Savvy Wealth wooes Commonwealth advisors with Fidelity advantage

Savvy Wealth, the wealth management company that operates an Registered Investment Advisor (RIA), is leaning into its custodian relationship with Fidelity as part of its recruitment bid for Commonwealth advisors. 

The Commonwealth team of 2,900 advisors was Fidelity’s biggest client for clearing and custody services. However, that lucrative relationship has been jeopardized by Commonwealth’s $2.7 billion sale to LPL, which runs its own self-clearing platform without Fidelity’s presence.

“Being on Fidelity gives us the advantage. Given that Commonwealth folks are also on that platform, it's a super seamless transition,” Savvy Wealth CEO Ritik Malhotra said. “We've worked with the Fidelity team, and they've actually given us some special access to make that transition even smoother and faster for the end clients. So we think that that's a huge advantage.”

The Savvy Advisors RIA, which earlier this month grew to over 50 advisors managing over $1.5 billion in client assets, maintains Schwab as a custodian partner in addition to Fidelity. InvestmentNews reported earlier this month that Fidelity was supporting RIAs in their pursuit of Commonwealth advisors to help keep them as custodian clients. 

Savvy Wealth has engaged with hundreds of Commonwealth advisors who are contemplating their next move. Advisors from Commonwealth expect to take anywhere from six weeks to six months to decide on their next home, Malhotra said. 

Malhotra emphasizes that Savvy’s status as an RIA is better suited for Commonwealth advisors as opposed to the independent broker-dealer model at LPL or other courting firms such as Ameriprise and Raymond James. 

“One of the things that's been a little bit muddied is the difference between an IBD and an RIA here. We actually found a lot of these Commonwealth advisors are running businesses that are well suited for an RIA, predominantly [because] they're all fee-based businesses,” Malhotra said. “Very few of them, if any, have any kind of meaningful commissionable broker dealer business.

“On top of that, they want a consistent user experience, which is why Commonwealth was on the Fidelity clearing platform and why we've chosen them as one of our two partners. And that element is squarely at odds with the independent broker dealers.”

InvestmentNews reported that Ameriprise is offering up to 125% up front of a Commonwealth advisor’s trailing 12 months revenue, and a Commonwealth advisor said Raymond James is offering over 100% of their trailing revenue. Other firms competing to land Commonwealth advisors include broker-dealers Kestra Financial Inc. and Cetera Financial Group.

“We think that the business that the Commonwealth advisor already has should fit into the model of the place that they're going to. And we just think that the RIA model is exactly fit for a lot of these businesses,” said Malhotra 

Savvy Wealth is even mailing “Acquisition Relief Boxes” to Commonwealth advisors that contain cookies, brownies, and Savvy-branded aspirin. “Transitions shouldn’t cause headaches, and moving to Savvy won’t,” Malhotra said on LinkedIn. His post was in response to Ritholtz Wealth Management CEO Josh Brown writing “the desperation for AUM growth by any means necessary is striking,” in regards to the industry’s recruitment of Commonwealth advisors. “When the PE firm is breathing down your neck for quarterly KPIs, you'll hire anyone,” Brown added

“The way that we've done the offers, and that's been compelling to all these Commonwealth advisors that are engaged with us and evaluated all these other options too—Ameriprise, Raymond James, etc—and said no, was the fact that with all these upfronts payments, they're tying up advisors for 10 years and sometimes more,” Malhotra said. “The amount that they're getting over that 10 year period, if you divide those out, it actually ends up being a worse deal for a lot of them because there's a lot of other hidden costs, support costs that they have to pay, and a number of other things.”

“When we are giving these offers, we actually say it's less about the headline upfront number, but over that 10-year period you'd want to be making the same amount or more at Savvy at the end of the day,” added Malhotra. “So we construct our offers to be competitive, but we're not going to say one standard size fits all, you have an upfront offer, take it or leave it. We have a lot more flexibility across the revenue share, the equity component, other incentives and bonuses.”