retirement and more junior advisers looking to grow their books of businesses with the support of an enabling partner.

There's a misperception that Super OSJs, by their very nature, have businesses that are at odds with or are competing against broker-dealers. While this may be the case in isolated instances, the truth is that the overwhelming majority of these groups fill a vital role in the industry by providing high-touch services that many broker-dealers, by themselves, could not.

Still, as Super OSJs begin to adjust their service model to cope with the new realities of the industry, they would do well to seek closer partnerships with broker-dealers. This would help them generate offerings that transcend compliance and be truly additive in their adviser relationships. The fiduciary era has created disruption, no doubt. But it will not wipe out independent firms nor the overwhelming majority of their Super-OSJ partners, despite what many doomsayers have predicted.

(More: How advisers can become small business exit planning specialists)

Rich Whitworth is managing director of business consulting at Cetera.


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