Advisors weigh the risks and rewards of adding new business lines

It’s not simply enough to sign up new clients, RIAs need to keep them as well. And that means making sure they accommodate client needs in house whenever they can, lest they be tempted away by a competitor.  

That’s why more RIA firms are opening new lines of business to expand their touch points and keep clients "sticky". 

RIAs in the Dynasty network, for example, are exploring several new business lines. Many firms are moving into asset management and ETF creation, often tied to the 351 exchange opportunity, as they evaluate launching proprietary investment products. Others are expanding into tax preparation and planning, which is highly complementary to wealth management and creates a more coordinated and “sticky” client experience. Advisor recruitment is another area of focus for firms pursuing inorganic growth through tuck-ins.

“Some firms are building out family office services, including bill pay, personal CFO services, trust services, concierge support, and specialized investment access for ultra-high-net-worth clients. There is also growing interest in emerging trend services such as identity security, credit monitoring, and other risk-mitigation solutions in response to client concerns,” according to Casey Jorgensen, director of relationship management at Dynasty Financial Partners.

Expanding into a new line of business, nevertheless, requires balancing the desire not to disrupt a strong core offering with the risk of letting complacency set in. The real question, says Matthew Liebman, CEO of Amplius Wealth, is what problem the expansion solves—for clients, advisors, or the firm’s long-term strategy.

“For us, the tiebreaker was identifying an idea that clearly enhanced the client experience, which made it something we had to seriously consider pursuing,” Liebman said.

Liebman says he evaluates whether a new offering should be built in-house, spun out, or partnered based on alignment, risk, and clarity of purpose.

“In our case, while investments are a core component of wealth management, we launched a distinct asset management business to draw a clear line between portfolio management and advice. Creating separation allowed each business to focus on its strengths without blurring roles or distracting from the core client experience,” Liebman said.

BUSINESS LINE EXPANSION RISKS

Dynasty’s Jorgensen says the recruitment market in particular is extremely competitive, and firms have found that without a dedicated recruiter, success is unlikely. Strong firms build a standardized recruitment package that clearly outlines economics, transition support, and ongoing services. Many have also adopted a formal acceptance or due diligence committee to evaluate both the financial and cultural fit of potential advisors.

“One firm ultimately chose not to pursue inorganic growth despite early interest. The firm realized that its strategic advantage lay in developing young talent internally through an apprenticeship model, top-grading and reallocating relationships to free up senior advisors, and allowing next-generation advisors to grow into business development roles organically. From an enterprise value perspective, this approach was highly effective and ultimately outweighed the complexity and distraction of pursuing M&A,” Jorgensen said.

Liebman said his firm seriously considered launching its own alternative investments fund, but ultimately decided against it because they didn’t see a meaningful need among his current client base.

“That decision reinforced that our priority is responding to real client demand rather than building products for their own sake. It also reminded us to stay flexible, knowing the decision could change as client needs and the market evolve,” Liebman said.

BUILDING VS. BUYING

A common rule of thumb is that if a service is core to the client experience and cheaper to build than to buy, it should be built internally. Services that typically remain internal include financial planning and relationship management.

By contrast, services that are often better suited to outsourcing or partnerships include specialized investment strategies, complex tax or trust administration, bill pay at scale, and technology-intensive offerings.

“To simplify the build-versus-buy decision, firms evaluate the strategic value to their client base, the cost to build versus the cost to outsource, the desired level of control and customization, the talent required and its availability, and the scalability and ongoing operational burden,” Jorgensen said.

To prove his point, Jorgensen highlights a firm that launched an ETF through a 351 exchange via a newly formed asset management arm. The firm’s goals were to act in clients’ best interests, create tax efficiency, and offer something clients could not access elsewhere.

“An unintended but powerful outcome was that clients became emotionally invested in the ETF, talked about it with peers, and generated increased referrals. The offering meaningfully differentiated the firm and amplified its brand,” Jorgensen said.